The philosophy of the strategy has been refined by Henry Dixon and his team over 15 years in the industry. In seeking out companies with strong cash and asset characteristics – but which are unloved by the market – the managers aim to construct a portfolio that is materially better value than the broader market.

The managers target companies that demonstrate the following:

• An estimated replacement cost that exceeds market value
• Cash generation with a strong balance sheet
• Priced below their estimated intrinsic value as defined by earnings

The team believes that conventional equity valuation principles often place too much emphasis on forecasting earnings into the future. Instead, by focusing on the current shape of the balance sheet the team targets significant uplift in valuation metrics versus the market.

Risk is mitigated through a thorough analysis of a company’s balance sheet. The managers aim to avoid value traps that appear cheap on P/E and yield by constructing a portfolio with a stronger balance sheet, superior cash flow, and more assets than the market.