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

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

James Inglis-Jones and Samantha Gleave first worked together in 1998. James has previously managed money at Fleming Investment Management, JP Morgan Fleming and Polar Capital while Samantha formerly worked at Sutherlands Limited, Fleming Investment Management, Credit Suisse First Boston and Bank of America Merrill Lynch.

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Key Risks

Past performance is not a guide to future performance. Do remember that the value of an investment and the income generated from them can fall as well as rise and is not guaranteed, therefore, you may not get back the amount originally invested and potentially risk total loss of capital. 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. The Liontrust European Growth Fund holds a concentrated portfolio of stocks, if the price of one of these stocks should move significantly, this may have a notable effect on the value of the respective portfolio. The Liontrust 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, an offer to buy or sell units/shares of Funds mentioned, or a solicitation to purchase securities in any company or investment product. Always research your own investments and (if you are not a professional or a financial adviser) consult suitability with a regulated financial 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. © 2022 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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