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:
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why a company’s customers do business with it and why they are prepared to pay its prices
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the likely direction of sales volume and prices, the level of industry competition and the availability of substitute products
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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
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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.
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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.
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Conservatively geared.
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