Fundamental Approach to Capital Preservation

AMI Asset Management believes that in order to generate superior long-term returns, a strategy must perform in line with its benchmark in bull markets but, more importantly, outperform in bear markets. AMI looks to achieve this by utilizing a GARP strategy, which focuses on investing in companies with recurring revenue business models. The team defines recurring revenue business models as those with products and services that have a life span of less than two years and thus must be replaced frequently. AMI believes that a recurring revenue business model allows a company to grow at a more predictable and sustainable rate and reduces volatility in its earnings.

Strategic Investment Principles

Idea Generation

AMI Asset Management generates investment ideas from a variety of sources, such as screens, industry conferences, and third-party research. However, AMI believes the best ideas often arise from speaking with the users and customers of a product or service, conversations with company management and industry experts (e.g. doctors), and through “feet on the street” research (e.g., walking grocery store aisles).

Recurring Revenue

Uncovering whether a firm’s revenue is primarily recurring in nature cannot be completed through running screens. An investigation of the firm’s income statement is required. At least 50% of a firm’s revenue must come from recurring sources. Due to the recurring revenue requirement, the strategies’ holdings tend to be high quality and exhibit less cyclicality.

Fundamental Research

Once a candidate is identified, it is subjected to a rigorous due diligence process that examines its product portfolio, industry and competitive dynamics, and fundamental metrics, among other factors. AMI is a fully bottom-up manager that looks for companies with consistent recurring revenue, sustainable growth prospects, strong cash flow, and healthy balance sheets.


AMI places a heavy emphasis on valuation. The team’s goal is to uncover quality, growing companies that can be bought at a discount to their intrinsic value, allowing for alpha generation over the long run. The research team determines a firm's intrinsic value through a combination of discounted free cash flow valuation and earnings multiple analysis. AMI utilizes a DCF model to obtain an initial intrinsic value and then compares this to historical and peer P/E and PEG ratios. The research team views securities with at least a 10% discount to its value as a candidate for the portfolio.

Downside Protection

AMI focuses on sectors in which recurring revenue is most easily found (typically Consumer Staples & Healthcare). Due to the defensive nature of these sectors, and the lower volatility of the names in which the firm invests, each portfolio tends to exhibit a lower downside capture ratio as compared to its benchmark.