What We Are…
I. Concentrated...We have a thorough knowledge of the 20-25 names in our portfolio at any given time. This affords us the benefits of diversification without the dilution of our best thinking, what we refer to as “de-worsification.” Historically, our performance results have been realized with below market beta.
II. Quality Businesses...We take a fundamental, company specific approach to identifying quality business franchises with criteria that include: strong management teams; superior business models; sound balance sheets; high free cash flow characteristics; recurring revenue streams; pricing power; global platforms; new market opportunities; wide and defensible moats; and strong, albeit reasonably attainable, earnings prospects.
III. Growth...We employ a multi-dimensional approach to the assembly of a concentrated quality growth portfolio. Our criteria for consistently growing the portfolio earnings/cash flow stream at an above average rate is balanced with a disciplined use of proven valuation tools.
...And What We Are Not
I. Macro Oriented...rather, we take a bottom-up, fundamental approach. While we have a strong sense of economic trends and related influences on our portfolio holdings, we do not apply an econometric discipline as a baseline for stock selection.
II. Index Influenced...rather, we are benchmark agnostic. A high degree of visibility is implicit in our goal to consistently grow the earnings stream over time. We believe visibility is more predictable in select industries and, by inference, less predictable in others. Accordingly, our portfolio does not seek to be highly representative of the broad sectors comprising popular market indices.
III. Constrained...by market cap or domicile. Our willingness to own businesses across the growth continuum, up and down the cap scale, and around the world (including non-U.S. domiciled equities provided our quality criteria are met) highlights our flexible investment approach.
HS Management Partners’ investment philosophy is fundamentally grounded and pragmatic in nature; we take a common sense approach to the management of client assets.