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30 Aug 2021

Foord — We find value

The savings industry likes to complicate matters by trying to place fund managers into a myriad of style boxes. Portfolio manager Ishreth Hassesn writes that Foord eschews manager style labels and just seeks to find value.

You may have seen how investment consultants label fund managers as having ‘growth’ or ‘growth at a reasonable price’ or ‘quality’ or ‘value’ or ‘momentum’ styles, or even a combination of several styles. These labels refer to the kind of companies they like to invest in and are mostly self-explanatory.
 
However, style definitions are not relevant for true long-term investors (like Foord). This is because, over time, good companies reflect many (if not all) of these style descriptors at various points in the business and market cycles. Sometimes a share price might be temporarily depressed and it may look like a ‘value’ share. In booming business cycles it will show ‘growth’ attributes, while during frothy stock market periods it might appear to be a ‘momentum’ stock, and so on. Value and growth are two sides of the same coin.

What does matter is the price you paid when you invested, and how cheap that price is measured against the future value of that business. Foord has always sought to buy quality businesses priced at less than what they are truly worth—and then hold them for the long term. If we find value correctly and then properly diversify the portfolio to manage risks, the long-term compounding of earnings growth will protect investors from the ravages of inflation.
 
This is, quite simply, what we call ‘value investing’. And to us, value investing is a very broad church. Sometimes we find value in the traditional sense—when a company is priced way lower than the value of its underlying assets (it may or may not be a quality business, and very often it’s not). The return from the investment comes when some catalyst closes the gap between price and underlying value. When this occurs, you must redeploy the capital into the next investment idea.
 
We also find value in high-quality, long-term compounding businesses that at first look expensive, but which offer good value based on how much we think they can grow in the coming years. Value for Foord is not only about what a company is worth today or next year, but more about what we think it will be worth in five, ten or fifteen years’ time. As such, we only need to make one decision—to buy (and never sell). This is the best kind of value to find, because it can deliver the most powerful long-term compounding.
 
We avoid style labels for good reason. You should be wary of them, too. We work hard to understand where a business will be in the future, then buy it at a good enough price such that the future value delivers a satisfactory return to our investors for the risk taken. And then we manage the risks by diversifying which is the only free lunch available to investors.
 
We find value. It’s as simple as that.

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