The Clue is in the name: Quality, Sustainability and Long -Term Value

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When Maurice Stern had to leave Paris with his family to escape from the German occupation and came to New York, he had to decide how to invest the capital he had in the United States.  He faced the loss of the family’s bank, their houses and their other assets in France and the possibility of never being able to return.  He invested in the stocks of great companies based on principles that still guide us today. 

J. Stern & Co. represents the third generation of the family to invest in quality and value for the long-term. Quality to us is a company that has a strong and sustainable competitive position in a good and growing industry, with a management with a track record of value creation and a balance sheet so strong that the company can weather any adversity. Value is being able to buy that company at a price that allows us to generate 8-10% or more over the long-term. 

The challenge for us as long-term investors is how to build on the experience of the past and to adapt our approach to the opportunities and challenges we face.  We realized that the digital transformation of our societies and our economies has only just begun and that there are digital platforms that have great prospects. That is how we bought stocks like Amazon, Alphabet or Adobe and added them to our portfolios.  We continue to see significant upside and had the opportunity to express our views in a number of outlets when Alphabet crossed the threshold of becoming a $1 trillion company on its way to becoming a $2 trillion company and a future dividend payer when it changes its capital allocation policy and starts returning part of the cash it makes to shareholders.

Today we are facing a similar moment when we have to adapt what we do. Climate change and the existential challenges it poses has been one of the primary drivers of a higher awareness of the impact environmental, social and governance (ESG) issues can have on companies, their operating and financial performance, and their prospects for value generation.

The clue is in the name, as it were. In order to have a sustainable competitive advantage, companies have to operate in a sustainable way. This has always been our approach, but over the last few years we have seen issues of sustainability, transparency and accountability grow in importance, with the broader investment community being asked by both clients and other stakeholders to better understand what outcomes companies are delivering for broader society.

The United Nations have worked to establish goals for global sustainable development that provide a blueprint to achieve a better and more sustainable future for all. We believe that the discourse about sustainable investing will increasingly focus on the UNSDG and we will be called on to answer the challenge they pose: What are companies and investors doing to achieve a better and more sustainable future for all?

We have worked over the past six months to fully integrate our investment process in a rigorous, transparent and repeatable way.  We have signed up for the UN Principle of Responsible Investing and similar organizations.  Our insight this month discusses our Roadmap to Sustainable investing and provides the background, methodology and criteria we use to identify and analyse issues and examples of companies in which we are invested and with which we have engaged to address them

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