{"id":7411,"date":"2020-11-12T09:40:20","date_gmt":"2020-11-12T14:40:20","guid":{"rendered":"http:\/\/online.lba.ca\/standing-the-test-of-time-letko-brosseaus-investment-principles\/"},"modified":"2021-07-20T14:04:37","modified_gmt":"2021-07-20T18:04:37","slug":"standing-the-test-of-time-letko-brosseaus-investment-principles","status":"publish","type":"page","link":"https:\/\/www.lba.ca\/us\/standing-the-test-of-time-letko-brosseaus-investment-principles\/","title":{"rendered":"Standing the Test of Time &#8211; Letko Brosseau\u2019s Investment Principles"},"content":{"rendered":"<p>[et_pb_section bb_built=&#8221;1&#8243; fullwidth=&#8221;on&#8221; next_background_color=&#8221;#000000&#8243; _builder_version=&#8221;3.22&#8243; hover_enabled=&#8221;0&#8243;][et_pb_fullwidth_header background_overlay_color=&#8221;rgba(0,0,0,0.55)&#8221; _builder_version=&#8221;4.9.0&#8243; title_font_size=&#8221;50px&#8221; subhead_font_size=&#8221;15px&#8221; background_color=&#8221;#ffffff&#8221; background_image=&#8221;https:\/\/www.lba.ca\/wp-content\/uploads\/2020\/11\/shutterstock_676845610__Small.png&#8221; 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box_shadow_spread_button_one_tablet=&#8221;0px&#8221; box_shadow_horizontal_button_two_tablet=&#8221;0px&#8221; box_shadow_vertical_button_two_tablet=&#8221;0px&#8221; box_shadow_blur_button_two_tablet=&#8221;40px&#8221; box_shadow_spread_button_two_tablet=&#8221;0px&#8221; text_shadow_horizontal_length=&#8221;text_shadow_style,%91object Object%93&#8243; text_shadow_vertical_length=&#8221;text_shadow_style,%91object Object%93&#8243; text_shadow_blur_strength=&#8221;text_shadow_style,%91object Object%93&#8243; text_shadow_horizontal_length_tablet=&#8221;0px&#8221; text_shadow_vertical_length_tablet=&#8221;0px&#8221; text_shadow_blur_strength_tablet=&#8221;1px&#8221; vertical_offset_tablet=&#8221;0&#8243; horizontal_offset_tablet=&#8221;0&#8243;]<\/p>\n<h1>Standing the Test of Time<\/h1>\n<h1>Letko Brosseau\u2019s Investment Principles<\/h1>\n<p>October 31, 2020<\/p>\n<p>[\/et_pb_fullwidth_header][\/et_pb_section][et_pb_section bb_built=&#8221;1&#8243; prev_background_color=&#8221;#000000&#8243; 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header_5_text_shadow_vertical_length_tablet=&#8221;0px&#8221; header_5_text_shadow_blur_strength_tablet=&#8221;1px&#8221; header_6_text_shadow_horizontal_length=&#8221;header_6_text_shadow_style,%91object Object%93&#8243; header_6_text_shadow_vertical_length=&#8221;header_6_text_shadow_style,%91object Object%93&#8243; header_6_text_shadow_blur_strength=&#8221;header_6_text_shadow_style,%91object Object%93&#8243; header_6_text_shadow_horizontal_length_tablet=&#8221;0px&#8221; header_6_text_shadow_vertical_length_tablet=&#8221;0px&#8221; header_6_text_shadow_blur_strength_tablet=&#8221;1px&#8221; box_shadow_horizontal_tablet=&#8221;0px&#8221; box_shadow_vertical_tablet=&#8221;0px&#8221; box_shadow_blur_tablet=&#8221;40px&#8221; box_shadow_spread_tablet=&#8221;0px&#8221; vertical_offset_tablet=&#8221;0&#8243; horizontal_offset_tablet=&#8221;0&#8243;]<\/p>\n<p><em><i><span class=\"bigger\">This month, on the 33<sup>rd<\/sup> anniversary of the founding of our firm, we take the opportunity to share with you our guiding investment principles. Each of the six principles has a key role in our investment decision-making, and is applied consistently across all asset classes, for all clients.<\/span><\/i> <\/em><\/p>\n<p>\u00a0<\/p>\n<h3>Fundamental Approach<\/h3>\n<h5>In-house research drives all of our investment decisions<\/h5>\n<p>We believe that the success of our investments ultimately depends on the success of the companies we invest in. A business-minded, fundamental research approach is, thus, key to investment success. This work combines macro-economic forecasts of global economies with an analysis of trends in major industries and a detailed evaluation of companies.<\/p>\n<p>The investment team performs extensive independent field research. They regularly engage and speak with management, customers, and suppliers in order to validate industry and company dynamics. They review strategies, examine plans, and analyze future challenges and opportunities.