The fast view
- Wider adoption of ‘quality’ as a term and investment approach has led to both inconsistency and impurity in its definition, in our view. Our purist quality approach leads us to favour certain sectors over others, and within these sectors, we gravitate towards those stocks that possess specific quality attributes.
- We don’t have exposure to any of the ‘FAANGs’; our preference in the ‘Big Tech’ space is Microsoft. We typically prefer our technology-focused businesses to have subscription rather than transaction-based revenue models.
- In financials, we have historically avoided banks, preferring businesses that exhibit capital-light business models, highly differentiated competitive positions, structural tailwinds, or preferably a combination of these traits. We therefore have exposure to Moody’s and look towards financial software and savings platforms.
- Specialised software players can provide attractive exposure to some end markets that themselves tend to be lower quality, such as travel. For example, Booking Holdings – despite exposure to the cyclical travel industry – displays many of the characteristics we seek.
- We retain an unwavering belief that our consistent purist approach to quality investing can continue to compound intrinsic value and therefore shareholder wealth, so it is well suited to both current conditions and for uncertain times ahead.
Explore our purist approach
What is quality?
What is quality?
‘Quality’ is a term and an investment approach that has been increasingly adopted by investors in recent years given the long-term track record of this style of investing. However, this wider adoption has also led to inconsistency in the definition of ‘quality’. In particular, the lines have become blurred with growth investing, often causing confusion as growth has outperformed other styles – including pure quality – in recent years.
Ninety One’s Global Franchise strategy reflects a purer and more consistent expression of quality that is focused solely on what we believe to be attractively valued best-of-breed ‘Franchise’ companies with the following key attributes:
Key attributes
 Hard-to-replicate enduring competitive advantages |
 Dominant market positions in stable growing industries |
 Low sensitivity to the economic market cycle |
 Healthy balance sheets and low capital intensity |
 Sustainable cash generation and effective capital allocation |
In this piece we provide some examples of holdings to demonstrate how our purist quality approach leads us to favour certain stocks over others, even in seemingly similar parts of the market, and illustrate how we can still find quality even in lower-quality parts of the market. Even though our portfolio contains companies in different industries, they all possess the same core DNA that we believe will drive long-term outperformance over a full cycle.