Investment Approach - Process
We seek to gain insights in the world's most attractive growth investment opportunities through the careful study of individual companies and the competitive dynamics of the global industries in which they participate.
Our investment process proceeds in four stages:
Mutual Fund investing involves risk. Principal loss is possible.
The Harding Loevner Funds are distributed by Quasar Distributors, LLC.
Preliminary Qualification
Analysts apply quantitative and qualitative screens to fundamental data and draw on their experience to identify companies that exhibit four key characteristics: financial strength, durable growth, capable management, and competitive advantage. Identified companies, regardless of current share price, advance to Stage II for in-depth analysis.
Mutual Fund investing involves risk. Principal loss is possible.
The Harding Loevner Portfolios are distributed by Quasar Distributors, LLC.
Fundamental Analysis
Through the study of financial statements and disclosures, direct interaction with management, and extensive internal discussion, we seek to understand the business model of each company identified in Stage I. Our company scoring system—the Quality Quotient ("QQ")—serves as a common framework for evaluating the rate, duration, and risks of each company's prospective earnings growth. Those companies that we confirm meet all our growth and business-quality investment criteria advance to Stage III for valuation.
Mutual Fund investing involves risk. Principal loss is possible.
The Harding Loevner Portfolios are distributed by Quasar Distributors, LLC.
Valuation
We estimate the intrinsic value of each company found to meet all our criteria. An analyst prepares long-term earnings and cash projections using return-on-investment models and DuPont return-on-equity decomposition. The analyst then estimates the intrinsic value of the company's shares using these projections and a risk factor derived from its QQ score, and compares this estimate to the current market price. The analyst also establishes fundamental "mileposts" for business results that the company must achieve for the valuation to remain valid. The analyst's findings are compiled and circulated within the investment team for consideration and comment. At the conclusion of Stage III, the analyst issues an initial "buy", "hold", or "sell" recommendation based on the shares' potential return relative to its industrial sector; thereafter, the analyst monitors the recommendation and revises as necessary.
Return on Equity: the net income divided by total common equity outstanding, expressed as a percent.
Mutual Fund investing involves risk. Principal loss is possible.
The Harding Loevner Portfolios are distributed by Quasar Distributors, LLC.
Portfolio Construction
Portfolio managers construct, for each investment strategy, a single model portfolio that serves as a template for the management of real portfolios. The goal is a portfolio that exploits our insights into market mispricing of certain high-quality growth companies generated by our research in Stages I to III. Portfolio managers select from among the stocks that have passed through Stage III, taking into account analysts' recommendations and the effect on the portfolio's risk characteristics and its compliance with established diversification guidelines.
Mutual Fund investing involves risk. Principal loss is possible.
The Harding Loevner Portfolios are distributed by Quasar Distributors, LLC.