Our research methodology has been developed over many years and is based upon sound fundamentals and proven techniques. For UK share portfolios we analyse the UK's 350 largest companies according to our own process, the core of which is our SAFER research model. This incorporates over 25 criteria, summarised as follows:
Statistical — market capitalisation, index weighting, consensus recommendation, earnings per share growth, dividend per share growth, revenue growth
Analytical — technical analysis by sector and stock, long and short-term
Fundamental — dividend yield, dividend cover, P/E (price/earnings ratio)
Emotional — risk, valuation, management and business/market assessment
Review — upside, downside, momentum, growth versus P/E assessment and target price (bull, base and bear)
Caution, Rigour and Flexibility over the Cycle
As Investment Managers we are not speculative investors, but adhere to the disciplines of both value and growth investing. By this we mean that we do not believe in just one investment style, but change our policy as we go through the different stages of the economic cycle, analysing the UK Stockmarket to identify companies whose share prices do not yet reflect their true potential.
We start this process by looking at the different sectors of the market (of which there are currently 39) and eliminating the sectors which we believe will under-perform on an 18-month view (this normally eliminate 1/3rd of the sectors). We then identify the sectors which we like the most and expect to outperform on an 18-month view (again normally 1/3rd of the sectors).
The next step is to look at the individual shares within each sector and eliminate all companies which do not comply with our minimum criteria.
We then look at each sector and apply our 'SAFER' process to analyse the data available on qualifying companies, formulating our own opinion on each stock: BUY, HOLD or SELL. Once we have identified those we wish to buy, we set a target price for purchase and acquire as opportunities arise.
Maximising Yield, Protecting Capital
We analyse the different types of fixed-interest stocks in terms of both security and interest yield. For gilts, we analyse "shorts", "mediums" and "longs" and look for value, taking into account interest-rate and inflation forecasts. For permanent interest-bearing shares (PIBS), we look at good-quality issuers with strong balance sheets to reduce the risk of interest payment default. For loan stocks, convertibles and preference shares, we first look at our equity analysis and only purchase stock of companies we like in order to reduce the risk of interest payment default.
Managing Specialist Exposures
(*Unit trusts, OEICs, Investment Trusts and other collective investments – overseas, specialist, commercial property, fixed-interest/bonds and alternative investments)
We start our assessment of Collective Investments by analysing performance on two bases. First, 12-month discrete rolling periods and second, short/medium & long-term cumulative performance. We are looking for consistent first or second quartile performances to identify funds that warrant further analysis.
The second part of our assessment is to examine the identified funds. We look at the size and charging structure of the fund, asset allocation by geographical/sectorial/market cap, external rating agency ratings and quantitative analysis.
The third part of our assessment is an in-depth analysis in terms of risk profile, investment management process and style, fund manager experience, benchmarks and risk controls, including performance ratios.
Up to date Information and Analysis
Our resources include:
Thomson Reuters Eikon - web-based intelligent database, updated daily, covering over 22,000 companies across 87 countries. Contains Pricing data, Research, News, Estimates, Fundamentals and Charts.
Alpha Terminal – real-time prices, news stories and charts with full tools for technical analysis and monitoring.
Research Houses – Balkerne Asset Management subscribes to in-depth research, analytical opinion and broker forecasts from specialist research houses, including Numis Securities Ltd, N+1 Singer and Stifel Nicolaus Europe Ltd.
Publications - we subscribe to various daily, weekly and monthly financial & research publications for background in the stock selection process