Stock Picking at Work

Zadig takes its name from the protagonist of the novel ‘Zadig, or the Book of Fate’, written by the French Enlightenment philosopher Voltaire. The art of investment is to know the principles but to apply them wisely and let common sense and realism prevail in stock picking. Day-to-day, we demonstrate that building a risk-controlled concentrated portfolio of best ideas based on in-depth fundamental analysis yields to long term superior returns.

Our strategies

Concentrated.
And diversified.

We are active managers. As such our mission is to carefully select and focus on our best ideas only. Having 100 convictions is equivalent to have none. By running a concentrated portfolio, we remain on top of each investment and in close contact with companies management.

Academic research and our experience show that risk is reduced by picking stocks that behave differently and bring diversification to the portfolio. After 15/20 names, the marginal diversification effect is minimal and detrimental to performance.

 

Our philosophy

Zadig takes its name from the protagonist of the novel ‘Zadig, or the Book of Fate’, written by the French Enlightenment philosopher Voltaire.

Voltaire was a versatile and prolific writer, producing works in almost every literary form. He wrote more than 20,000 letters and 2,000 books and pamphlets.

He was an outspoken advocate of civil liberties and he was at constant risk from the strict censorship laws of the Catholic French monarchy. His polemics witheringly satirized intolerance, religious dogma, and the French institutions of his day.

Zadig, a young man blessed with a good education, overcomes the trials and tribulations that life engenders on his travels. At the end he rules over a glorious empire: “The whole country was sway’d by Love and Justice.”

The novel underlines Voltaire’s enlightenment belief that if a man is endowed with good sense, patience, ingenuity and courage, this will ensure his eventual triumph of wisdom over destiny.

Zadig’s rational and cautious approach to investment pays homage to its namesake and is key to our team’s success. Our research efforts allow us, like Zadig’s character, to overcome markets’ irrational moods in delivering superior returns to our investors.

In 2011, we launched Memnon, our flagship long only European Equity strategy and name of our UCITS SICAV.

‘Memnon, or Human Wisdom’, a short novel by Voltaire, was the title of the first edition of ‘Zadig, or the Book of Fate’. It tells story of a gentleman who wishes to become infinitely wise, but has to learn the hard way to become a realist.

As stock pickers, we believe that principles must be applied wisely and always rely on a pragmatic rather than dogmatic approach.

Valuations matter

The Equity market is right in the long term but can leave stock picking opportunities in the short to mid term.

We think there is a comfort bias in the market, and investors overpay for perceived safety. At Zadig we are often contrarian in our approach; our Equity portfolios are made of companies that are undervalued due to investors’ perception of risk and their stocks offer attracting risk/return profile as a result. This happens in cyclical, defensive, growth or financial sectors alike.

Our aim is to understand the path to recovery and how market participants will reevaluate the company as a results of business improvement. The low valuations at which we invest reflect the companies’ challenges. When we are wrong, the low valuation protects our investments somewhat. When we are right, we are disproportionately rewarded for the risk of investing in a ‘less than perfect’ company.

Valuations matter.

European Equity strategies

Memnon European Equity

Zadig’s flagship concentrated stock picking strategy investing in undervalued European companies while keeping a blend approach with regards to Growth/Value styles.

- Mid to Large caps - 20/30 investments - Active share ~90% - ESG integration
Memnon European Equity

Memnon European Opportunities

Zadig’s unconstrained strategy investing in undervalued European Small and Mid caps companies

- Small to Mid caps – typically - <20 investments
Memnon European Opportunities Strategy

Our Socially Responsible Investment approach

Zadig’s rational and cautious approach to investment pays tribute to its namesake from the protagonist of the novel with the same name written by the French Enlightenment philosopher Voltaire.

Voltaire took great pride in judging people by the questions they ask rather than by their answers. As curious stock pickers, a major part of our job is asking questions, testing hypotheses and challenging the status quo. “What is the company’s fundamental reason for being?” is the first and most important question we ask and the starting point of our due diligence process when assessing a potential investment.

Through its day to day activities, a company must demonstrate that it creates value for all of its stakeholders and not just its shareholders for us to consider an investment.

 

Sustainability at a Reasonable Price

Our Sustainability at a reasonable price approach means we shall not pay any price to ‘tick the SRI box’. Zadig relies on a hands-on research approach. We build our own valuation models, meet with management of companies, and select the best risk/return opportunities among sustainable European Equities.

We are flexible in our SRI approach: we use third parties for data but rely on our internal assessment of companies’ sustainability today or tomorrow. We have established an exclusion list made of unsustainable businesses and companies exposed to controversies. Overall, the Sustainable Europe portfolio shows a net positive contribution to sustainable themes. Our SRI approach is well documented and transparent.

We rely on multiple layers of risk controls that allow the portfolio to maintain an all-weather profile with constant exposure to cyclical, defensive, growth and financial companies as well as a variety of industries and countries. We think a combination of Sustainability and ESG helps performance while reducing downside risk.

European SRI strategy

Sustainable Europe

Zadig’s concentrated stock picking strategy investing in undervalued sustainable European companies

- Mid to Large caps - 20/30 investments - Active share ~90% - Labelled SRI strategy
Sustainable Europe Strategy

Zadig alternative strategies’ approach

At Zadig, risk at the core of every decision we make and part of our culture. Zadig’s top management and investment team has two decades of track record managing alternative strategies, both Long Short Equity and Global Macro.

While the recent market trends, low interest rates and central bank policies have slowly relegated Market Neutral and Global Macro strategies to the back of investors’ agenda, we believe these strategies are adequate vehicule to address the upcoming market uncertainties, in particular with regards to higher inflation ahead.

Our absolute return strategies

Memnon Market Neutral

Zadig’s market neutral strategy concentrated around best long and short ideas among European Equities with a market and factor neutral approach.

- Small to Large caps - 25/30 Longs - 10/15 Shorts + index
Memnon Market Neutral Strategy

Memnon ARP

Zadig’s global macro strategy taking directional Long or Short exposures on global markets with the aim of protecting investors capital in an higher inflation environment.

- Government Bond - Equity Index Futures - Commodities - Credit ETFs
Memnon ARP Strategy