Consumer Alpha™: An investment philosophy based on human nature.
Consumer Alpha™ is the driving tenant of Infusive’s investment framework. On the conceptual level it is based on the understanding that consumers themselves drive the performance of the most enduringly successful companies by purchasing products that make them happy.
The quest for happiness is a basic human desire. It has and will always persist. Consumers continually demand products that satisfy this pursuit for pleasure and will go the extra mile, and eagerly pay a premium, to obtain them. Broadly speaking, the companies that can provide these products are therefore advantaged in terms of resilient and inelastic consumer demand dynamics.
From an investment perspective this usually manifests itself in stable and growing revenues, high margins and lofty returns on capital. Over the long run Consumer Alpha™ companies have a history of delivering consistent returns.
Infusive’s Consumer Alpha™ investment products look to invest in companies that generate a rate of return over and above their cost of capital and have the ability to compound this return over a prolonged period of time. In selecting the companies that we believe are best placed to deliver these returns, we look for four critical elements:
- The presence of Consumer Alpha™
- Favourable industry dynamics
- Deep economic moats
- Reliable stewardship of capital
Once satisfied, we then seek to invest in these businesses at attractive valuations.