A top-down look at the economy helps us put our asset allocation strategies into perspective and determine where we can add risk-adjusted value through sector concentrations and thematic overlays. 

Asset allocation

• Stage 1: Major asset classes
  
• Stage 2: Sector concentrations  
  
• Stage 3: Thematic overlays
  

Company Selection and Review
We rigorously assess each individual company based on its own merits and within the context of our overall economic outlook. 

• Macro suitability review
• Expected returns and risk review  

We take an old-fashioned view on quality; we demand potential investments, meet certain stringent requirements and base each decision on its own extensive merits.  

Profitability:
There's more than one way to look at profitability; we take a look at many measures and metrics, including:

• Return on Equity
  
• Return on Assets
  
• Free Cash flow Creation
  

Balance Sheet Strength:
A strong balance sheet is critical to any public companies sustainability. That's why we look closely at measures like: 

• Equity vs. Debt
  
• Fixed charge coverage
  
• Ability to internally finance operations
  
• Ability to manage debt
  

Stability and creation of Free Cash flow
Cash flow is critical to uninterpreted business operations and ability to drive growth forward. A couple of the measures we look at include: 

• Demonstrated cash flow creation
  
• Stability of historic cash flow 

Long term
Without sustainability, there can be no true value creation. We look at a company's ability to survive - and thrive - over the long-term to ensure we're providing the optimal risk-adjusted returns. We look at the following variables: 

• Income Statement – Will this company generate sustainable growth?
  
• Balance Sheet – Is this company’s financial strength strong enough to weather headwinds and take advantage of opportunities?
  
• Management – A strong management can be successful in a difficult industry. A weak management can fail in an industry with the wind at its back
  

Short Term
Short-term fluctuations provide potential for trading opportunities that ultimately create value; they enable us to move into positions that are under-valued and exit positions to secure returns. Some of the elements we consider include: 

• Current acro events and where are we in the economic cycle?
  
• How are a company’s earnings forecasts changing?
  
• Are year-over-year results following expectations? 
  

Soft Side
No company is without potential detractors. We try to look at every angle, even the ones not measured by a financial yardstick, including: 

• Does this company’s management demonstrate progressive corporate governance?
  
• Is social responsibility important to the management of this company?
  
• Am I proud to sponsor and invest in this company?

We believe tactical asset allocation is the key to providing the best possible risk-adjusted returns. Before we determine asset allocation, we take a look at a wide variety of factors:

• Economic outlook 
  

          - Global
          - Local

• Interest rate outlook
• Credit spreads and their relation to risk
• Capital market valuations
• Capital market emotional index
• Consumer market emotional index
• Market “Value” vs. “Growth” sentiment
• Sector Cycle

          - i.e. Consumer vs. Industrial vs. Resources