Our investment process includes two components: Fundamental Analysis and Risk Management
Fundamental Analysis
- We believe that in the long run, buying good companies at good valuations and shorting bad companies at bad valuations is the best way to generate outsized returns. Nothing is a substitute for in-depth financial analysis, management visits, and on the ground due diligence.
- We run a concentrated portfolio of long positions and employ a team of sector specialists. This allows us to have organic relationships with the companies we cover. We rarely “discover” new companies or themes. Instead, we strive to know the assets and management teams in our coverage whether we currently have a position in the portfolio or not. In this way, we can separate true opportunities from day-to-day noise.
- Our team relies on both public sources of information and proprietary bottom-up work to arrive at conclusions. Speaking to management teams and reviewing financial statements and models is just the first step of our process. We compliment that work by speaking with competitors, former employees and industry specialists. Additionally, we leverage our in-house data team to complement our understanding of the companies we study.
Risk Management
- We believe that in Latin America, stock picking is not enough to generate a strong risk/reward on a USD basis. FX and country risk are the best way to generate outsized losses.
- Equity investors in Emerging Markets sometimes forget that the biggest exposure risk they run in their portfolio is not necessarily specific stocks, but rather currencies. Often, the largest factor exposure of Latin America portfolios lies in single country macro risk and the underlying commodity exposure of a given country. That is why our risk management process is focused on assessing risk levels of different countries, and why we adjust our hedges so that our bottom-up decisions do not leave us overexposed to risky factors in the region.
- To determine country risk, we follow macro variables and political developments. We complement this work with a network of political scientists and economists on the ground in every country that we invest in.
HOW WE INVEST
Our investment process includes two components: Fundamental Analysis and Risk Management
Fundamental Analysis
- We believe that in the long run, buying good companies at good valuations and shorting bad companies at bad valuations is the best way to generate outsized returns. Nothing is a substitute for in-depth financial analysis, management visits, and on the ground due diligence.
- We run a concentrated portfolio of long positions and employ a team of sector specialists. This allows us to have organic relationships with the companies we cover. We rarely “discover” new companies or themes. Instead, we strive to know the assets and management teams in our coverage whether we currently have a position in the portfolio or not. In this way, we can separate true opportunities from day-to-day noise.
- Our team relies on both public sources of information and proprietary bottom-up work to arrive at conclusions. Speaking to management teams and reviewing financial statements and models is just the first step of our process. We compliment that work by speaking with competitors, former employees and industry specialists. Additionally, we leverage our in-house data team to complement our understanding of the companies we study.
Risk Management
- We believe that in Latin America, stock picking is not enough to generate a strong risk/reward on a USD basis. FX and country risk are the best way to generate outsized losses.
- Equity investors in Emerging Markets sometimes forget that the biggest exposure risk they run in their portfolio is not necessarily specific stocks, but rather currencies. Often, the largest factor exposure of Latin America portfolios lies in single country macro risk and the underlying commodity exposure of a given country. That is why our risk management process is focused on assessing risk levels of different countries, and why we adjust our hedges so that our bottom-up decisions do not leave us overexposed to risky factors in the region.
- To determine country risk, we follow macro variables and political developments. We complement this work with a network of political scientists and economists on the ground in every country that we invest in.