Our investment process is one that is collaborative and collegial. We employ our quality criteria to assemble a Focus List of 50 companies that we may like to own at an attractive valuation. From this list, we construct a portfolio of what we believe to be our best 20-25 ideas. Embedded in our investment culture is a focus on generating new names, constantly evaluating opportunities while testing the conviction among existing portfolio holdings.
Our team is nimble, close-knit, and experienced, which allows us to quickly mobilize around ideas and arrive at investment decisions as opportunities arise. We execute our research in a consistent, repeatable manner and strive to allocate our time and effort on value-added activities.
In a world where information is ubiquitous, we believe the process of conceptualizing an idea is one where we can add value. Conceptualization defines the investment story and how our view is unique from the consensus, and drives the research process by focusing the team on what matters.
Once an idea is conceptualized, a research point person is assigned and the entire team immerses itself in understanding key company issues. This generally includes reviewing financial statements, SEC filings, management presentations, interviews, competitor profiles, customer commentary and other information. This work either supports or refutes the investment concept, and informs our Focus List assumptions for long-term growth, terminal valuation and an appropriate discount rate.
Given that the investment team is engaged in the process from the beginning, and communication is ongoing, the portfolio decision becomes clearer as our work progresses. While all team members have input into the process, the CIO makes the ultimate investment decision. We seek to apply our decisions across all accounts with the goal of minimizing dispersion and providing a similar client investment experience over time.
HSMP’s replicable investment process effectively bridges the conceptualization of a new idea to its commercialization in a portfolio decision.