FocusIn making investments, Arlington primarily focuses on companies with:
- Low absolute valuations;
- Ownership of a product or franchise which is capable of generating higher returns;
- A robust balance sheet and net debt which is appropriate for both the cash generation profile of the business and the economic environment; and
- Capacity for change.
These companies tend to be concentrated in the small and mid cap segments and are often misunderstood or overlooked by the market. However, they offer great potential for improvement and share price appreciation.
Due diligenceFollowing identification of investment candidates, an extensive “due diligence” review is carried out, centred on validating our investment criteria, around the following issues:
Product or Franchise - Market position and barriers to entry
- Competitors, customers, suppliers
- Independent assessment / verification
- Likely threats
Potential returns- 5-year historic and 3-year forecast financial model
- Analysis of peer performance and potential returns
- Breakdown of path to target price
- Likelihood of a re-rating
Balance Sheet - Historic and forecast cash generation
- Likely cash calls
- Appropriate leverage structure
Management - Meetings to assess
- Analysis of past performance
- Willingness to engage
InvestmentOnce the pre-investment review has been satisfactorily completed performance and share price targets will be established as part of the investment decision. These will be closely monitored thereafter and the firm will engage with company managements where this is necessary in support of its investment case.
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Strategy & Processes
