The investment process, which involves the monitoring and review of existing investments as well as analysing potential new investments, includes extensive research, company visits and industry studies, as well as economic analysis to help identify emerging trends and assist with the timing of transactions.
Argo uses sophisticated software to help collate and analyse the vast amounts of information and daily 'noise' generated by the share market, including forecasts and recommendations by brokers, company earnings guidance and other announcements and news events. This enables consensus estimates to be generated for comparison with our own forecasts and valuations.
The diagram below summarises the overall investment process.
Once an appealing potential investment is identified, all aspects of its operations, strategy, management and the relevant industry dynamics are rigorously investigated and analysed. The designated analyst prepares an internal report and recommendation which is subjected to peer review and debate. The following diagram illustrates the analytical process which culminates in the assessment of a quality score for each entity under consideration. Existing portfolio investments are also reviewed on a regular basis using this process.
The final consideration in making an investment decision is portfolio construction. This takes into account Argo's desire for appropriate diversification across sectors and industries to reduce risk, and the need to generate long-term capital growth and an ongoing dividend income stream which also grows over time. These factors are summarised below.