Altrinsic’s emerging market investment process includes a diligent appraisal of a company’s quality, its valuation, and the prudent incorporation of risk management throughout the investment process. Quality is ultimately quantified by a company’s financial productivity, measured by its prospective cash flow return on invested capital or return on equity, considering its underlying cost of capital. We focus primarily on those companies that have delivered strong sustainable cash flow return on invested capital and those companies positioned to demonstrate improvement in financial productivity.
Long-term investment opportunities often arise when share prices trade below intrinsic value. This can occur for many reasons, including:
Market overreaction/dislocation: short-term overreactions to economic or political uncertainty, changing industry or competitive dynamics, or disappointing short-term earnings results that do not reflect the company’s true long-term earnings potential
Underappreciated sources of value creation: situations where markets may not be recognizing superior franchise value and its compounding potential, the company’s growth prospects in existing or new markets and geographies, the impact of new or existing management priorities and incentives, higher shareholder value from improved capital allocation decisions, better asset utilization and increased financial productivity
Risk management, including applying material Environmental, Social, and Governance (ESG) considerations, is embedded throughout the investment process to maximize the risk/return efficiency of the portfolio and limit unintended risks. Quantitative analysis, fundamental research, and portfolio risk controls seek to prudently address company-specific, macro, and overall portfolio risk.
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