Markets are constantly in a state of uncertainty and flux and money is made by discounting the obvious and betting on the unexpected.
GAM manages its equity allocation predominantly with the following principles in mind:
We invest in a total of 20 shares. This reduces company specific risk to the theoretical maximum level.
Our investment managers are restricted to investing no more than 5% of the equity allocation in any one stock (the 20 stocks are equally weighted) and 15% in any one sector.
Regarding the selection of stocks, GAM considers both technical and fundamental factors. Our criteria include:
Low debt levels
We invest predominantly in companies with low debt levels, particularly important post credit crunch.
Good earnings visibility
Good forward visibility of earnings ensures a company has the ability to survive an economic downturn.
We invest predominantly in good dividend-paying companies whose dividends are well covered. Stocks with good dividends are less affected by market volatility and over the long term, studies have found that dividend yield accounts for a greater proportion of total returns than capital gains.
We focus on companies that are inexpensive as measured by either price earnings multiples, price earnings growth or price to book value.
We only invest in companies we understand.
The categories of shares we purchase come under the following broad headings – core defensive, cyclical and thematic.