WCM believes that attractive returns can only be achieved by structuring portfolios distinct from the market indices. As a result, our portfolio has around 50 companies, concentrating on our best ideas. Our focus is on attractively valued, non-US organizations that are currently, or in the midst of becoming, dominant, industry leading companies. When selecting equity investments, our minimum time horizon is 3–5 years, as we are expecting this dominance is likely to continue well into the future.
The process begins with a series of quantitative screens to identify the most undervalued stocks within the $2B+ market capitalization universe. We use six primary factors: EPS revision trends, cash-flow/price ratio, book/ price ratio, trailing earnings/price ratio, dividend yield, and a net-net (working capital)/price ratio. In order to avoid value traps, we focus on consistency of earnings and relative price strength as additional criteria. Only the most undervalued 30% of all stocks screened are considered for initial investment. The companies surviving both the quantitative and relative strength screens are subjected to our fundamental analysis, with particular emphasis on the long term tailwinds of the business, and the anticipated change in their competitive advantages over time.
The investment universe is comprised of non-US businesses with at least $2 billion in market cap. Idea generation begins with a series of quantitative screens to identify the most undervalued stocks in the strategy's investable universe. To avoid value traps, WCM focuses on consistency of earnings and relative price strength as additional criteria. Only the 30% most undervalued of all the stocks screened are considered for initial purchase.