General Investing
GARP Approach to Investing in the Long Term
December 19, 2011Companies that can grow at sustainable rates, have recurring-revenue business models and products with disposable or relatively short life spans are the focus of a resilient, long-term investment approach, says Christian Sessing, CFA, Senior Equity Analyst and Co-Portfolio Manager at AMI Asset Management.
“Our belief is that to grow and to perform well over the long term, you need to perform well over multiple market cycles. We don’t believe in trying to hit homeruns, so to speak, in the good markets only to give it all back in the bad markets. Our goal is to maintain capital in those down markets,” he said.
Sessing likes Stericycle (SRCL), a disposer of medical waste, because of the stability of its recurring-revenue business model. He says SRCL has been able to grow in the mid-to-high single digits on an organic basis with additional growth through acquisitions.
“[Stericycle] has about a 10% market share in the U.S. and has been rolling up small regional players. It has also expanded internationally, and recently broke into new countries that have similar market dynamics to the U.S. in terms of high regulation of medical waste,” Sessing said. “It’s been an interesting name, and a good example of that recurring revenue that we like.”
