Sterling Equity prefers to invest in companies with the following characteristics:
- Businesses that we can understand and monitor without being overly reliant on management.
- A competitive position that is likely to sustain strong returns on invested capital. We analyse:
A strong management team and board with a track record of paying dividends and/or successfully deploying capital. Management must be trustworthy, competent and motivated to create shareholder wealth.
Relatively predictable earnings and an ability to at least maintain profits in most economic environments. We prefer businesses with little exposure to commodity prices, economic cycles and exchange rates.
why a company’s customers do business with it and why they are prepared to pay its prices
the likely direction of sales volume and prices, the level of industry competition and the availability of substitute products
the relationships a company has with its suppliers, its cost structure and the barriers a competitor would face if it tried to enter the market