Behind each of the ICAP strategies is a practical, value-driven process, which historically has been successful in a variety of market conditions and has helped produce an enviable record of performance over time.
ICAP's investment strategy seeks to find underpriced large-capitalization securities that have a clear catalyst for significant price appreciation within a definable time horizon. ICAP focuses on exploiting market inefficiencies by combining its valuation discipline with dynamic catalyst identification through independent, fundamental, in-depth research. We conduct extensive analysis of worldwide economic and financial market trends. We check external sources for significant developments that could influence a company’s strategy, culture, and competitive landscape. By digging deeper, we strive to uncover values sooner than the market. Our investment team performs its own fundamental research on every company, including communication with top management, customers, competitors, and suppliers.
Identify Best Values Identify Catalysts Portfolio Construction
- Identify Values – ICAP's analysts develop a target price based on fundamental research. Analysts concentrate on stocks that are undervalued by at least 15% and avoid stocks with the most negative earnings revisions.
- Identify Catalysts – ICAP's analysts identify catalysts - events they believe will be the driving force in increasing the stock's price within a 12-18 month timeframe. Stock-specific catalysts include: management, restructuring, problem fixing, new product, and pricing flexibility. ICAP also considers thematic catalysts that are dependent on macroeconomic or industry trends.
- Portfolio Construction
- Analysts Present Stock Recommendations to the Global Research Team - Once an analyst has identified a viable candidate, a comprehensive recommendation is presented to the Global Research Team. The presentations must include a thorough review of the valuation analysis and catalyst identification along with the supporting fundamental research. ICAP’s analysts must also discuss the potential risk factors.
- Investment Committee Votes on New Stock Ideas - The Investment Committee is composed of ICAP’s most senior investment professionals. The Investment Committee analyzes, discusses and challenges each recommendation and votes on stocks for inclusion in the portfolio.
- Portfolio Management - The day-to-day portfolio management is done by Jerrold K. Senser, Co-Chief Investment Officer and Chairman; Thomas M. Cole, CFA, Senior Executive Vice President, Co-Chief Investment Officer, and Portfolio Manager; Andrew P. Starr, CFA, Executive Vice President, Director of Research, and Portfolio Manager; Matthew T. Swanson, CFA, Executive Vice President, and Portfolio Manager; and J. Christian Kirtley, CFA, Executive Vice President, and Portfolio Manager. As Portfolio Managers, they have the final responsibility for stock selection and portfolio weights.
- Risk Management and Sell Discipline – We believe it is important to control risk on a bottom-up, stock-by-stock basis. When stocks are evaluated for potential purchase, both valuation and catalysts are thoroughly vetted by the team. We believe our global macroeconomic analysis along with our company specific research provides a more robust framework allowing us to better understand each company's individual risk profile. Through our focused approach to investing we thoroughly understand why each stock is in the portfolio and closely monitor the dynamics of each individual security. We systematically evaluate each of the securities purchased on an ongoing basis. Key factors in determining if a stock will undergo a full team review are:
- The stock is underperforming
- Earnings estimates have deteriorated
- The catalyst has changed or disappeared
- Exogenous risks bring the investment thesis into question
Stocks are sold for specific reasons. We will act when:
- The stock has achieved its target price
- The catalyst has been violated
- A risk to the investment thesis has been identified
- Other candidates are more attractive
One of the primary reasons for ICAP's continuing success is the ICAP investment team. The senior team members are among the most experienced investment professionals working in the industry today. These veteran institutional money managers have been in the business, on average, for 23 years. To ensure consistent application of ICAP's investment philosophy, our analysts have been developed "in house" through a structured mentoring program with senior committee members. This program allows the experience of the team to be shared with the next generation and it facilitates better communication within each step of the investment process. In order to broaden their capabilities, our analysts generally earn their MBA and CFA designations early in their careers.
ICAP has worked with institutional clients for more than 40 years. We understand the importance of keeping our clients and consultants up-to-date on organizational changes, investment performance, and portfolio strategy. Client relationships are managed by senior professionals. Our client service team is extremely knowledgeable and can provide details on ICAP's investments, portfolio strategy, and outlook. We are committed to ensuring high-quality client service, which has been a hallmark of the firm throughout its history.