Polen Capital – selecting and sticking with ‘perfect apples’

Mike Taylor

Managing Editor and Publisher

25 September 2023

If companies were apples, then the philosophy of US active investment management firm Polen Capital is identifying the perfect apple and discarding those with blemishes.

It is an approach which Polen Capital’s Head of Team for Large Company Growth, Damon Ficklin believes represents the firm’s key point of difference as it seeks to attract Australian investors – both advised and institutional.

The point he makes is that the Polen formula is to take an extensive universe of companies and then select only the top one per cent before taking meaningful positions and holding for five or more years.

Indeed, Polen has made a virtue of its long-term holding strategy stating that it is underpinned by a belief that short-term fluctuations may not reflect the true value of the underlying business and return of the share price will match the growth of the earnings.

Strong research is fundamental to the Polen process, but also fundamental are the “guardrails” the firm then applies including selecting companies with a sustained return on earnings of above 20%, solid balance sheets, stable or growing profit margins and a “abundant free cashflow”.

It is this approach which explains Polen’s approach to investment in artificial intelligence (AI) with Ficklin pointing to investments in Microsoft, Alphabet and Adobe as giving solid exposure to AI via companies with proven track-records, good strategies and solid balance sheets.

“It is very early days in terms of AI and that is our approach,” he said “It reflects our essence as being bottom-up, fundamental investors.”

The Polen Capital team has been in Australia over the past fortnight and told Financial Newswire that the firm is looking to grow its profile with both financial advisers and superannuation funds.