Methodology using the example of ACATIS Aktien Global Fonds
The investment process begins with “finding” and “searching” for interesting companies. We differentiate between the two points due to the different time of consideration. When “finding”, we look at the current earnings and existing substance of a company; when “searching”, we focus on future potential and opportunities.
When “finding”, we start with database support. First, we limit the investment universe by specifying a minimum market capitalisation. We filter the remaining companies according to classic value indicators such as price-to-book value or price-to-earnings ratio. We also use artificial intelligence models as a filtering tool. The aim is to identify companies with high quality or those that are in a crisis and on the verge of a turnaround. Ideally, the company should also have a strategic competitive advantage (moat). This includes special technologies, manufacturing processes, patents or strong brands. We also attach great importance to good corporate governance and transparent accounting.
Our “search” is about identifying new trends, ground-breaking technologies or other innovations and the companies that could benefit from them. To do this, we attend specialist conferences, talk to experts and read specialist literature.
Once we have identified potentially attractive companies by “finding” and “searching”, we evaluate them and calculate their “fair” value. Our calculation is based on the valuation model developed by US professor Stephen Penman. The four most important key figures in the model are sales growth, operating margin, tax burden and the company's capital turnover.
If a stock fulfils our valuation criteria, we invest. We prioritise sectors that cover basic human needs (mobility, communication, energy, health, accommodation, consumption, food, money and security).
We review the weighting of the individual portfolio stocks on a quarterly basis using an attractiveness score calculated with artificial intelligence and historical volatility. If the outlook improves, we increase the weighting and vice versa.
The portfolio stocks are constantly monitored. We sell when a stock has reached its fair value, when we discover more promising companies or when there are warning signs that the company's financial situation could deteriorate, for example.
Fund management is based on the successful investment philosophy of Benjamin Graham, his student Warren Buffett and the latter's former partner Charlie Munger.
Benjamin Graham (1894 - 1976) conducted scientific research of value investing and successfully applied the method as an investor. He recognised that the real (intrinsic) value of a company does not correlate with the price at which the share is currently traded on the stock exchange. Rather, it is important to find the fundamental value of the share based on key indicators and therefore invest in companies that are traded at a low price (below their actual value) on the stock exchange.
Warren Buffett (born 1930) continued the method of Benjamin Graham. He recognised that “Value” and “Growth” are like Siamese twins. Growth is always a part of the value calculation. When selecting industries, Buffett focuses on basic human needs, added shareholder value, defensible market positions, competitive prices and a good business outlook. What matters is that the company is a solid and steady value creator with a wide moat.
While Charlie Munger (1924 - 2023) was six years older than Warren Buffett, he was the more future-oriented thinker of the two. The “Lollapalooza” effect described by him also plays an important role at ACATIS. “Lollapalooza” is a phenomenon in which technological breakthroughs, efficiency gains and large volumes come together to create value. The big benefit promises “better, cheaper, faster”. We are interested in companies that benefit from this “Lollapalooza” effect. They can become global market leaders.
All three role models and their strategies promise a lot of value growth over long periods, if applied correctly. An excellent example is our equity fund that was launched in 1997 - ACATIS Aktien Global Fonds.