“Quality companies at the right prices. That is what we set our sights firmly on.”
Investing Core Values
Flowing from the Investing Triple approach, the following are our core values of investing.
Stringent Quality Criteria
We identify businesses of the highest quality and return potential for our portfolio. Typically, our portfolio consists of less than 30 businesses from four to eight industries. Our historical experience has shown that a concentrated portfolio of quality companies has enabled us to achieve superior absolute returns in excess of benchmark over time.
Keeping It Simple
Our product is an uncomplicated one. We simply invest in listed shares of quality companies at undervalued prices. Divestment takes place when an investment reaches or exceeds full value. No leverage or short-selling is used.
Asian Perspective
We invest in high quality businesses and assets in Asia that will benefit from the dynamic and long-term growth of this region due to the intense rising demand for goods and services. Favourable demographic factors include over 2.5 billion people from China to India, relatively young and growing populations in countries such as Indonesia, rising affluence, increasing consumption power, improving education levels and advancements in technology.
Based in Asia and being locals, we are familiar with the language, culture and thinking in this region. We believe that in order to be successful in investing, you must invest in what you know and understand.
Long Term Business Owner
We undertake every investment with a long-term mindset and see each investment as owning a piece of the underlying business. Using a private equity approach, we are inherently a bottom-up investor in listed companies, focusing keenly on the managerial capability and integrity, growth potential, balance sheet strength, cash-flow generation capability, sustainable competitive advantages and risks of each investment.
Independent Research
Relying on our independent, in-house research, the intrinsic value of each investment is evaluated objectively and thoroughly before formulating investment strategies.
We rely on our skill and judgment in making intelligent and careful choices. By being disciplined in our selection right from the outset, we avoid wasting precious time and effort on less optimum choices and can contribute towards the final investment performance by focusing on companies that we feel will make a real impact on investment returns.
Thereafter, active monitoring and management of the portfolio is carried out unceasingly. We distinguish fads from facts and stay above the market noise.
Market Cap Agnostic
Our investment strategy is market capitalization agnostic. This means that we invest in a mixture of companies from different capitalization categories. Our portfolio will usually consist of familiar household names as well as some more esoteric ones. Our empirical analyses have shown that big, medium or small cap stocks all have their respective strengths and limitations. So we have trained our mindset and proficiency over the years towards achieving the right mix in the investment portfolio of companies of various sizes. As long as they are quality companies at the right prices, they will make it into our investment universe. Having said that, historically our portfolio has had stronger weightage in the mid cap and large cap categories.
Investment Risk Management
Investment risk management is a clear priority. Close attention is paid to various factors which may pose as downside risks to each investment and there are upper limits on the Fund’s exposure to individual investment, by sector as well as by country. Together with the stated intention of assembling a cluster of businesses that generate strong and recurring free cash flow, we believe such measures will serve as effective risk management tools that will assist the portfolio in delivering superior investment returns over the long term.
Strong Investment Conviction
In line with the mindset of a long-term investor, we eschew active trading of our investments. Portfolio turnover tends to remain low. We are tolerant of short-term price fluctuations as long as we believe our long-term investment thesis remains intact. However, as part of our constant drive to improve the risk-return profile of the fund, we will adjust the portfolio where necessary and appropriate if we judge that there are compelling reasons to do so.
Contrarian Investing
We are not averse to investing into out-of-favour industries or badly performing markets, if prices are trading at a discount to intrinsic values. There is often no better time to invest in quality companies at attractive prices than when their industries or markets are going through a period of weakness. If we assess that expected investment returns justify a contrarian style of investment, we will act on the opportunities offered by such market dislocations. Buying or holding investments while their prices go down is uncomfortable. However, we do not believe it is possible to time the market. So although we may risk being too early, it is certainly preferable to being too late.
Alignment Of Interests between manager and investors
Rainforest Research is founded primarily on the principle of a performance-based reward structure for the company as well as its employees. Being independently owned and managed by the investment managers themselves, there is a direct relationship between investors and investment managers, who have long term commitment and accountability. We co-invest alongside our clients and are prepared to stay invested in our chosen businesses beyond our clients’ investment horizon.
Extract from FAQ
“It is not possible to time the market (whether by human or computerized means). And index-hugging has been shown to be unable to withstand the volatility of the world’s markets.
Our aim is to maximize investment Return while minimizing Risk, doing this in a sustainable manner.
This aim is best served using a steady, level-headed approach through qualitative active management of investment. This would hold true throughout any and all market conditions.”