Whilst growth investing has been unfashionable as of late, that investing style has returned Bermuda-head quartered WP Stewart, an 18 per cent compounded annual growth rate over 32 years. The US-listed company’s mantra - that price will follow earnings, has worked handsomely over the long term, during which the S&P has returned 13 per cent. According to Jeffrey Lewis, senior-vice president business development, WP Stewart looks for solid earnings growth, excellent management, strong leadership and branded names. The US and global universe consists of only 40 and 100 companies, respectively. From the global universe, around 25 to 30 companies are selected for investment. For investors interested in participating in international markets, WP Stewart recently introduced its US Plus Account, which comprises its US portfolio, plus five to six of the best international companies. The firm has a buy-and-hold approach and therefore a relatively low portfolio turnover, with equity positions typically held for two to five years. The company says that this approach results in a focused equity portfolio for clients, which drives returns and mitigates risk. “But these companies might not always be available at the right price,” says Mark Phelps, the company’s UK-based president and chief investment officer. “More recently investors have been seeking higher returns in private equity or other areas, hence the growth sector was somewhat overlooked. We see investor appetite changing toward growth since P/E ratios have come down, and earnings remain high,” he told WealthBriefing. “In the long term, the price earnings ratio should be around 20-22 with returns of 15-17 per cent, versus bond yields of around 5.5-6 per cent,” he said. “High quality companies, as we define them, are currently trading at around 18 times earnings but they can go as high as 30 times.” The company says that its bottom-up approach has led it to never have a down earnings year. With assets under management around $5 billion, the trend had been declining until recently because, as the company says, investors will move their capital among a variety of styles. Commodities, as an example, have been attractive. Nonetheless, the firm says its investment process and style have been successful for over three decades, and they have many long-term supporters. “Although the art is in the timing, the focus is on the earnings. We wait for the P/E that we’re prepared to pay, and over time price will follow earnings. In aggregate terms the earnings of the stocks we have chosen have never gone down even if price has declined,” said Mr Phelps. “We don’t currently invest directly in China due to recent price levels, although we do like and invest in companies that do business in China.” The company’s client base is two-thirds high net worth, one third institutional and for private clients the entry level is $1 million.