Beyond Growth and Value, We Look for Quality.
Our Earnings Certain Portfolios are equity portfolios that hold companies which have demonstrated steady and highly predictable earnings growth over sustained periods of time by being well-insulated from boom-bust cycles.
We find these companies by looking for quality. But what exactly is quality? Our definition has just two parts: consistency and durability. That’s it.
We measure consistency and durability using four factors: Return on Invested Capital; EPS Linearity; EPS Growth; and FCF (Free Cash Flow) Conversion. Companies that can sustain these factors over long periods generally have significant business durability that insulates them from economic ups and downs, and from competition. This tends to lead to high returns on capital for sustained periods of time, leading to outperformance for long-term investors.
Metrics we use to measure consistency and durability include:
- Return on Invested Capital
- PS Linearity
- EPS Growth
- FCF Conversion