Investment Process

Saville Capital’s investment process has been developed over 20 years of experience in research, analysis and financial markets. The investment process is deliberately free from a “growth” or “value” bias, but will generally include investing in companies with sustainable and growing earnings streams that Saville Capital believes have been mispriced by the market, with identifiable catalysts for market discovery.

The following points summarise Saville Capital’s view to building an effective emerging companies portfolio:

• Idea generation – potential investment opportunities are identified through traditional screening of operating and financial metrics and observations of share price volatility. More importantly, extensive experience in research and financial markets enables Saville Capital to generate bespoke opportunities through –

a. its existing professional and personal networks (including an extensive company visitation program),
b. identification of emerging structural themes, and
c. observation of common situational opportunities.

• Fundamental valuation – Saville Capital conducts a detailed analysis of the target company including its operational and financial performance, capital structure, competitive advantage, industry structure and sensitivity to prevailing economic factors. In support of this analysis, Saville Capital’s research task typically includes establishing contact with management, competitors, clients, suppliers and independent industry experts. Saville Capital uses proprietary financial models to determine forecast earnings, valuation and implied returns, combined with a sensitivity analysis to ensure it is capturing the full spectrum of potential outcomes. Finally, Saville Capital speaks with trusted advisers to test its opinion and gain a better understanding of the consensus view held by the market.
• Catalyst identification – Saville Capital seeks to identify events which may act as catalysts for the price of target investments to converge with its view of their intrinsic value. These may include one or a combination of earnings releases, guidance updates, regulatory announcements, media/research coverage and macroeconomic factors. Preferably, Saville Capital will have a view on the timing of the catalyst for a favourable shift in view on the stock.
• Investment advantage – in order for Saville Capital to pursue an investment opportunity it must be satisfied that it has a view, based on superior research, on one or more key earnings drivers or potential catalysts that is materially different to that of the market, whether it be directional or level of conviction.
• Portfolio construction – a relatively concentrated stock portfolio aims to ensure the benefits of Saville Capital’s comprehensive research process are captured, quality control is maintained and an appropriate level of diversification is achieved. Furthermore, Saville Capital uses its experience and skill to examine how a selection of preferred stocks combine in the portfolio and assess what sectoral or thematic biases are present. Any bias deemed acceptable can be maintained; any unintended or extreme bias is mitigated by adjustments to holdings.