PhilosophyEdgbaston applies a bottom-up, fundamental value philosophy to managing equities in the Asia Pacific ex-Japan region. The firm’s investment style has a strong price discipline, an income bias, an aversion to excess leverage, and a preference for companies with visibility in their earnings and dividend streams. Protecting capital is key to generating superior returns and the firm expects these portfolio biases will insulate the Programme, to some extent, in difficult market environments. All of Edgbaston’s investment decisions are made with a long investment horizon.
The securities Edgbaston owns are typically attractive on the basis of classic valuation measures such as dividend yield, P/E, and P/BV. However, Edgbaston is not interested in holding securities simply because they are cheaply priced; portfolio companies must demonstrate the ability to earn good levels of profitability over the long-term and to maintain strong balance sheets.
Edgbaston’s investment philosophy focuses on three types of risk: valuation risk, business risk, and balance sheet risk. Of the three, valuation risk is most important, as the price paid for a stock is the single greatest determinant of return.