QV buys a portfolio of enduring businesses run by capable, committed, and candid people. They select equities based on good value – that is the price they pay for a company’s assets and their return on equity. QV holds their good business positions for an indefinite period. The objective is to create a portfolio of companies to provide consistent growth with below average risk.
QV uses fundamental research to identify corporate management teams who are able to sustain or improve the return on shareholders’ equity and to create growth on a per share basis. In their analysis, QV examines the executives' ownership, their integrity and vision, the promise of the business in a global context, the record of growth in shareholders’ equity and earnings, the corporation's financial strength, and the price paid for growth and/or assets. The research process is internal, with all managers assigned specific responsibilities and engaged in the selection and evaluation process.
Fundamental business analysis is based on:
Share ownership, years of leadership, succession planning, compensation, board& operational team, corporate governance.
Demonstrated record of growth in equity, earnings, sales and cash flow or demonstrated management of asset base.
Franchise & Outlook
Innovation, service, product or resource development. Competitive position. Business outlook.
Balance Sheet Strength
Equity financed balanced sheet versus debt. Sensible allocation of capital.
P/E’s, P/CF’s, P/B’s and NAV’s below market. Reasonable relative to ROE’s and ROIC’s above market. Assessment of downside risk.
Dividends & Capital Allocation
Free cash flow to increase dividends. Sensible capital allocation.
New selections enhance quantitative portfolio characteristics – quality, value, diversification and growth.