Long-term Growth Value Index
Long-term Growth Value® (LGV) US patent-pending index can help investing in companies
growing for the long-term. Although this type of investment has the same goal as
a general long-term investment in equities, it is in many ways different.
LGV-based long-term investment can deliver higher return with much lower risk by
applying a new approach to such investment. This enables selecting the most optimal
point for making an investment (selecting undervalued assets) and indicating the
best point of exit. The most fundamental difference between the LGV-based investment
and a more typical investment in equities is that the highest return can be achieved
by investing against the market trend. This is similar to the way Warren Buffet used
to invest, particularly during the dot.com era.
The LGV index uses only long-term growth productivity criteria (such as 5Y AVG turnover/employee
ratio). It is applied primarily for an initial composition of the long-term growth
portfolio with the correlation of above +0.7. The key principles underpinning the
LGV-based investment are as follows:
1. Investment is based on the company’s LGV index value, which is calculated using
25 non-financial, economic criteria to assess the companies’ position relative to
its sector’s peers.
2. Especially good return with lower risk can be made in companies, which are less
known and their shares are less frequently traded. Their value is relatively lower
precisely for that reason - not a lot is known about such companies. LGV index provides
such information and allows investment with a higher confidence.
3. Investment is usually made for a period from a few weeks to a many months, depending
on the LGV index values over a 5-year period, 5-year average share price, the corresponding
average value of key market indices, LGV-based share value, Volatility, Country Risk,
etc.
4. The combined set of ratios helps to generate automatically Portfolio Investment
Recommendations: Composition of the long-term growth portfolio and Share Dealing
Recommendation.
5. One of the strongest points of applying the LGV index for such companies is that
their assets represent low risk because they are grown for the long-term and are
less affected by the speculative market forces.
6. That allows for the spread between the buy/sell for this type of investment to
be quite wide. Therefore, there would normally be no frantic share dealing activity,
although the share price as well as the changing LGV index value, must of course
be closely monitored.
7. The portfolio of such assets can be composed of a mix of companies from 40 sectors
depending on the selected overall criteria such as:
a. Best companies in each sector (companies with the highest LGV index value in the
sector)
b. Companies with the lowest growth volatility
c. Companies with the lowest country risk and highest growth
d. Companies with best corporate governance, very important in the long-term investment
LGV index, which can be used in at least 12 other application areas, is based on
Sustensis’ Business Sustainability methodology, which can help companies achieve
long-term sustainable growth with lower risk through a balanced use of financial,
material, organisational and human resources. In general, it recommends placing long-term
investment in the companies, which also grow for the long-term.
The indices calculate the company’s true (intrinsic) share value, corresponding to
its long-term growth competitiveness and productivity. We also rank companies’ long-term
growth on the scale of 1 to 50 (over 5 grades with 10 steps – similar to S&P A, B,C
rating), which allows a quick identification of the undervalued companies as potential
targets for investments (e.g. corporate bonds).
LGV and LGP family of indices (with over 1,000 sub-indices) can support customized
portfolio of most fund managers investing in equities. Currently, there is a choice
to invest in about 3,000 companies with the turnover of over $100M. We can generate
LGV a new portfolio, requested by funds, in a day. We can also provide automatically
generated recommended investment decisions, upon request.
Especially good return with lower risk can be made in companies, which are less known.
Their value is relatively low because of lack of non-financial information. Sustensis
indices provide such information, reducing the investment risk and at the same time
generating higher return.
