Through thematic investing we can identify industries and companies leveraged to structural growth stories that drive revenues and profits. Thematic investing has been around for a while, and many institutional investors have adopted this approach as a part of their investment strategy.

But until Macrovue, it has been out of reach for the everyday retail investor, especially on a global scale.

Our portfolios of shares are poised to benefit from long term structural changes in the global economy. Potential benefits include: incremental returns and/or a reduction of overall portfolio risk through diversification.

The Process of Creating a Vue

View the three steps involved in selecting the shares for a Macrovue thematic portfolio below.

Identify portfolio theme and relevant stocks

We identify a global theme or trend that we believe makes for a good compelling long term investment story. Our investment professionals use various databases, industry reports, third party research tools and reports to identify and track emerging themes and megatrends. Once we identify a theme, we screen the investable universe and create a list of companies which have exposure to the theme.

Run quantitative model to create shortlist

We have developed a proprietary multi-factor stock selection model to rank stocks by attractiveness. The model evaluates companies and provides Z-scores and quintile ranks for each of the stocks across five composite factors and provides an overall score. The factors used in the model are:

Measure of “cheapness” relative to peer group. It is based on metrics like earnings yield, free cash flow yield, EBITDA to Enterprise Value. Relative Value is the most important factor of the model.

Based on past earnings growth metrics and future growth according to industry analyst consensus estimates.

Evaluates quality of companies’ earnings. Based on factors like Return on Equity and Return on Assets.

Used to assess attractiveness of the stock from the perspective of dividend income potential. Metrics like dividend yield and dividend growth are used to calculate the Dividend Score.

Technical factor based on past price performance of the stock. We use quintile ranks of the Macrovue Score on the relevant list of stocks to help us filter out companies with unattractive characteristics and shorten the list for further analysis.

Conduct fundamental research to select stocks

In third stage of the process we conduct fundamental research on the companies in the short list. The qualities we look at include; sustainable competitive advantage, earnings growth potential, trading multiples and potential catalysts in the near term that could unlock shareholder value. We also factor in industry outlook and consensus earnings forecasts.

Apart from return potential of a stock, some primary considerations in constructing a portfolio, is to ensure geographic and industry diversification. Some of the themes straddle multiple sectors and/or industries containing companies across the value chain that have exposure to the theme. This process leads us to arrive at the final list of stocks that constitute a Vue.

Vue rebalancing process

The Vues are reviewed and rebalanced (if necessary) periodically or if necessitated by unexpected developments. We evaluate the stocks in the Vue on the basis of the metrics and characteristics set in our stock selection process. 

Our Recommendation & Review Committee evaluates the merit of the changes recommended by the research analyst and makes a decision on whether to proceed. On successful review, changes are implemented and clients are notified. Macrovue does not implement recommended changes in client Vues automatically. The client has discretion whether to follow through and implement recommended changes in their portfolio.

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