When I was deliberating over the headline for this blog I visited our website at www.minervamoneymanagement.co.uk.
On the home page, we explain our system which we have called our five-star investment process. It consists of 5 stars because each of the five processes is assigned a star. We also believe our fund is a five-star fund in terms of it being a top-class strategy. I have re-produced it verbatim below.
Our 5-star investment process
We identify disruptive and innovative companies that have significant growth potential that can deliver exceptional compound returns over the long term.
We focus on extraordinary businesses run by visionary founders with scalable business models.
We focus on businesses that generate high cash flow and return on capital with great re-investment opportunities to deploy it.
We allocate more capital to superior businesses that can create long-term capital appreciation and have strong competitive advantages.
We focus on highly ethical and environmental companies.
We are less keen on some popular ratios such as the PE ratio which can lead to suboptimal investment decisions. Instead, we prefer the multiple of price to free cash flow because free cash flow is less manipulable than free cash flow. An excellent return on capital is vitally important especially when funded by a low weighted average cost of capital. Companies that are able to allocate their capital optimally tend to be great compounders such as Amazon.
The honesty of the management and prudence are also excellent signs.
The inclination to put shareholders first is an excellent sign too. Mark Leonard and Constellation Software are a great example of this principle.
The culture of the management tells you a lot about the company. Great culture usually leads to great results.
So if you want to know how to invest smarter you will not go far wrong if you follow the lessons in this blog. You know it makes sense.*
Anthony Byrne, Managing Director
The Fund is authorised in the United Kingdom and regulated by the Financial Conduct Authority (FCA) Firm Reference Number: 754570.
If you’re interested in learning more about this topic, I encourage you to visit our website:
More information about the fund can be found here Hargreaves Lansdown or AJ Bell.
* RISK WARNING
The value of investments can fall as well as rise. You may not get back what you invest. The information contained within this article is for guidance only and does not constitute advice which should be sought before taking any action or inaction. All information is based on our current understanding of taxation, legislation, regulations and case law in the current tax year. Any levels and bases of relief from taxation are subject to change. Tax treatment is based on individual circumstances and may be subject to change in the future. This blog is based on my own observations and opinions.
