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QG

Jensen Quality Growth Fund

Process

We conduct fundamental analysis of the qualifying businesses on a bottom-up basis without regard to sector, industry group or market capitalization. To determine future value creation, we analyze both the growth and the use of free cash flow to benefit shareholders. Our proprietary discounted cash flow analysis and other metrics allow us to determine what we believe to be the full value of the business. We will purchase the stock only when its current market price represents a discount to our valuation.

Investment Process

Step 1

The Jensen Quality Universe™ + Market Cap

Our annual selection process pares down 4,000 publicly-traded U.S. companies, creating a focused universe of approximately 250 to perform further screening.

  • ROE greater than 15% for each of the last ten years as determined by the Investment Team
  • Market capitalization above $1 Billion
Step 2

Quality + Growth Screen

Identification of quality growth companies on which to perform due diligence.

  • Growth potential
  • Margin strength and consistency
  • Business returns
  • Financial strength
  • Other quality characteristics
Step 3

Due Diligence

40-50 quality growth companies for potential inclusion in client portfolios.

  • Assess sustainability of competitive advantages
  • Identify growth drivers
  • Determine free cash flow potential
Step 4

Portfolio Construction

Approximately 25-30 portfolio stocks selected that we believe should offer potential long-term returns with less volatility than the overall securities market.

  • Identify undervalued securities
  • Individual positions of 1% to 7.5%
  • Sector limit of 30%
  • Position weights reflecting conviction level

Sell Discipline

Our sell discipline monitors the key tenets of our buy discipline: sustainable competitive advantages, growth, value creation and price. We will sell a company if:

  • Company fundamentals deteriorate below our minimum business standard of a 15% return on equity, on an annual basis, indicating a possible loss of competitive advantage
  • The market price of a business exceeds our estimate of full value
  • It is displaced by a better investment that allows an upgrade to the portfolio’s quality, growth outlook and/or valuation metrics