Our Process
Our investment objective is to preserve capital and to grow that capital in the medium term. The Clime investment process is driven by our investment beliefs and consists of three key components:
- Stock selection
- Attractive investment criteria
- Risk management
Stock Selection
We take a great deal of care in choosing the companies that make up our investment universe.
Attractive Investment Criteria
Before we invest, we assess each company against the following ‘attractive investment’ criteria:
- Business Models that are easy to understand, so we can identify how a company generates its revenue.
- Profitability, as distinct from profit and measured by Return on Equity (ROE).
- Profit that can increase year after year, with companies that operate in growth industries and can grow their market share.
- Cash Flow from operating activities rather than financing or investing activities and dividend that is franked.
- Debt levels consistent with the company’s business model and market position.
- Sensible Capital Management of both debt and equity.
- Solid Governance, and Management teams that have a track record of integrity
Risk Management
We believe that risk increases when no account is made of each individual investment. The risk in our portfolios is managed by:
- Strict adherence to our fundamental beliefs and value investment philosophy
- Disciplined application of our investment process
- Robust portfolio management systems
- An experienced investment team
- Margin of safety
Margin of safety
We will only invest if there is a sufficient margin, typically 20%+, between the current share price and our valuation. In the example below, the shares are valued at $4.00 and we would look to puchase shares when the price falls below $3.20.
