Investment Policy

RFG Fund Profile

We Invest primarily in Large Cap US Equities
Holdings: 20-25
Style: Growth
Benchmark: Russell 1000 Growth

Investment Objective

RFG’s Investment objective seeks to achieve long-term growth of our capital by using a bottom-up approach to build a concentrated portfolio of competitively advantaged businesses with the potential for sustained superior growth.

Investment Approach

We believe that consistent earnings growth is the primary driver of intrinsic value and long-term stock appreciation. We seek to invest in companies with a durable earnings profile driven by a sustainable competitive advantage, superior financial strength, sound ESG practices, proven management teams and powerful products/services. By thinking and investing like a business owner and taking a long-term investment approach, we believe we can preserve capital and provide stability across market cycles.  Investing in only what we believe to be the best companies with long-term staying power supports our ability to deliver outsized returns and minimize risk.

RFG Growth Strategy Criteria

Quantitative Metrics:

• Minimum Market Cap: ~$3 Billion
• Minimum Stock Price: ~$15/share
• Return on Equity: ~15%
• Revenue Growth ~10%
• Debt to equity ratio below ~40% (Ideally trending lower)
• Long Term EPS Growth Rate over ~12%

Qualitative Metrics:

• Consistent or Growing Margins:
  • Improving gross margins shows greater efficiency in generating revenue.
  • Improving operating and net margins shows greater efficiency across the value chain and improving profitability.
• Strong Free Cash Flow
  • Shows the company is able to satisfy capital expenditure requirements, cover liabilities as they come due, and reinvest in the business.
• Sustainable Competitive Advantage
  • Companies with solid business models and disruptive products or services are difficult for competitors to emulate.
  • Avoid industries with low barriers to entry; not every great company may have a sustainable competitive advantage.
  • Seek companies with strong pricing power which can help offset inflationary pressures.
• Organic Revenue Growth
  • Core business is driving the company’s growth rather than continuous mergers and acquisitions.
  • Invest in secular growing industries vs. cyclical businesses.

Investments Outside Growth Criteria

Up to 20% of the portfolio may be unrestricted to allocate capital to ideas not meeting our growth strategy. This will give us more flexibility and enable us to capitalize on strong companies with catalysts to outperform in the short-to-intermediate term even if they are not secular growth stories and fail to meet our growth criteria.

• Portfolio (Google Sheet)
• Featured Pitches – Heico and Palo Alto Networks
• Semiannual Reports