Kiltearn manages a global value strategy. We are fundamentally research focused, all cap and benchmark agnostic in our approach. Kiltearn does not employ a top down or asset allocation model. Quantitative techniques are employed as an analytical tool in the initial screening process (see below), but do not feature in portfolio construction. Consequently, our expectation is that the primary source of value added will be stock selection. To be successful over many years, we employ a methodical and consistent investment process.
There are four primary stages in the process which are summarized below.
Our Process
We start with the FactSet database and screen for the cheapest 25% (bottom quartile) of securities across four discrete screens. The purpose of the screens is to point us to areas of pessimism to help identify stocks that warrant further research, and to keep us true to our value philosophy. We can’t research a business unless it has some form of bottom quartile valuation support.
Screening
This is a fundamental company research report, conducted by all members of the Investment team. Our work is based on in-depth, proprietary research with a strong emphasis on objectivity. We evaluate companies under the same eight criteria, regardless of sector or region. The aim is to assess the quality of the business, and to establish if there is continuity. We use blind voting to minimise bias and believe in collective intelligence.
Business Analysis
This is a different discipline from the business analysis, explored in a separate research note and discussed on a different day. The aim is to identify the normalised valuation for the business.
Valuation Analysis
All Portfolio Managers can propose any reviewed stock for a buy/sell at our Portfolio Management Group (PMG) meeting. We consider valuation and quality relative to the existing portfolio. We are committed to a team-based approach that incorporates blind voting and open discussion. All votes are equally weighted and majority rules.
Portfolio Management
Our team is based in Edinburgh, Scotland and Pittsburgh, PA.
