WaveStone believes that share prices over time typically reflect the growth in the level of a company’s earnings; and that markets are not perfectly efficient, leading to securities becoming mispriced. As a result we utilise a bottom up stock picking process to add value over the medium term.
The WaveStone investment philosophy aims to:
- Identify businesses which exhibit Sustainable Competitive Advantage (SCA). SCA is determined by the interaction of a company’s Corporate DNA and the underlying industry dynamics in which a company operates which are expected to deliver above market earnings growth over the medium to long term.
- Identify companies where the Board and Management have demonstrated a track record of effective capital allocation.
- Exploits inefficiencies whereby the market misprices the underlying medium to long term earnings potential.
We only invest in large, proven business models with an equity market capitalisation of greater than $200m at time of purchase. Typically, the companies we invest in are prudently financed, well managed and have a track record of success. We apply growth, quality and valuation tests, positioning our investment style towards growth at a reasonable price (GARP). Our five year focus also tends to favour higher growth companies.
WaveStone believes that a company with the strongest corporate DNA that operates in the most favourable industry and economic conditions should have the most robust Sustainable Competitive Advantage.