Contango’s investment philosophy is based on three basic principles. Firstly, economic conditions drive earnings and valuations. Secondly, stocks and sectors perform differently at each stage of the economic cycle. Thirdly, these relationships can be exploited in a systematic way to add value to investment portfolios.
We believe that having a view on the economic and market cycle is critical to investment performance given the dominance of macroeconomic influences on company earnings and valuations.
Although longer term valuation models can provide good baseline valuations, sectors and stocks can trade at significant premiums and discounts to underlying valuations for extended periods of time depending on the stage of the cycle. We believe an investment process that incorporates this insight can outperform static-longer term valuation approaches to investing.