PORTFOLIO CONSTRUCTION
Integrated Investment Approach
At Cordis we employ a highly integrated investment process, combining our rigorous fundamental company analysis with inimitable insights from our Medical Advisory Panel and Medical Device Industry Specialists in a cyclical, rather than linear, fashion.
Our investible universe is made up of the publicly listed companies that design and manufacture devices to treat critical chronic diseases. The other criteria that must be met for inclusion is that companies must have regulatory approval and a commercially available device, which reduces the risk of clinical trial failure in the portfolio.
Using the unique insights from our deep medical industry network we determine the most critical areas of healthcare and attempt to understand the key factors driving prevalence of disease and penetration rates of treatments. With these inimitable insights, we are able to identify trends and opportunities in the MedTech sector earlier than our peers.
We then narrow the investible universe down to a portfolio of between 20 and 40 stocks, through fundamental bottom-up analysis centred around quality and value filters. When evaluating the quality of a business we assess five key criteria: device technology, industry structure, management, profitability and balance sheet strength. We then calculate a valuation range for businesses that have met our strict quality criteria. When valuing a business, we focus on cashflows, not accounting earnings, because a business is only as valuable as the cashflows that an owner can take out. We build our own internal models, aided by external research, to come up with valuation ranges. Acknowledging that valuation is as much art as it is science, keeps us focussed on investing with as much margin as safety as possible.
Through this approach, we strive to own high quality businesses which we believe are primed to outperform over the long-term.