Our goal is to protect and build our clients’ capital. We think like owners, and focus on earning strong long-term absolute returns without taking excessive risks.
We employ a quality-value investment approach to preserve and grow our clients’ capital over the long term. Quality-value investing is based on investing in great companies when we can buy them for less than they are worth and holding them for the long term.
Our investment philosophy guides us to:
- Focus on research - Intensive research into individual companies and their management is the critical process that supports our investment decisions
- Remain patient - We take a long-term view because it takes time for the quality and value of our companies to be realized by the market
- Invest globally - We invest in quality companies across the capitalization spectrum, wherever they may be found in the world
Research & Patience
The value of an investment opportunity comes from the quality of a company’s business and the price we are willing to pay for it.
We start by narrowing the vast global investment universe to a subset of companies that have characteristics of quality, and those that fit within our “circle of competence” – the companies and industries that we have the ability to understand thoroughly.
1. Quality Investment Universe
2. Research Methodology
- Interview management teams
- Conduct site visits and other on-the-ground research
- Interview customers and industry experts
- Analyze financial statements
- Screen for quality and value characteristics
- Perform discounted cash flow analysis and other valuation techniques
- Identify and forecast key operating metrics
- Test balance sheet strength
3. QUALITY CRITERIA – WHAT WE LOOK FOR
- Strong barriers to entry and competitive advantages
- Attractive value proposition to customers
- Manageable macro, political, regulatory, and ESG risks – and ideally, some opportunities
- Capable, honest management
- Good capital allocators
- Interests aligned with shareholders and focused on long-term value creation
- Thoughtful ESG practices
- Long-term growth in free cash flow and intrinsic value
- High underlying returns on capital
- Resilience and an avoidance of high cyclicality
- Conservative debt levels
4. VALUATION ASSESSMENTIntrinsic value calculation: our estimate of a company’s true value
5. CONCENTRATED INVESTMENT PORTFOLIOSApproximately 25-40 holdings per regional geography
We compare our assessment of a company’s intrinsic value to the price at which it is available in the market. We remain patient, investing in a company when its market price is significantly lower than its intrinsic value.
The greater the difference between a company’s market price and its intrinsic value, the greater the margin of safety. Investing with a margin of safety helps to protect and grow capital over time. Ultimately, over the long term, we expect a company’s market price to align with our estimate of its intrinsic value.
The types of companies we seek have a history of increasing their intrinsic values as they continuously improve and grow their business. We look to invest in companies that never close that gap between price and value. Investing in these types of businesses will drive most of the value creation for shareholders over time.
One Equity Approach, Applied Globally
Our Chief Investment Officer oversees seven equity teams with specialized investment expertise in Canada, the U.S., Europe, Asia and Emerging Markets.
The structure of our teams empowers the people with the deepest experience to make decisions. Each equity team is led by a single Portfolio Manager who has full accountability and autonomy over the team’s mandate, within the limits of Burgundy’s investment philosophy and the guidelines set by our Chief Investment Officer.
Portfolio managers, together with the dedicated and experienced analysts who support them, spend their time building a deep understanding of the investment opportunities within their geographic mandates. The combination of senior established investment managers with like-minded analysts encourages collaboration, stability and succession within each equity team.
Working from our hub in Toronto, Canada, our Investment Team’s research includes frequent travel to gain first-hand knowledge of companies and their management teams. We choose to dedicate resources to travel because we believe it leads to deeper insights about the companies we invest in. This combination of on-the ground experience and a localized team allows us to create a truly global perspective.
Our Fixed Income Approach
Our approach to fixed income investing is based on rigorous fundamental analysis. We thoroughly analyze financial and business risks, management quality and capital structure to assess a corporation’s ability to meet its debt obligations. Combined with our assessment of relative value, based on incremental yield, we invest in fixed income securities that offer the most attractive risk-reward proposition.
Evaluate Company’s Ability to Service Debt
- Industry dynamics
- Barriers to entry
- Capable, honest management
- Alignment of interests
- Attitude towards capital allocation
- Level and profile of debt
- Stability of cash flow
- Bondholder protection (covenants)
Determine if Incremental Yield Compensates for Risk of Default
Capital preservation is paramount in our approach to fixed income investing. We invest in corporate bonds when our fundamental analysis combined with our relative value assessment demonstrate that our clients will be compensated for the inherent risks.
Interested in learning more about our approach?Contact Us