4 Key Ways We’re Different
1. Our Definition of Quality is Qualitative
We invest in quality. Many money managers say that, but our approach is different. Companies that fit our definition of quality are rare. We look beyond the numbers — profits, balance sheet figures — to the qualitative characteristics of a business that enable it to weather good economic times and bad. We search for companies whose business model is not only competitive but sustainable.
2. We Think of Ourselves as Business Analysts
Market analysts look at how the market is doing. We research businesses. We walk the factory floor, talk to customers and competitors. We dig deep to understand the relationship between the qualitative and the quantitative, which we believe enables us to assess the sustainability of a company’s success more accurately.
We also work to understand the entire competitive landscape. Who’s coming up behind our company? Who’s looking to take their market share? Is our company prepared for the fight?
3. We Have a Different Timeline
While other analysts look out a few years, we want to know if a company will remain prosperous over the next 10 years and what our return on investment can be in that time frame.
4. We Invest in Businesses Rather Than Trade in Stocks
Because we’re looking only for the best companies out there, our portfolios are more concentrated than those of other portfolio managers. We generally invest in only 25-35 names. How do we feel about diversifying for less risk? The companies that we invest in typically exhibit lower business risk, lower balance sheet risk, and lower profit risk. Therefore, even though our portfolios are concentrated, they typically will exhibit lower risk characteristics than the benchmark given the high-quality nature of the companies owned.
At KAR, we are always trying to figure out how to do our jobs better and quicker, with better information to make better decisions. But our quality-focused philosophy remains consistent over time because we firmly believe it is the best way to preserve and create value for our clients.
This information is being provided by Kayne Anderson Rudnick Investment Management, LLC (“KAR”) for illustrative purposes only. Information contained in this material is not intended by KAR to be interpreted as investment advice, a recommendation or solicitation to purchase securities, or a recommendation of a particular course of action and has not been updated since the date of the material, and KAR does not undertake to update the information presented should it change. This information is based on KAR’s opinions at the time of the recording of this material and are subject to change based on market activity. There is no guarantee that any forecasts made will come to pass. KAR makes no warranty as to the accuracy or reliability of the information contained herein.