TM CRUX European Special Situations I GBP

Investment Process

The fund has an investable universe of 3,000 continental European companies. Ideas are sourced from quantitative screens, around 350 company meetings a year, company/industry/analyst reports, and peer/customer reviews. The team focuses on four key criteria in its stock selection. They look for companies that are not highly capital intensive but generate good cash flow that is either invested in the business, put to work in mergers and acquisitions or returned to shareholders with higher dividend yields than usual. The team seeks companies with high barriers to entry and strong pricing power, enabling them to produce robust earnings with good growth potential. Pease likes firms with defendable global niches, companies that can expand by buying up small private rivals and he has a favourable view on family ownership. In addition, the team looks for businesses whose management have proven track records as well as meaningful stakes in the companies they run. Pease has no interest in “career jockeys” just there for the ride. Finally, they target companies that have relatively conservative valuations versus their competitors because if values are high then it is much harder to exceed expectations. Pease also shuns commodity-related business, most banks, those with regulatory risks such as telcos and utilities and firms which spend a lot of cash such as big oil groups. The process is almost entirely bottom-up with little consideration of economic factors. Pease believes it’s getting the company right that is important.