What exactly is a "quality" investment?
8 November 2019
As a professional investor, I’m often asked about the characteristics we look for in a ‘good’ company and how we seek to identify the long-term winners.
In short, we favour investing in companies with ‘quality’ characteristics. They’re the firms that have established an enduring competitive edge, invest to grow their business and enjoy pricing power in their markets.
In short, we favour investing in companies with ‘quality’ characteristics...However, identifying those characteristics is not easy and there are no short-cuts.
However, identifying those characteristics is not easy and there are no short-cuts. We analyse hundreds of independent factors to underpin our conviction to invest – or not.
As income investors we are particularly keen on companies that will grow their dividends over time. So we also carry-out additional credit analysis - normally used by bond managers - to understand how a company will operate across a range of financial climates.
Those tests assess whether corporate growth can fund consistent and progressive dividend increases even if earnings and cash flows fall.
Importantly, we also place significant emphasis on the sustainability credentials of a company: something we believe is closely aligned to its ability to deliver strong returns long into the future.
In this way we believe we can find quality firms that truly last the distance.
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Income strategy charges are deducted from capital. Because of this, the level of income may be higher but the growth potential of the capital value of the investment may be reduced. The level of income is not guaranteed.
Information correct at time of publication. This information is issued and approved by Martin Currie Investment Management Limited. The opinions contained in this article are those of the named manager. They may not necessarily represent the views of other Martin Currie managers, strategies or funds. Market and currency movements may cause the capital value of shares, and the income from them, to fall as well as rise and you may get back less than you invested.