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What is Investing? An Art or a Science?

When investing one’s hard-earned money, a question always prevails about whether one should trust the passion of Art or the precision of Science?

Investing is generally referred to as an art of stock picking. This theory is broadly based on the judgement and experience of the investment manager. But with experience comes biases. So, what can help in overcoming the same?

The process and discipline of Science.

We at WhiteOak, feel that to achieve sustainable performance, one needs a combination of Art and Science. Art is the skills of the investment team, executed with the application of investment science.

Thus, our philosophy is to believe in “The Art and Science of Investing.”

We have defined the following four pillars of our investment model to help us stay true to our philosophy.

High calibre team of stock pickers with global experience

Well-resourced investment team with an average relevant experience of 12 years. Every senior sector analyst is paired with an investment analyst, forming two people team for every stock under coverage.

Bottom up stock selection philosophy honed over two decades

A simple bottom up stock selection philosophy which is that outsized returns can be earned over time by investing in great businesses at attractive values. We seek to invest in companies which present the most powerful combination of business and valuation.

Rigorous fundamental research process

We seek to generate alpha through bottom-up stock selection, based on intensive fundamental research and a proprietary rigorous analytical framework.

Balanced portfolio construction ensures stock selection driven performance

The objective of our portfolio construction approach is to ensure that alpha is driven by stock selection and does not get easily overwhelmed by non-stock specific risk factors over any reasonable time-period. We seek to maintain a balanced portfolio reflecting the stock selection capabilities and views of the team rather than being driven by non-stock specific macro factors such as market timing, sector, currency or other such factor exposures.

What’s More?

We bring the balance of Art and Science in our approach with a team of 35 investment professionals and processes regulated by our trademark OpcoFincoTM Model. A few more factors of our investment process are:

We have a simple yet powerful process of investing in businesses based on stock selection rather than betting on macro.
We believe outsized returns can be earned over time by investing in great businesses at attractive values. A great business is one that is well managed, scalable, and generates superior returns on incremental capital. Valuation is attractive when the current market price is at a substantial discount to intrinsic value. Bottom up stock selection forms the basis of everything we do and is the key return driver of our investment approach.
We seek to invest in companies with strong or improving fundamentals and do so when they are trading at a substantial discount to their intrinsic value.
We generally avoid businesses with weaker characteristics such as poor corporate governance, weak returns on incremental capital, and businesses that face substitution or obsolescence risk.

We look for investment opportunities that represent a powerful combination of business and value while avoiding weaker combinations. These are the two critical pillars of our investment philosophy – business and valuation.

To sum it up, we firmly believe that Investing is a combination of Art and Science and maintaining a balance between both.