Project Main Details
The budget is $250 per video, for a total of $1,000.
**Each video is about 5 minutes or less. 2016-05-18 17:54:13 GMT 2016-05-19 09:04:41 (GMT -05:00) Eastern Time (US & Canada) Yes (click here to learn more about ) Closed - Note: This project was manually closed by the voice seeker before it reached its original deadline. 0 0 0 direct invitation(s) have been sent by the voice seeker resulting in 0 audition(s) and/or proposal(s) so far. Voice123 SmartCast is seeking 10 auditions and/or proposals for this project (approx.) Invitations sent by SmartCast have resulted in 0 audition(s) and/or proposal(s) so far.
The most important fundamental is high quality. But, the term high quality means different things to different investors. To fully understand our investment approach, we want our clients to understand what we look for in companies that we call high quality:
Sustainable growth, Low debt-to-equity ratio; High free cash flow, High and stable ROE and ROA and strong and growing margins. If a company has all of these attributes, it will generally have a wide moat.
An “economic moat” is a set of attributes that indicate how likely a company is to “keep competitors at bay for an extended period.” It’s a simple concept really, like a moat protects a castle, certain characteristics empower a business to sustain its growth. While there are many moat attributes, the ones we look for include:
Patents/trademarks, Economies of scale, Brand Power and
Let’s look at a few examples. Company A is a high quality name that has been a cornerstone position in our portfolios for nearly a decade. Why are we so confident in Company A’s potential?
First off, it’s a household name. It’s a smartly diversified company with 32 brands, each generating $1 billion in annual revenue.
It’s also diversified by geography. Company A operates in 197 countries. What’s more, 44% of its revenue is from emerging markets, so it’s capturing consumer growth in developing countries, where people want to better their lives with aspirational products.
Let’s dig a little deeper by looking at Company A s balance sheet. It’s net debt-to-equity ratio is 30%. It generates free cash flow, which it pays back to shareholders in the form of dividends and share buybacks. We think Company A can sustain its growth with low capital expenditures.
Company A’s senior executives manage its portfolio of assets well. Management draws upon the strength and history of a 100 year old company.
Perhaps best of all, Company A is not a cyclical company. Consumers will buy Company A’s products - baby and pet food, bottled water and ice cream - in both good times and bad.
For comparative purposes, let’s look at another company that is also an industry leader, but one that we do not view as high-quality. Company B is the number one global containership operator in the world, with 15% market share. It has many compelling attributes, such as high margins, but it does not meet our criteria for investment.
First, its earnings are cyclical because the business is subject to the level of available demand for shipping capacity at a certain point in time. While it is diversified into other businesses and geographies - its oil and gas subsidiaries are subject to the price swings of commodities.
Unlike Company A, Company B is a high capital intensive business that reinvests its cash right back into the company in order to sustain itself. As you can see, even though its cash flow has steadily increased since 2005, nearly all of it is re-invested in the business. As a result, it has little cash left to return to shareholders.
While both companies can perform well - here’s where we illustrate why Company A is a high quality stock. Since 2005, Company A’s return on equity is higher and more stable than Company B’s, in the 16%-21% range. While Company B’s ROE is lower and much more volatile: -5% to 17%. We believe stabile, high ROE serves as octane to long-term EPS growth.
Consistent and sustainable earnings per share growth is the defining characteristic of a quality company. Clearly Company A’s EPS growth has bested Company B’s over the past 10 years.
Our core investment philosophy is that earnings growth drives price performance . So when we break down the return components of Company B, we see that the overwhelming majority of its returns are from multiple expansion, and its earnings growth is actually negative - this is highly speculative, less predictable, and not repeatable over the long term.
On the other hand, the overwhelming majority of Company A’s returns are generated from earnings growth and dividends. We believe earnings growth for sustainable powerful businesses is repeatable over the long term.
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