TM REDWHEEL UK EQUITY INCOME R

Investment Process

The managers have two main pillars in their investment process. When it comes to generating new ideas, they look for fundamentally sound companies with a strong balance sheet and quality business model that are part of a healthy sector or market. They also look for stocks trading below their intrinsic value, but with growth potential. An example is iconic retailer Marks & Spencer, where Lance and Purves see value in its joint venture with online grocer Ocado and in the revival of its clothing business. Lance and Purves also look at core ideas. These are previously out of favour companies, where the fundamentals are improving but the shares are still trading at below intrinsic value. The managers believe that looking for intrinsic value reduces investment risk and provides smoother returns. They are looking to manage valuation risk, the potential for a decline in earnings for cyclical or secular reasons, high debt, and Environmental Social and Governance problems that could damage a company’s brand or end up in regulatory actions and fines. They also have a clear exiting process, deciding to offload companies whose share prices have performed well, and which are now above intrinsic value.