AXA Framlington UK Mid Cap Z

Investment Process

The fund’s portfolio construction begins with a top-down analysis of sectors and themes which are already or about to experience long-term growth, followed by bottom-up company fundamental and valuation analysis. St John likes to focus on quality companies, with low debt, and tends to avoid the often over-valued IPO market. The companies should be benefiting from economic, thematic tailwinds, expected profitability, growth prospects, pricing power and quality management. The team’s valuation analysis has a focus on free cash flow and return on capital combined with earnings yield and growth. The process puts a big emphasis on company meetings to get first-hand information and insight, as well as in-house analysis and external research. Whilst there are no formal sector constraints St John will always seek to ensure the portfolio is diversified by sector. It typically holds between 60 and 80 stocks with a maximum position size of 4%. He will sell if he sees examples of management inconsistency or dishonesty, profit deterioration or, on the plus side, extreme outperformance.