<\/p>\n<p>The aim is to create a full picture of the company and its environment. We prepare detailed multi-year financial forecasts and draft an investment proposal for each investment candidate. These must then pass peer review and gain consensus. Regardless of years of experience or seniority, our portfolio managers must explain the reasons for their recommendations to their peers. This ensures adherence to our investment principles, enables an exchange of knowledge, and helps mentoring.<\/p>\n<p>Finally, each investment must be confirmed through continuous monitoring and validation. We adjust our views and long-term outlook as the economy, industries, companies and markets change.<\/p>\n<p>\u00a0<\/p>\n<table width=\"100%\">\n<tbody>\n<tr>\n<td width=\"25%\"><img loading=\"lazy\" decoding=\"async\" class=\"size-medium wp-image-4003 alignleft\" src=\"https:\/\/www.lba.ca\/wp-content\/uploads\/2020\/11\/Rohit-Khuller-200x300.jpg\" alt=\"\" width=\"200\" height=\"300\" \/><\/td>\n<td style=\"vertical-align: top; padding-left: 10px;\">\n<p><i><strong>The work we do is very granular. We want to understand the business as though we were to run it ourselves.<\/strong><\/i><\/p>\n<p><strong><em>\u00a0<\/em><\/strong><\/p>\n<p><strong><em>Rohit Khuller, MBA, CFA\u00ae*<\/em><\/strong><\/p>\n<p><em>VP Investment Management, Partner<\/em><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>\u00a0<\/p>\n<p>\u00a0<\/p>\n<h3>ESG Integration<\/h3>\n<h5>ESG factors are seamlessly integrated into our investment process and portfolio decisions<\/h5>\n<p>We believe that sound business practices, including strong corporate governance and responsible management of material environmental and social issues, help companies achieve greater success and financial performance over time. Conversely, companies that have poor ESG practices present risks that hinder their performance.<\/p>\n<p>Each analyst is responsible for investigating the environmental, social and governance risks \u2013 and the opportunities \u2013 companies in their coverage face. Most of the investment team has obtained the Fundamentals of Sustainability Accounting (FSA**) credential from the Sustainability Accounting Standards Board (SASB<sup>1<\/sup>), the industry leading accreditation for ESG investing. In addition, a senior portfolio manager has been designated as ESG Lead and is responsible for conducting an independent verification of each investment. The Lead presents third-party ESG research to the investment committee as each investment is made and follows up with an annual review of all companies in our portfolio.<\/p>\n<p>We are a member and active voice of the Canadian Coalition for Good Governance (CCGG) and are a signatory of the United Nations\u2019 Principles for Responsible Investment (PRI), a global framework for incorporating ESG issues into investment practice. We actively engage with our investee companies in our quest for sustainability, promoting effective corporate governance and business practices.<\/p>\n<p>\u00a0<\/p>\n<table width=\"100%\">\n<tbody>\n<tr>\n<td width=\"25%\"><img loading=\"lazy\" decoding=\"async\" class=\"alignleft size-medium wp-image-1418\" src=\"https:\/\/www.lba.ca\/wp-content\/uploads\/2020\/11\/Terry-Howard-200x300.jpg\" alt=\"Terry Howard\" width=\"200\" height=\"300\" \/><\/td>\n<td style=\"vertical-align: top; padding-left: 10px;\">\n<p><i><strong>Through ongoing, active engagement, we hope to contribute toward positive change.<br \/>We believe we can do good while doing well.<\/strong><\/i><strong><em>\u00a0<\/em><\/strong><\/p>\n<p>\u00a0<\/p>\n<p><strong><em>Terry Howard, MBA, CFA\u00ae*, SASB FSA** credential holder<\/em><\/strong><\/p>\n<p><em>Senior Portfolio Manager and ESG Lead, <\/em><em>Partner<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>\u00a0<\/p>\n<p>\u00a0<\/p>\n<h3>Price Sensitivity<\/h3>\n<h5>Distinguishing the difference between a great company and a great investment depends on understanding the difference between price and value<\/h5>\n<p>Price has meaning when compared to the underlying economic value of a company&#8217;s activities. Once the value of the company has been assessed by our investment research team, we then look at the price we need to pay for the company in the market. We are interested in the relationship between value and price and our objective is to invest at a justifiable price.