Investment Strategy
- To maximize the risk/return ratio Positions are actively managed to maximize total return potential
- To capitalize on the longer-term investment horizon unique to energy value chain assets- a capital intensive industry providing essential services
- Take advantage of shorter term themes through a discipline approach within a relative value framework
- Capitalize on event driven opportunities
- The investment strategy is managed for all market environments, emphasizing both top-down macro analysis and bottom-up fundamental research
- Total return focus with an emphasis on current income in a risk controlled framework
Investment Process
- ELCO employs sector expertise and an intensive bottom-up fundamental research driven process
- Top down themes are developed by analyzing current industry trends
- Positions are modelled and selected on several criteria including:
- Earnings leverage to broader themes
- Strength of management
- Potential upside to fundamental price target
- Earnings stability and growth potential
- Free cash flow growth potential
- Dividend/distribution coverage ratio and quality of cash flow
Risk Management
- We screen for fundamental, macro or political issues
- We sell when a change in the fundamentals place earnings at risk
- We keep the portfolio diversified to avoid concentration or systemic risks
- We reassess, then typically trim as a position nears its fundamental price target
- We employ relative downside targets
- We average down when the stock price is negatively affected by drivers which do not compromise earnings (market sentiment for instance)