Philosophy

WaveStone believes that share prices over time typically reflect the growth in the level of a company’s earnings; and that markets are not perfectly efficient, leading to securities becoming mispriced. As a result we utilise a bottom up stock picking process to add value over the medium term.

The WaveStone investment philosophy aims to:

• Identify businesses which exhibit Sustainable Competitive Advantage (SCA). SCA is determined by the interaction of a company’s Corporate DNA and the underlying industry dynamics in which a company operates which are expected to deliver above market earnings growth over the medium to long term.
• Identify companies where the Board and Management have demonstrated a track record of effective capital allocation.
• Exploit inefficiencies  whereby  the  market  misprices  the  underlying  medium  to long  term earnings potential.

We only invest in large, proven business models with an equity market capitalisation of greater than $200m at time of purchase. Typically, the companies we invest in are prudently financed, well managed and have a track record of success. We apply growth, quality and valuation tests, positioning our investment style towards growth at a reasonable price (GARP). Our five year focus also tends to favour higher growth companies.

WaveStone believes that a company with the strongest corporate DNA that operates in the most favourable industry and economic conditions should have the most robust Sustainable Competitive Advantage.