ProcessEdgbaston’s investment decision-making process is research driven. The investment process has three elements: screening, the research programme, and Portfolio Implementation Committee.
The screening process is quantitative and starts with a universe of approximately 6,000 companies with market capitalisations greater than $100 million covering developed, emerging, and frontier markets in Asia. The screening process selects companies that have a combination of valuation, balance sheet, and profitability characteristics which make them attractive for further research.
Edgbaston’s research programme encompasses financial analysis, investment reports, and company interviews. Comprehensive investment reports include an analysis of industry position, regulatory issues, management track record, corporate governance, and growth opportunities. Financials are checked and restated with particular emphasis on cash flow. Investment reports are reviewed at weekly Research Committee meetings and the resulting output is used by Edgbaston’s Portfolio Implementation Committee to make buy and sell decisions.
A stock is purchased when its combination of value and profitability factors is more attractive as compared to existing portfolio names, to the universe, to the peer group, and to the stock’s own history. Conversely, a security is sold from the portfolio if its combination of value and profitability has deteriorated and the capital can be recycled into more attractive positions.
The Edgbaston portfolio is constructed entirely by bottom-up, individual stock selection. The portfolio’s country and sector weights are determined entirely as a by-product of the stock selection process. Although there are sensible upper limits on the maximum Edgbaston will invest in individual countries and sectors, the portfolio will hold a zero weight in any country or sector if investment work indicates there are no attractively valued stocks.