Our investment process is broadly divided into four components
Investment Opportunity Generation
Wenlock utilises two methods in generating investment opportunities:
Quantitatively – we build our own screening models that use strict criteria ensuring we adhere to our investment philosophy. The criteria we employ maintains our investment universe captures the most superlative businesses. We spend a vast amount of time focusing on Returns on Free Cash Flow (CROIC/CFROI).
Qualitatively – there are occasions when opportunities are identified during our research process whilst analysing industry and economic trends. Others are also presented after extensive contact with business executives and industry leaders. These opportunities will need to meet our prime criteria of returns on free cash flow.
Comprehensive investment research is undertaken for each investment opportunity that meets our investment criteria. This involves:
Extensive meetings with management teams of businesses as well as competitors and entities that play a critical role in future prospects;
Analysing and understanding all financial information that is available to investors;
Research industry, economic, financial reports and trends;
Valuation (intrinsic value) is determined by constructing financial models on each investment opportunity which is supplemented with a research report.
The Portfolio consists of 20 – 40 of the most superlative businesses that have the strongest sustainable attributes with the highest conviction and greatest opportunity to achieve our intrinsic value.
The position size of each business is an outcome of our conviction and the relative investment returns that are achievable. Overlaying this are other factors that influence position size including our assessment on macroeconomic and industry environments.
Risk management is critical aspect of our investment process and we follow a strict procedure to ensure that we manage the risks. Capital Protection has two central pillars:
Implicit Risk Management – This is integral to our research process during investment selection, portfolio construction and portfolio management oversight. There are strict parameters that ensure we are disciplined in the risk exposures.
Explicit Risk Management – Deploying protection for known and unknown risks. There are occasions when asset prices exhibit unexpected volatility. The objective of employing protection is to mitigate against large falls in asset prices.