The importance of the
There are several main philosophies when it comes to investing, offering a variety of personal interpretations. As an investor, it is essential that you take the time to get to know the preferred approach of your portfolio manager in order to ensure that you endorse his or her basic principles.
What is the "value" approach?
It is Warren Buffett, one of the best investors of all time, who popularized the fundamental analysis based on value. Though numerous studies have shown that “value” investment is the most profitable investment method in the long run, very few managers use it, as this approach requires certain skills:
The determination to go
The perseverance to go through the lethargic periods that stock can encounter
The patience to apply the method
with consistency and duration
The strategy is based on a principle which states that there can be a considerable gap between the value of a company and the price of its share, hence the notion of “overvalued stocks” and “undervalued stocks.” Because this gap tends to disappear in the medium term, the idea is to buy good companies that are temporarily undervalued and wait for the price of the share to adjust to the true value of the company. In addition to creating a high return potential, this technique offers the additional advantage of reducing the risk of capital loss.
The typical scenario of a “value” investment is a more or less long period of stagnation of the share price during which the measurable settings of the company are consistently improving, which in turn exerts a bullish pressure on the price of the stock.
Our stock selection criteria
1: GROWING AND CONSTANT BENEFITS
- Resilience and stability of the growth
- Anti-cyclical quality of the sector
2: SUPERIOR PROFITABILITY
- High return on capital
3: SOLID BUSINESS MODEL
- Competitive advantages
- Competent and honest leaders
- Controlled indebtedness
4: TEMPORARILY UNDERVALUED STOCK PRICE
Low price/earnings ratio
Experience has shown us that it is not necessary to take unnecessary risks in order to have an interesting performance. This is why we have developed 3 strategies to considerably attenuate this risk and create sufficient latitude.
1. Investing in the long term while keeping the same strategy, to reduce the risk related to market corrections.
A 5- or more year horizon is recommended to fully benefit from the value approach. It is our role to guide you when you have doubts or are feeling discouraged in order to preserve your future returns. In investment, emotions and impulsiveness are productivity’s worst enemy.
Despite our work in analyzing these companies, there is still some unknown which can lead to wrong anticipation. Having a diversified portfolio allows profits to compensate largely for occasional losses. However, we try to stay away from overdiversification, which leaves room for a risk of loss in quality of the portfolio.
3. Buying extraordinary company shares on sale, to create a risk amortization zone while maximizing the return potential.
When you buy a share that is already undervalued, the probability that it will continue to drop is minimized. When it goes up, however, the potential is increased. If the share was bought at 50% less than its intrinsic value and continues rising, even if only to its fair value, our investment has simply doubled. Of course, for such scenarios to arise, no compromise must be made regarding the quality of the company.