 | |
MS Global Franchise Portfolio | MSFAXMutual Fund | |
| Morgan Stanley Institutional Global Franchise Port | |
| Last update 2024-11-27 | 41 Stocks (4 new) |
| Value $2.88 Bil | Turnover 13 % |
| Portfolio Report | |
MS Global Franchise Portfolio Investing Philosophy
The team follows a distinct and disciplined investment process based on bottom-up stock selection, with sector, industry and stock weightings driven by the team's assessment of each stock's quality and valuation characteristics.
(1) Investable universe: Companies are screened based on financial metrics that the team believes are associated with strong franchise businesses. The key financial characteristic of these companies is that they enjoy sustainable, high unlevered return on invested capital (ROIC), which is generated by a combination of recurring revenues, high gross margins and low capital intensity. This combination helps support strong free cash flow generation, which, crucially, must be either reinvested at similarly high returns or distributed to shareholders.
(2) Security selection: The team looks for high-quality businesses with the following characteristics: difficult-to-duplicate intangible assets that protect the durability of the franchise; a sustainable, high ROIC on an unlevered basis; high gross margins and low capital intensity; a reliably recurring revenue stream; and financial strength and capable management. The team monitors signs of franchise abuse, including failing to reinvest capital in high ROIC businesses, preventing compounding by retaining excessive cash and earnings per share targets having precedence over ROIC, which rewards short-sighted behavior.
(1) Investable universe: Companies are screened based on financial metrics that the team believes are associated with strong franchise businesses. The key financial characteristic of these companies is that they enjoy sustainable, high unlevered return on invested capital (ROIC), which is generated by a combination of recurring revenues, high gross margins and low capital intensity. This combination helps support strong free cash flow generation, which, crucially, must be either reinvested at similarly high returns or distributed to shareholders.
(2) Security selection: The team looks for high-quality businesses with the following characteristics: difficult-to-duplicate intangible assets that protect the durability of the franchise; a sustainable, high ROIC on an unlevered basis; high gross margins and low capital intensity; a reliably recurring revenue stream; and financial strength and capable management. The team monitors signs of franchise abuse, including failing to reinvest capital in high ROIC businesses, preventing compounding by retaining excessive cash and earnings per share targets having precedence over ROIC, which rewards short-sighted behavior.
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