Investment Philosophy and Process

Investment Philosophy and Process.

Our proprietary investment process clearly articulates the probability of achieving our return objective

The foundation of Sigma's success is our proprietary Value: Risk Adjust investment process. As value investors we focus on not overpaying for future earnings as the price you pay for an investment will more than likely determine your future returns. However stocks can be out of favour for the very simple reason that a business is fundamentally undergoing substantial change, that can either be positive or negative over the medium to longer term. Deep expertise and rigorous analysis provides the pathway to understanding that change and capitalising on the differential in market expectations or the "variant perception". The greater variation the more likely excess returns can be captured. Furthermore, contrary to academic finance theories this can also be achieved with less risk.
Sigma's Investment Philosophy, Approach and Process document provides a detailed explanation of our Value: Risk Adjust methodology and Sigma's business model.

Sigma's Six Investment Tenets

The approach we take to deliver investment performance is summarised through Six Tenets that fundamentally underpin our investment framework: 

Tenet 1: Sigma's Return Objective

Sigma targets returns above the index benchmark over the medium to longer term while taking on less risk than the market overall.

Tenet 2: Sigma’s Fundamental Assessment of Risk

Sigma assesses risk in a business or fundamental sense measured relative to the business universe. A quantitative and qualitative approach is employed to derive our expectations for returns and the associated level of business risk.

Tenet 3: Sigma Targets Market Inefficiency

Sigma’s framework targets attractive risk-adjusted returns or market inefficiency where our perceptions of risk and return are sufficiently different to the market. This approach achieves returns with lower than average market risk.

Tenet 4: Sigma’s Medium Term Investment Timeframe

Sigma defines the medium to longer term as a 3-to-5 year timeframe over which period we are more certain the fundamentals for the portfolio as a whole will be recognised by the market.

Tenet 5: Sigma’s Portfolio Construction Starts With Valuation

The first step in Sigma’s process requires a comparison and selection of stocks on the basis of valuation. Expensive stocks are excluded from consideration. This is crucial to maximising the achievement of our Return Objective as the “maths are in our favour”.

Tenet 6: Sigma’s Portfolio Construction Concludes With Risk Adjustment

The final step in the process focuses on the risk-return or business risk-valuation tradeoff of the undervalued stocks to derive the relative weightings between stocks in the portfolio. This step is crucial in maximising the probability of achieving the Return Objective.
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