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Investment Principles

Quality at a reasonable price offers the optimal path to maximise returns while taking limited long term risk

What does Nartex do?

Invest in the 20-25 highest quality global businesses at a reasonable price

What is quality?

Businesses that meet three criteria:

  • Sustainable cash generation;
  • Ability to reinvest capital at high returns; and
  • Long term runway for continued growth

Nartex invests in the best companies, facing long term favourable prospects and operating in attractive industries

These companies usually:

  • Have attractive market structures
    • Natural monopolies and oligopolies
    • Market leaders and market share winners
    • They do not compete on price, but rather brand, product quality, R&D
    • They provide benefits to both the consumer and the whole value chain
    • Sell non-discretionary or small ticket products
  • They are irreplaceable and enduring
    • High barriers to entry with unique IP – trademarks, licenses, patents, high switching or replacement costs
    • Competitive advantages – benefits of scale, long lasting network effects
    • Extremely hard to disintermediate or be disrupted
  • High growth industries
    • They benefit from structural trends (e.g. population aging, digitization, outsourcing, passenger growth, etc.)
  • Management teams with talent and good corporate governance
  • Low leverage

What Nartex does NOT do?

Do not speculate or invest on the basis of macroeconomic expectations:

  • Do Not try to guess where the market is going
  • Do Not try to predict the economic cycle
  • Do Not invest in situations with highly volatile variables that are outside the company’s control
  • Do Not invest in vulnerable or non-resilient companies
    • Commodities – oil/gas; metals, mining, gold, etc;
    • High FX risk;
    • Where the political situation can change the fund’s investment thesis substantially

    The above Don’ts reduce the sectors and universe of investable companies drastically, limiting the investment universe to very few companies – the global winners (Nartex does not invest in banks, insurance companies, utilities, automotive, mining, oil etc.)

Why does Nartex believe this is the optimal strategy?

Historical data, theory and experience confirm this.

Empirically, the MSCI World Quality Index (a crude way of identifying quality) has delivered almost 3x more absolute return than the global index, the value index or the growth index over the last 40 years.

Past performance is not indicative of future results. Source: Bloomberg.

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