Pendo's entire staff dedicates the majority of its time to conducting research.
Pendo looks for businesses that have a high and sustainable return on invested capital.
It seeks companies with a distinct competitive advantage that is sustainable over extended market cycles.
A company cannot have excessive debt for its industry or business model. Appropriate debt is determined on a case-by-case basis.
Pendo will not pay a fair price for a security. It seizes opportunity for an appropriate entry point, which usually means when sellers are acting in distressed, confused, or misinformed ways.
Pendo's investment universe is all non-US companies (above micro-cap) that have as little-to-no business with, or dependence upon, the United States market and currency as possible. Of this large universe, many countries limit access for non-local investors. This leaves a standard universe of companies, traditionally listed as ADRs trading on an US-listed exchange. Most managers stop here. As a natural result, this pool of common international equities is over-represented by typical global and international managers, index funds and now ETFs. Pendo takes its security selection several steps further.
Pendo is not limited by the common restrictions that limit many strategies. As such, Pendo does not adhere or "cling" to a benchmark. The investment objective is absolute return. The strategy is agnostic with regard to market cap, sector, geography, ADR or ordinary shares, developed or emerging markets, etc. This vastly expands the universe of available investments, allowing access to companies needlessly ignored by most international and global strategies.
Pendo conducts macro-economic research to determine developing secular trends across global economies. Investment themes are then developed incorporating geography, industry, as well as sectors that will remain "necessary" to a growing economy and the attendant middle class, and that which may benefit from such long-term secular growth. This is accomplished by purchasing companies that have a long-term competitive advantage. They should maintain high barriers to entry (often in implicit or explicit partnership with their government) and are a "necessary" business that is not easily replicable; in other words, cannot be "made" obsolete.
Pendo conducts a rigorous bottom-up fundamental analysis of all companies of interest. All analysis is based on public filings. Companies are valuated based on intrinsic asset value, sum-of-the-parts, as well as earnings as measured by historical or normal return on equity and profit margins. Great weight is placed upon strength of the balance sheet.
Typical areas of interest may include infrastructure, energy, communications, etc., and the hard and soft commodities that will be needed to sustain them, along with agriculture and all else that goes along with a growing, prospering middle class. We choose businesses with high barriers to entry, or the Graham & Dodd/Buffett "wide moat." Pendo is not interested in a business that is easily replicable, or one that can be "made" obsolete.
An investment meets our investment guidelines, at a discounted price.
The investment represents either new opportunity or a strategic hedge for the portfolio.
A unanimous decision is made by the investment committee.
Expectations met or exceeded
Risk/reward characteristics have changed or no longer meet our investment guidelines
Another investment idea, with more favorable risk/reward characteristics has been identified
We have misjudged or otherwise found an omission in our original analysis