Investment Philosophy

Equity Investment Process

Quantitative Analysis Identify the best companies

  • Selection of the universe of companies to follow.
  • Identification of companies with high sustainable growth potential, considering:
    • Specialization of the activity.
    • Clear sources to generate profits.
    • Stability of margins.
    • Cash Flow Sustainability.
    • Level of internationalization.
    • Appropriate financial structure.

 

Qualitative Analysis Determine the solidity of the business and the quality of the managerial team

  • Medium term consistency of the business model.
  • Medium and long term vision of the managerial team.
  • Credibility of the managerial team.
  • Expectations of sales, margins and results.
  • Analysis of the internal cycles of the business activity.
Fundamental Discount Valuation Analyse performance expectations

  • Selection of investable companies.
  • Business valuation: Discounted Operating Cash Flows.
  • Currency valuation according to PPP.
  • Company fundamental discount analysis (in EUR).
  • Discount life cycle monitoring.
Portfolio Construction Portfolio optimization

  • Bottom Up Approach.
  • Portfolio Fundamental Discount maximization.
  • Concentrated Portfolios.
  • Active management: Large tracking errors.
  • Analysis of the internal market cycles.
  • Portfolio tracking.

Investment Process for the Mixed Funds

  • Fundamental approach both for Equities and Fixed Income.
  • Each Fund has a range of risk exposure.
  • Equity investment is weighted upon the fundamental discount. A Normal distribution is traced, whose average corresponds to the asset’s fundamental value and its standard deviation reflects the valuation variability. The asset’s market price determines the probability that the asset is considered as “cheap”, and the exposure to Equity is based on that probability.
  • The relation among the short, medium and long term interest rates with the inflation rates determines the Fixed Income selection.
  • Other important criteria in Fixed Income assets are:
    • The rating and solvency of the issuer (company, the State) and the issue.
    • The bond’s maturity.
    • The portfolio’s average duration.
  • How is the percentage of Equity exposure managed in the Mixed Funds?

Example 1:

  • Probability that the stock market was undervalued: 99.9%.
  • If the Mixed Fund A can invest in Equity a maximum of 30%, the managers from GVC Gaesco will use as a reference to take positions, an investment based in Equity of:

30% * 99,9% = 29,97%

Exemple 2:

  • Probability that the stock market was undervalued: 70%.
  • If the Mixed Fund A can invest in Equity a maximum of 30%, the managers from GVC Gaesco will use as a reference to take positions, an investment based in Equity of:

30% * 70% = 21%

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