Philosophy and Approach
Our Philosophy
Frontier’s investment philosophy is based on the belief that active, fundamental research adds value to the investment process. Cornerstones to this philosophy include the belief that over time stock prices tend to follow earnings progress and that stocks must be purchased and owned at reasonable valuations. Portfolios are constructed on a bottom-up basis, one stock at a time.
Approach
Frontier's philosophy is followed throughout the firm and across all strategies. Differences occur due to capitalization and style, rather than overall philosophy.
Business Model
- Identify long-term favorable secular trends
- Buy businesses with long-term competitive advantages
- Invest in strong management teams
- Own companies with potential for attractive returns on capital
Earnings Power
- Identify catalysts to drive above-average earnings growth potential
- Buy unrecognized "earnings power"—opportunities for sales acceleration, margin improvement and cash flow deployment
- Be willing to be early
- Scrutinize cash flow and balance sheet metrics
Valuation
- P/E Ratios—Buy stocks cheap relative to their "earnings power"
- Price/Sales—Seek opportunities and avoid high expectations
- Valuations need to be supported by cash flows
- Sustainability of growth is a key consideration
