Investment Philosophy

AGFIA Limited believes that investing in undervalued companies with strong franchise values will provide clients the greatest opportunity to outperform the market over the long term. The team unearths undervalued companies by applying their proprietary 30/30/30 screen and through their in-depth fundamental research.

Investment Process

Quantitative Screens & Research: Quantitative screens for capitalization and liquidity are applied to the emerging markets investment universe, excluding companies with a market cap below USD$ 500M. The 30/30/30 value screen identifies attractive companies for monitoring. Companies with strong franchise value are also identified for the monitoring list through ongoing research.

In-depth Company Research  A broad range of companies are reviewed and researched. To evaluate a companys competitive position, management quality, and commitment to creating shareholder value, a team of analysts meet with management, employees, competitors, suppliers, customers and local government. Subsequent to the company meetings, analysts will assess the companys balance sheet and financials. A detailed research report will be produced for all stock recommendations and presented for team discussion and debate.

Portfolio Construction: The culmination of the research process is the identification of solid companies with attractive franchise value as potential candidates for the portfolio. These are companies that satisfy the 30/30/30 discipline (normally within two years) as well as bottom-up fundamental analysis. The portfolio is typically fully invested and will hold between 50 to 90 stocks, with the top ten holdings representing approximately 20-25% of the portfolio.

Following the analysis on the stock, a discussion is prompted among the team to debate whether the stock should be included in the portfolio. The Portfolio Manager has ultimate decision making authority, however all views are considered. New positions are added with a weight of between 0.5-2.0 % of the portfolio. The performance of the position is monitored by all members of the team and a decision to increase or decrease the weighting of the position is again discussed within the team.

A typical stock holding will generally go through three stages in its Lifecycle; Accumulation, Recovery and Selling. The holding period will average around 5-7 years, with turnover expected to be in the region of 15-25% per annum. Stocks will be deemed to have entered a sell phase when their valuation reaches a market multiple times normal earnings. Stocks can be sold out of the portfolio if the investment thesis for holding the stock fundamentally changes or a better idea presents itself. It is the responsibility of each member of the team to monitor positions in the strategy.