<\/p>\n<p>We do not react solely to share price changes, rather, we react to changes in the price-to-value ratio. Thus, the evolution of a company\u2019s prospects and its intrinsic value also play an essential role. The economic value of an investment is determined by building forward-looking, multi-year financial models of revenues, costs, cash-flows, profits and dividends.<\/p>\n<p>We tend to avoid securities with a lot of valuation risk, or those that are too dependent on achieving extraordinary future growth. Our portfolios typically have lower price\/earnings ratios than the overall market. They also have higher current yields, trade at lower price-to-cash-flow and have higher margins based on true market value.<\/p>\n<p>\u00a0<\/p>\n<table width=\"100%\">\n<tbody>\n<tr>\n<td width=\"25%\"><img loading=\"lazy\" decoding=\"async\" class=\"alignleft size-medium wp-image-4005\" src=\"https:\/\/www.lba.ca\/wp-content\/uploads\/2020\/11\/Charmaine-Lim-Uy-200x300.jpg\" alt=\"\" width=\"200\" height=\"300\" \/><\/td>\n<td style=\"vertical-align: top; padding-left: 10px;\">\n<p><i><strong>We are trying to invest in the best opportunities, at the best prices.<br \/><\/strong><strong>That is the core of what we do.<\/strong><\/i><br \/><strong><em>\u00a0<\/em><\/strong><\/p>\n<p><strong><em>Charmaine Uy, MBA, CFA\u00ae*, SASB FSA** credential holder<\/em><\/strong><\/p>\n<p><em>Senior Portfolio Manager, Partner<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>\u00a0<\/p>\n<p>\u00a0<\/p>\n<h3>Long Investment Horizon<\/h3>\n<h5>While timing is always a challenge in investing, value is created over the long term<\/h5>\n<p>Economic forces often become more predictable when viewed over longer periods. As such, setting a long-term horizon allows investors to better understand and fully benefit from a company\u2019s growth. Notions of high returns over the shorter term often do not consider the time it takes for a commercial strategy to be formulated, put in place, measured, refined, and exploited.<\/p>\n<p>Achieving results depends on fundamental changes that can only occur over several years. A credible plan, capital investment, experienced management \u2013 and time \u2013 will deliver the return. The transformations required to deliver great returns are not always linear. Patience is a key ingredient in our investment process.<\/p>\n<p>\u00a0<\/p>\n<table width=\"100%\">\n<tbody>\n<tr>\n<td width=\"25%\"><img loading=\"lazy\" decoding=\"async\" class=\"alignleft size-medium wp-image-4191\" src=\"https:\/\/www.lba.ca\/wp-content\/uploads\/2020\/11\/Joel-Kaczor-200x300.jpg\" alt=\"\" width=\"200\" height=\"300\" \/><\/td>\n<td style=\"vertical-align: top; padding-left: 10px;\">\n<p><i><strong>Our portfolios are positioned for a 3 to 5 year horizon. We analyze economic cycles and the impact of secular forces, while trying to avoid being distracted by market noise.<\/strong><\/i><\/p>\n<p>\u00a0<\/p>\n<p><strong><em>Joel Kaczor, MSc, CFA\u00ae*, <\/em><\/strong><strong style=\"font-family: inherit; font-size: inherit; background-color: transparent;\"><em>SASB FSA** credential holder<\/em><\/strong><\/p>\n<p><em>Senior Portfolio Manager, <\/em><em>Partner<\/em><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>\u00a0<\/p>\n<p>\u00a0<\/p>\n<h3>International Perspective<\/h3>\n<h5>The depth and breadth of our research effort is international in scope<\/h5>\n<p>We believe that a research team organized along global sector lines is best positioned to evaluate and select investment opportunities and effectively diversify a portfolio. In our globalized world, financial markets are seamless and highly integrated. Economies are linked not only through trade, interest rates and growth, but also by international companies and investors. An investment strategy that is only focused on Canada, the U.S., or a given region stands to be blindsided and is untenable.<\/p>\n<p>As such, our research team has cultivated and developed deep international sector knowledge. We pursue knowledge and appreciation of global industry-shaping trends. We promote engagement with business managers to better understand corporate strategies and challenges.