Stewart Investors Indian Subcontinent Sustainability

Investment process

The Stewart Investment philosophy is all about stewardship and long-term thinking - finding the right type of very high-quality businesses with good governance and management and then holding them for the long term. Capital preservation is critical.

The team tries to ignore the day-to-day volatility of the stock market and focuses on owning good quality businesses with strong balance sheets which will ultimately do well over time. Most firms do not meet the fund’s quality criteria meaning it is very different to the index. Valuation is a secondary concern to finding the right companies.

The team looks at quality in three ways. Firstly, management – it’s competence, integrity, track record and alignment with stakeholders. Secondly the franchise, or that the firm has necessary and responsible products and services with pricing power and sustainable growth. Thirdly the financials: are there resilient cash flows and profit margins and strong balance sheets?

Of these, management is considered to be the most important element of quality. The team must be able to trust management teams as good stewards of its clients’ capital. The team likes to build long-term relationships with company stewards and family owners.

The team prefers more defensive resilient businesses which are generally less affected by the economic cycle. It looks to invest for companies for more than 10 years from the point of investment, although obviously situations can change. There are some stocks in the portfolio which have been there longer than 25 years.

Stewart Investors Indian Subcontinent Sustainability is highly concentrated with around 35 stocks. The top ten holdings usually account for more than 40% of the fund’s value. The fund usually has little or no exposure to mining or oil, and generally has an overweight to more defensive sectors such as healthcare or consumer staples.