Farringdon European Opportunities
What's in a name?
Farringdon is a bustling, popular, small borough in Central London. However, it wasn’t always the energetic place it is today. When two of the Fund's current portfolio managers lived there two decades ago, it was rather the opposite; fatigued and shabby, but with significant potential. The Fund's investment approach reflects the transformation that took place in the district of Farringdon. The investment team seeks to find companies that today may seem ragged and are priced accordingly, but are in fact future Farringdons in disguise.
Investment Philosophy
The investment team's mantra is, and will always be, that the price you pay for a company is the most important component in determining what the return will be. Valuation drives returns and for the team, this is not up for debate.
The Fund will be investing in companies that may be growing or declining; capital-intensive or capital-light; making stellar returns or sub-par returns; have good management teams or poor. We are style-agnostic when it comes to characteristics such as these. What matters is that the price paid is attractive given the riskiness of the stream of future cash flows the investment team expects will be generated by these businesses. The Fund's stock purchases are premised upon value and not popularity.
Contrarian
The team's strong conviction in valuation means that the investments tend to be contrarian. This is not a goal in and of itself. It is, however, very difficult to produce superior performance without doing something different from what the majority does. As it is central to the investment strategy of the Fund that valuation is the most critical determinant of future returns, it often means that the Fund invests in companies where pessimism is at its highest and the price at its lowest. Bargains will be found where other investors are selling – this may feel uncomfortable at times.
“In investing, what is comfortable
is rarely profitable."
Robert Arnott