Superior returns with lower risk.
The Ash Park Global Consumer strategy operates a ‘Buy and Hold’ approach to the best consumer franchises in the world. History shows that these businesses can deliver superior earnings growth that, over time, leads to excess returns for shareholders. These higher long-term returns have also come with lower volatility, supported by brands which have been built over decades, and sometimes centuries. The critical factor in the success of these Consumer franchises is consistency; growth is steady and does not require lots of capital investment, giving scope for attractive dividends or share repurchases instead.
It is rarely the most exciting area in stock market terms in any one year, as it doesn’t produce the instant gratification that investors often seem to demand, but it is relatively immune from the cyclicality and technological or fashion changes that ultimately hold back returns elsewhere. We do not seek or expect to outperform any specific benchmark in the short and medium-term, but history shows that the superior growth of these businesses over the course of an economic cycle has always driven above-average returns in the longer-term. We are increasingly drawn to the opportunities amongst some of the smaller companies in our universe, where we believe our extensive industry experience will help us to find the winners of tomorrow to support those of today.
We believe our in-depth knowledge of these businesses enables us to make the right judgement on the wide range of Environmental, Societal and Governance issues, most notably where companies have not taken steps to make themselves superficially compliant. We do not believe external agencies are capable of creating a consistent check-list that can make ESG issues just a ‘box-ticking’ exercise, or that ‘compliance’ can be reduced to a figure on a scorecard. We also think that the direction of travel can be more important than the starting point on environmental issues, as those involved (for example) in the use of plastic bottles for drinks are best placed to drive both more use of re-cycled materials as well as an efficient system for returnables. The businesses we invest in are highly cash generative – and therefore have no need for external capital to grow – as such, we believe engagement is more likely than disinvestment to drive change where it is necessary.
We seek to invest with management teams that act both as stewards or custodians of brands, as well as owners of the business – the task is to make sure these brands will still be relevant in the next 50 or 100 years, rather than to maximise the (shorter-term) profitability. We have been delighted to see many of the companies in which we have invested be at the forefront of providing assistance to smaller businesses and communities during the COVID pandemic, and not reliant on government handouts or shareholders for their continued survival.