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We believe the Asia Pacific ex-Japan region represents one of the most dynamic and prospective investment opportunities to be found anywhere in the world, and have been investing profitably in the region since 2002. Although our investment process is continuously evolving, our philosophy is underpinned by the same long-term value-based discipline adopted by our Australian equity business since 1984.
Our investment philosophy
At the heart of our value-based investment philosophy is a high conviction strategy focussed on stock selection, driven by in-depth analysis from our experienced team of investment professionals.
Our investment philosophy is based on the following key principles:
We are value investors
We believe that that the price and value of a company are often not the same and deviate over time. ‘Price is what you pay, value is what you get’ best summarises this difference. Greed and fear in markets can drive a wedge between these concepts at the stock level and we seek to take advantage of this behavioural phenomenon. By being disciplined on what we will pay for an investment provides a margin of safety to ensure we are not exposed to speculative hype that often results in capital loss when sentiment reverses.
We believe stock valuations are driven by the financial performance of the underlying business. By always taking a long-term view, we can use periods of short-term pessimism to our advantage and buy good businesses at attractive prices.
We are bottom-up stock pickers
Value investing by its nature is done on a bottom-up basis. By virtue of the fact we are regularly looking at the unloved or unpopular segments of the market, there is often a narrative attached as to why they are out of favour. Only by researching these companies on a bottom-up basis (in conjunction with what prevailing valuations imply) can one determine whether the narrative is correct or indeed an opportunity exists.
We are often contrarian
Logic will tell you that to beat the average, one must do something different from the average. With share prices representing the market consensus, we will often move early and against the crowd to invest in undervalued companies that we believe will generate strong investment performance.
We use a well-established and rigorous investment process to identify companies that are currently trading at an attractive discount to their true underlying value. This disciplined approach helps us balance opportunities and risks in our portfolio construction.
This long-term view enables us to look through short-term market events and ‘noise’ to invest in good companies at attractive prices.
Our experienced investment team takes a collegiate approach that assists us in delivering long-term performance. All our portfolio managers are also analysts, emphasising the importance of our fundamental company research. Similarly, there is a strong alignment of interest with our clients with the key investment professionals retaining equity in the business and significant personal investments in our underlying vehicles.
We invest for the long-term
A key ‘ingredient’ of value investing is time. We believe that price and value can diverge by a wide margin in the short run. What has been proven over time however is that in the long run, they should converge. What drives this process? Some like to point to catalysts however in our experience is more likely than not the passing of time as the ‘darling’ stocks fail to live up to expectations while the ‘value’ parts of the market deliver better results than what their share prices were implying.
We have a four-year investment horizon, as we believe this allows the company’s true intrinsic value to be realised and our process is structured accordingly.
Our investment approach
Our investment process is focussed on identifying companies that are currently trading at an attractive discount to their intrinsic value. Our process begins with utilising several quantitative screens designed to rank the investment universe and highlight prospective investments. Qualitative differences are also reflected to ensure higher quality but higher multiple businesses are not excluded for consideration. Stock ideas generated from the valuation screens then undergo in-depth fundamental and ESG research.
Our experienced team spends most of its time conducting detailed quantitative and qualitative analysis on these companies, ascertaining whether or not the company is undervalued relative to its prevailing price and its earnings potential. This includes identifying the key investment issues and risks, analysing the business and industry it operates in, as well as an assessment of management quality and ESG matters.
Our Asia and Asia Pacific equity portfolios generally hold between 40 and 60 stocks.
A team of experienced and dedicated investment professionals.