<\/p>\n<p>Our research team comprises professionals who are specialized by industry to ensure thorough knowledge of the sectors and economic regions they cover. \u00a0Collectively, they speak a total of thirteen languages. They travel abroad to visit investee companies, meeting with management and touring facilities, with the goal of making the best portfolio investments wherever a security may trade.<\/p>\n<p>\u00a0<\/p>\n<table width=\"100%\">\n<tbody>\n<tr>\n<td width=\"25%\"><img loading=\"lazy\" decoding=\"async\" class=\"alignleft size-medium wp-image-1408\" src=\"https:\/\/www.lba.ca\/wp-content\/uploads\/2020\/11\/Mila-Krassiouk-200x300.jpg\" alt=\"Mila Krassiouk\" width=\"200\" height=\"300\" \/><\/td>\n<td style=\"vertical-align: top; padding-left: 10px;\">\n<p><i><strong>Our team includes engineers, scientists, health and technical professionals \u2013 individuals with deep sector knowledge and relentless curiousity \u2013 and we ask them to apply that knowledge on a global scale.<\/strong><\/i><\/p>\n<p><strong><em>\u00a0<\/em><\/strong><\/p>\n<p><strong><em>Mila Krassiouk, MBA, CFA\u00ae*<\/em><\/strong><\/p>\n<p><em>Senior Portfolio Manager, <\/em><em>Partner<\/em><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>\u00a0<\/p>\n<p>\u00a0<\/p>\n<h3>Public Markets<\/h3>\n<h5>The characteristics of public markets \u2013 diversification, liquidity, transparency, low costs, and strong governance \u2013 reduce risk<\/h5>\n<p>When you buy shares listed on an exchange, the issuing company has met the financial requirements and is bound to report audited earnings on a regular basis according to strict standards. This may not necessarily guarantee good governance, but it does make it a public and visible issue. You know what you are investing in, and what it costs at any given time. You always have the flexibility to buy or sell your investment.<\/p>\n<p>Private markets, by contrast, are mostly opaque. Private equity investments are sometimes shrouded by unknown risks, long capital lock-in periods and infrequent (and subjective) pricing. Choice is limited and opportunities are not always available for purchase. Problems cannot always be disposed of.<\/p>\n<p>Transparency, known regulatory environments, and liquidity are key requirements. Therefore, we only invest in publicly-traded securities.<\/p>\n<p>\u00a0<\/p>\n<table width=\"100%\">\n<tbody>\n<tr>\n<td width=\"25%\"><img loading=\"lazy\" decoding=\"async\" class=\"alignleft size-medium wp-image-1416\" src=\"https:\/\/www.lba.ca\/wp-content\/uploads\/2020\/11\/Stephane-Lebrun-200x300.jpg\" alt=\"Stephane Lebrun\" width=\"200\" height=\"300\" \/><\/td>\n<td style=\"vertical-align: top; padding-left: 10px;\">\n<p><i><strong>We trade only in public markets because they provide liquidity and transparency.<\/strong><\/i><\/p>\n<p><strong><em>\u00a0<\/em><\/strong><\/p>\n<p><strong><em>Stephane Lebrun, MSc., CFA\u00ae*, <\/em><\/strong><strong><em>SASB FSA** credential holder<\/em><\/strong><\/p>\n<p><em>VP Investment Management, Partner<\/em><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>\u00a0<\/p>\n<p>\u00a0<\/p>\n<p>\u00a0<\/p>\n<p>[\/et_pb_text][et_pb_text _builder_version=&#8221;4.9.0&#8243; text_orientation=&#8221;justified&#8221; z_index_tablet=&#8221;500&#8243; 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header_5_text_shadow_horizontal_length=&#8221;header_5_text_shadow_style,%91object Object%93&#8243; header_5_text_shadow_vertical_length=&#8221;header_5_text_shadow_style,%91object Object%93&#8243; header_5_text_shadow_blur_strength=&#8221;header_5_text_shadow_style,%91object Object%93&#8243; header_5_text_shadow_horizontal_length_tablet=&#8221;0px&#8221; header_5_text_shadow_vertical_length_tablet=&#8221;0px&#8221; header_5_text_shadow_blur_strength_tablet=&#8221;1px&#8221; header_6_text_shadow_horizontal_length=&#8221;header_6_text_shadow_style,%91object Object%93&#8243; header_6_text_shadow_vertical_length=&#8221;header_6_text_shadow_style,%91object Object%93&#8243; header_6_text_shadow_blur_strength=&#8221;header_6_text_shadow_style,%91object Object%93&#8243; header_6_text_shadow_horizontal_length_tablet=&#8221;0px&#8221; header_6_text_shadow_vertical_length_tablet=&#8221;0px&#8221; header_6_text_shadow_blur_strength_tablet=&#8221;1px&#8221; box_shadow_horizontal_tablet=&#8221;0px&#8221; 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The certification qualifies one to be a financial analyst. To qualify for a CFA, one must have worked a certain number of years in the financial industry and must complete three levels of exams on all topics related to investing. CFA charterholders are required to adhere and annually attest to the CFA Institute Code of Ethics and Standards of Professional Conduct.