WCM’s Investment Strategy Group (ISG), consisting of our senior investment professionals, makes all portfolio decisions. Our process begins with analysis and qualification of portfolio candidates, identifying great businesses based on positioning (we avoid businesses fighting “headwinds” and require a long-lasting “tailwind”), competitive advantage (we insist on a durable, strengthening economic moat) and corporate culture (one that values great people and sustains the economic moat). Portfolio construction then provides a high level of risk control through thoughtful diversification while best capitalizing on the expected growth of these great businesses. In particular, when contemplating the inclusion of any specific company into the Quality Global Growth portfolio, the ISG will consider how the business fits the portfolio from traditional perspectives such as sector/industry diversification and country/currency diversification, but additionally from the perspectives of tailwinds (e.g., demographics, global commerce, outsourcing, the growing global middle class, proliferation of technology) and competitive advantage types (e.g., economies of scale, switching costs, network effect, legal or regulatory). The final portfolio is built with these inputs towards the goal of solid upside participation and extraordinary downside protection.
WCM utilizes independent sources for analysis of individual companies and trends – not Wall Street reports. Investment ideas are diverse in source, including scuttlebutt research through our network, independent research firms, industry publications, financial media, and news events.
WCM seeks quality growth businesses with superior growth prospects, high returns on invested capital, and low or no debt. It also requires each company to maintain a durable competitive advantage – what management terms an economic moat. The ISG strongly considers qualitative elements such as corporate culture and the strength, quality, and trustworthiness of management. WCM is sensitive to valuation and will avoid companies with limited or spotty histories. The ISG concentrates its efforts on large established multinationals, with a primary emphasis in the large cap space. Unlike other global growth managers, WCM generally passes on businesses in leveraged, non-growth sectors such as energy, basic materials, utilities, or financials. Instead, WCM focuses its attention on conventional growth sectors like technology, consumer discretionary, consumer staples, and health care.