CCLA Better World Global Equity

Investment process

CCLA believe that over the long-term, share prices are driven by fundamentals: growth in earnings and cash flows. They aim to look beyond the short-term noise in the market – to buy and hold quality companies at attractive valuations, which can grow and compound their cash flows at high rates of return over the long-term (defined as any rolling period over five years).

Their philosophy is to find these companies by looking for four different characteristics. Firstly, they want companies that have enduring competitive advantages, as these companies will likely benefit from cost advantages and have brand power. They also want companies that have multiple sources of growth which can be resilient through the economic cycle; and companies that have a track record of using their capital efficiently. Finally, CCLA look for companies that have stringent ESG standards.

They start their screen with a universe of 8,000 names. CCLA believe that legislation, regulation and changing societal preferences will impact negatively on the most unsustainable business models. As a result, the team will screen companies that score poorly on financial and ESG standards which reduces investment universe to between 150-200 names. They then analyse each business by assessing their fundamentals and risk and return potential. They will buy a stock only when they have established a clear investment case and can justify the upside from the current share price with a ‘margin of safety’. This typically leaves them with a portfolio of 70-90 names.