SAGE’s Investment Philosophy

The 10 tenets and beliefs that form our Investment Philosophy are:

  1. The world’s most profitable companies generate the best returns. We focus particularly on companies’ ROE (return on equity). Breaking down ROE into its composite parts (profit margin, asset turnover, leverage) leads to an understanding of the sources of profitability and provides a better look at operating and asset allocation efficiencies. 
  2. “Take a simple idea and take it seriously” – to borrow from Charlie Munger of Berkshire Hathaway.
  3. Risk is a function of price. We take a value-based approach to investing, looking for excellent companies trading at prices below their intrinsic value.
  4. On average, average is average. We believe a great company’s value is much less volatile than its stock price, so we have built an investment process based on a belief in mean reversion to take advantage of stock price volatility. Using a disciplined, fact-driven approach, we add to positions below their historical averages, and trim positions above their historical averages (systematically buying low and selling high).
  5. Dividend growth is a proven driver of alpha. In the Canadian context, the dividend tax credit makes dividend-paying stocks of critical importance to long-term investing success. In the global context, dividends force management to be disciplined on capital allocation. Studies have shown that companies that hold on to profits instead of distributing them to shareholders tend to be plagued by excessive executive compensation, sloppy management, unproductive use of assets, and overpaying for acquisitions.
  6. Garbage in is garbage out. We invest only in companies with the highest reporting and governance standards (North America and developed Europe & Asia).
  7. Active management better serves investors. Investors (and society as a whole) pay a price when capital is allocated based on current market capitalization rather than true productive value.
  8. Win by losing less. The secret to long term investment success is capital preservation. As such, we take a conservative investment approach with an emphasis on risk management and minimizing drawdowns.
  9. Companies are 99% people and great people are attracted to companies with great environmental, social and governance practices.
  10. The world is constantly changing and advancing. We are committed to constantly learning and searching for ways to improve our investment management performance.