Vontobel Viewpoints - Valuation: Taking a Long-Term View
Written by: David Souccar, Portfolio Manager, Senior Research Analyst, Vontobel Quality Growth Investment Team
For centuries, ship navigators were at the mercy of both a good compass and clear skies. Celestial markers were reliable enough for calculating latitude along the magnetic north-south poles, but measuring longitude was another story. Clouds, the curvature of the earth, and other complications led many an armada astray, extending voyages by weeks and months. Delays led to shorter rations, and the onset of disease and starvation. Shipwrecks were commonplace, as was the loss of cargo and human life.
Navigational problems became so acute that the three superpowers at the time — England, France, and Spain — offered a reward to anyone who could find a fix. By 1736, an unlikely hero and carpenter named John Harrison invented the world’s first marine chronometer, a timepiece that led the world to Greenwich Mean Time and the movement towards globalization.
It seems that navigation isn’t just about pinpointing a specific location; it’s also about knowing where you are going and how you’re going to get there. Like investment management, it’s also about access to proper tools. As investors, we aim for a financial destination and seek an accurate path for compounding capital. The journey begins by asking ourselves what a company is worth today and what tool can we use to calculate that worth tomorrow with reliable precision?
In this paper, we explain Vontobel’s philosophy on valuation, the challenges of imperfect measurement, and what has led us to develop our own investment chronometer.