Approach

"For over two decades we have focused exclusively on trying to identify leading growth businesses that meet our six investment criteria. These criteria form the foundation of everything we do at Sands Capital. They serve as the common analytical framework that we think allows our research team to remain objective and avoid getting swept up in the short-term swings of market sentiment. "

Frank M. Sands, CFA

Chief Investment Officer, Chief Executive Officer
Approach

Sands Capital maintains a single growth-oriented philosophy that is applied across all strategies. Our philosophy is rooted in the belief that, over time, common stock prices will reflect the earnings power and growth of the underlying businesses. We act on this belief by:

Striving to identify high quality, wealth-creating growth businesses using a fundamental, business-focused approach

Our core strength lies in our effort to identify leading growth businesses that we think are innovative and offer products and services for which there is no substitute. In our view, the businesses we own tend to be differentiated leaders in their industry with significant competitive advantages. Often they possess game-changing qualities that allow them to create their own growth drivers through new product development, entering new markets, or innovating within existing markets.

Constructing a concentrated and conviction-weighted portfolio

Many investors feel that a concentrated portfolio poses greater risk in terms of higher short-term volatility. However, we believe that a portfolio diluted with a large number of holdings may introduce the risk of not knowing the businesses well enough. Concentrated investing—allocating more money to what we believe are the right types of wealth-creating businesses—has been a powerful way to magnify the impact of our stock selection over time.

Maintaining a long-term investment horizon

In our experience, attempting to time investment actions typically does not add value to our investment process. As investors in business enterprises—as opposed to stock traders—we focus on trying to understand the strength and duration of the long-term growth drivers for each business. As a result, we are willing to accept short-term stock price volatility in exchange for the potential to create significant wealth over the long term. Our conviction in these key growth drivers leads to an average holding period greater than five years.

investment criteria

Environmental, Social, and Governance Framework

As stewards of our clients’ capital, we have a fiduciary responsibility to consider the full range of risks and opportunities that have the potential to influence investment outcomes. We think critically about incorporating Environmental, Social, and Governance (ESG) analysis into our investment decision-making but do not view it as a binary tool to separate good investments from bad. We do, however, believe overlooking material ESG issues can increase the risk of negative investment outcomes, so we seek to identify companies that understand and thoughtfully manage the risks inherent to their business, including ESG.

We believe ESG analysis is an inherent part of the deep, fundamental research that is ingrained in our culture, and we endeavor to evaluate all material financial and non-financial factors that may affect both business and investment results. We continue to review new data on the potential influence of ESG factors relative to our research and analysis, and believe our ability to add value for clients with prudence over time is best served by considering ESG within our normal research approach.

Our global investment team is responsible for evaluating ESG factors as part of our holistic research process. Our approach is driven by the following framework:

Business-Focused Research

The objective of our proprietary, criteria-driven fundamental research is to identify high-quality, leading growth franchises with sustainable businesses models, operating in attractive areas of growth and innovation. We place significant value on companies that embrace a long-term perspective and are thoughtful stewards of financial and non-financial resources, which can include environmental and social aspects of the business. In particular, we believe effective governance and responsible corporate strategy are critical components to long-term growth investing.

Materiality

ESG factors vary in importance and are highly dependent on the region, country, industry, and company. We believe deep domain and company-specific knowledge allows our investment professionals to make appropriate judgments about which ESG factors could have the greatest impact. Analysis of these factors is integrated into the investment decision-making process to the extent our team believes they may affect the sustainability of a company’s value-creating potential.

Engagement

We are not activists and do not invest with the intention of making any moral or ethical judgments. However, we view engagement as a valuable tool to better understand management’s long-term strategic vision and discuss how they manage ESG risks and opportunities, among other issues. We meet regularly with the management teams of portfolio companies, and when merited, we proactively express our views regarding business strategy, governance, financial reporting, executive compensation, and other stakeholder considerations. We reserve the option to sell our shares if management is unable to address our concerns, which could reduce our conviction in the company’s fit with our investment criteria.

Transparency

We are committed to providing transparency into our ESG initiatives and how we think certain factors may or may not relate to the long-term growth prospects of the companies we own. We welcome client questions about the extent to which we have incorporated our understanding of relevant ESG factors into each investment case. We use a variety of external sources to varying degrees (e.g., ESG databases, governance advisory firms, academic researchers) to identify key ESG issues for the businesses we own. However, we do not rely on third-party opinions when building conviction in our investment views, as we seek to maintain independence and objectivity in the execution of our proprietary, bottom-up research.