Investment Selection

Slater Investments employs an investment selection process that integrates rigorous, time-tested quantitative models with qualitative judgement. Slater Investments believes that investing in growth shares using value filters provides the optimal combination of risk and reward in the long term, particularly when combined with discipline, intellectual rigor and a healthy dose of common sense.

The different stages of our core investment selection process are outlined below:

Initial Screen

Our computers are programmed to screen the entire UK equity universe for the characteristics that we are looking for in a particular mandate. In developing the computer searches, we have deliberately introduced a bias. Our bias is growth. We unashamedly search for growth as the core to our process, be it pure growth, recovery or income. This core of growth coupled with other factors provides us with the margin of safety that helps to protect against downside risk.

  • Slater Growth Fund
    A "pure" growth fund, we programme for a below average PEG (a measure for quantifying the price of forecast earnings growth). A significantly lower PEG factor than the market as a whole provides a margin of safety. In addition, it leaves scope for an upwards status change in the PE ratio.
  • Slater Recovery Fund
    We have the growth programme as the core but it is supplemented by programmes searching for discount to net assets, companies trading at a discount to cash and recovery situations.
  • Slater Income Fund
    This fund does not have dynamic growth companies in the portfolio as these rarely pay dividends. The search is for companies that have rising dividends over a two year period.

This initial screen tends to reduce the UK stockmarket to a more manageable universe of shares which are then scrutinised in depth. We then weed out any companies which should not be valued on the basis of our initial screens -like any analytical tool, our screens should not be used out of context.

Further Analysis

We then apply further sieves, depending on the mandate. One of the first things we do is to check cash flow. Cash flow can give early warnings about creative accounting. We focus on companies with strong balance sheets, powerful competitive positions, high returns on capital and rising margins and sales per share. We interrogate company accounts and analysts' forecasts vigorously. We also place a great deal of emphasis on positive recent trading statements and directors' share dealings.

Meeting the Company

If we are still interested in a company at this stage, we meet with senior company management to get a greater understanding of the visibility of earnings and margins. We also focus on understanding both the opportunities and risks facing the business in the future.

 

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Investment Committee Meetings

At our weekly Investment Committee, we debate portfolio construction and which candidates, if any, should be added to each of the portfolios. One of three things will then happen:

  • The company is accepted as one that meets our investment requirements and a suitable investment will be made
  • The company is rejected as not meeting our investment requirements
  • Further work is still required to decide whether the company meets our investment requirements

 

 

Contact

Slater Investments Limited
Lisa Letham
T: 020 7220 9365
E: lisa@slaterinvestments.com

Financial Adviser Factsheet