LGM's investment professionals operate as one team, applying one investment philosophy and process across our core strategies.
We believe that free cash flow growth and stock price performance are correlated over the longer term. Therefore, we invest in “quality” companies that can compound free cash flow driven by a high returning, sustainable business model.
We are benchmark agnostic as we don’t believe that the current benchmark reflects the structural growth potential of Emerging markets. As such, we invest with an absolute mind-set as we believe indices reflect past growth while investment is for the future.
Quality is essentially determined by all internal as well as external factors impacting a business and its long-term prospects. However, we believe that certain factors have proved to be more important over the long term. High quality companies are characterised at LGM as those having a:
- Sustainable business model, which enables the company to generate substantial excess returns over their cost of capital throughout their business cycle;
- Robust balance sheet;
- Proven management team with a disciplined capital management; and
- Clear and fair alignment between majority and minority shareholders.
Although we look for quality companies across all sectors, we typically find a higher proportion of these names among the domestic sectors of the economy — mainly consumer, financial services, telecom and healthcare. There are generally fewer opportunities in capital intensive sectors such as materials and energy and a higher representation amongst asset light companies.
We aim to invest with a long-term perspective, typically a business cycle of 5-10 years.