<\/p>\n<p>** Fundamentals of Sustainability Accounting (FSA) Credential awarded by the Sustainability Accounting Standards Board (SASB) demonstrates in-depth knowledge of the integration of sustainability information into investment analysis. To qualify for the FSA Credential, one must complete two exams. Level I focuses on principles and practices and Level II focuses on application and analysis.<\/p>\n<p>&nbsp;<\/p>\n<p>The information and opinions expressed herein are provided for informational purposes only, are subject to change and are not intended to provide, and should not be relied upon for, accounting, legal or tax advice or investment recommendations.\u00a0Any companies mentioned herein are for illustrative purposes only and are not considered to be a recommendation to buy or sell. It should not be assumed that an investment in these companies was or would be profitable. Unless otherwise indicated, information included herein is presented as of the dates indicated.\u00a0While the information presented herein is believed to be accurate at the time it is prepared, Letko, Brosseau &amp; Associates Inc. cannot give any assurance that it is accurate, complete and current at all times.<\/p>\n<p>Where the information contained in this presentation has been obtained or derived from third-party sources, the information is from sources believed to be reliable, but the firm has not independently verified such information. No representation or warranty is provided in relation to the accuracy, correctness, completeness or reliability of such information. Any opinions or estimates contained herein constitute our judgment as of this date and are subject to change without notice.<\/p>\n<p>Past performance is not a guarantee of future returns. All investments pose the risk of loss and there is no guarantee that any of the benefits expressed herein will be achieved or realized.<\/p>\n<p>The information provided herein does not constitute investment advice and it should not be relied on as such. It should not be considered\u00a0 a solicitation to buy or an offer to sell a security. It does not take into account any investor&#8217;s particular investment objectives, strategies, tax status or investment horizon. There is no representation or warranty as to the current accuracy of, nor liability for, decisions based on such information.<\/p>\n<p>This presentation may contain certain forward-looking statements which reflect our current expectations or forecasts of future events concerning the economy, market changes and trends. Forward-looking statements are inherently subject to, among other things, risks, uncertainties and assumptions regarding currencies, economic growth, current and expected conditions, and other factors that are believed to be appropriate in the circumstances which could cause actual events, results, performance or prospects to differ materially from those expressed in, or implied by, these forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements.<\/p>\n<p>[\/et_pb_text][\/et_pb_column][\/et_pb_row][\/et_pb_section]<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Standing the Test of Time Letko Brosseau\u2019s Investment&#8230;<\/p>\n","protected":false},"author":9,"featured_media":0,"parent":0,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"LandingPage-CSS.php","meta":{"_acf_changed":false,"_et_pb_use_builder":"on","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"class_list":["post-7411","page","type-page","status-publish","hentry"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Standing the Test of Time - Letko Brosseau\u2019s Investment Principles - Letko, Brosseau &amp; Associates<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.lba.ca\/us\/standing-the-test-of-time-letko-brosseaus-investment-principles\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Standing the Test of Time - Letko Brosseau\u2019s Investment Principles - Letko, Brosseau &amp; 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