The Cashflow Solution Process | What we offer | Liontrust Asset Management PLC
Liontrust - Cashflow Solution

The Cashflow Solution process

James Inglis-Jones & Samantha Gleave

Investment philosophy

The philosophy is based on the mistakes people make when forecasting. The fund managers believe stock prices are frequently mis-priced as they tend to reflect the often unreliable and, at times, completely misleading, forecasts of future profitability made by company managers. These understandable errors in profit forecasting seem to play a dominant role in setting investors’ expectations, as investors treat these forecasts as superior and underestimate the risk that they will be wrong.

The fund managers find, in contrast, that historical analysis of company cash flows is a more reliable guide to future profitability and stock price valuation in the medium term. Investors undervalue free cash flow, a fundamental building block of long-term growth, in favour of short-term profit forecasts. Investors’ focus on profit forecasts over fundamental value provides a consistent opportunity to add alpha.

Investment process

The fund managers focus on the historic cash flows generated and invested by companies to support their forecast profits growth. As forecasts are often unreliable, the scale of cash invested to support forecasts is key.

The fund managers seek to own companies that generate significantly more cash than they need to sustain their planned growth, yet are lowly valued by investors on that measure. They sell short stocks that are expensive, are struggling to generate any cash and are run by management investing heavily for future growth.

To identify companies’ annual cash flow, balance sheet development and valuation efficiently across all equity markets the fund managers have developed a simple screen as a starting point for further qualitative analysis. The investment screen consists of two cash flow ratios that are combined equally to highlight the process characteristics that they seek.

The two cash flow measures are:

  1. 1

    Cash flow relative to operating assets

  2. 2

    Cash flow relative to market value

Process documents

Further information can be found in the Liontrust Cashflow Solution Process documents.

Cashflow Solution Process: Equity Income



Cashflow Solution Process: Long-Only



Cashflow Solution Process: Long/Short


Liontrust Cashflow team
James Inglis-Jones & Samantha Gleave
The Cashflow Solution team

James Inglis-Jones and Samantha Gleave have 40 years of combined investment experience, first working together in 1998. James managed money previously at Fleming Investment Management and Polar Capital while Samantha was formerly at Credit Suisse and Bank of America Merrill Lynch.

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Ratings

FE Crown Rated - 5
Liontrust European Growth Fund
FE Crown Rating: 5
Rayner Spencer Mills - R Rated Fund
Liontrust European Growth Fund
RSM rated
Square Mile Rated A - Liontrust
Liontrust European Growth Fund
Square Mile rated: A

Latest fund updates

The Cashflow Solution team

Read the latest fund updates from the Cashflow Solution team.

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Citywire - Fund Manager rated A
James Inglis-Jones
Citywire Manager rating: A
Citywire - Fund Manager rated A
Samantha Gleave
Citywire Manager rating: A

Disclaimer:
• Past performance is not a guide to future performance. • Do remember that the value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested. Investment in Funds managed by the Cashflow Solution Team involves foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. • Some of the Funds managed by the Cashflow Solution Team invest in smaller companies. These stocks may be less liquid and the price swings greater than those in, for example, larger companies. • The European Growth Fund holds a concentrated portfolio which could mean that it will be volatile when compared to its benchmark. • The Global Income Fund's expenses are charged to capital. This has the effect of increasing dividends while constraining capital appreciation.

• The information and opinions provided should not be construed as advice for investment in any product or security mentioned.  • Always research your own investments and consult with a regulated investment adviser before investing.


Citywire information is proprietary and confidential to Citywire Financial Publishers Ltd ('Citywire'), may not be copied and Citywire excludes any liability arising out of its use. © 2017 Morningstar. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.  Past performance is no guarantee of future results.

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