Category: Sectors

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ETFs ETFs

SPDR® Dow Jones Global Real Estate Fund: Well-diversified exposure to global real estate at a relatively cheap price

SPDR Dow Jones Real Estate ETF DJRE is a sensible option for investors seeking exposure to diversified global real estate. DJRE tracks the Dow Jones Global Select Real Estate Securities Index, a market-cap-weighted index (rebalanced quarterly) via full replication.

Approach

DJRE aims to fully replicate the Dow Jones Global Select Real Estate Securities Index. Stocks included in the index must derive 75% of revenue from owning and operating properties, have a market cap of at least USD 200 million at the time of inclusion, and meet certain liquidity requirements. In simple terms, companies in this index generate most of their revenue from rent.

Portfolio 

Real estate investment trusts make up about 85% of the portfolio while approximately 10% of DJRE’s holdings are property developers and non-REIT property managers. The US continues to dominate the portfolio, forming more than 65% of regional exposure in October 2021. Other sizable weightings include 10.2% in Japan, 4.6% in Australia, 4.5% in the United Kingdom, and 3% in Singapore. The remainder is in Hong Kong and developed European markets such as Germany, France, and Sweden.

People

John Tucker has been appointed as the new chief investment officer, Effectively from September 2021, replacing Lynn Blake, who has taken retirement. Tucker is a State Street veteran who has been in multiple senior leadership roles within GEBS for the past 20 years. Australia-domiciled passive products are managed by a core team of Tucker and four portfolio managers: Alexander King, Lillian Poon, Andrew Howson, and Elda Dong.

Performance

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(Source: Factsheet)

Top holdings of the fund

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(Source: Factsheet)

About the fund

SPDR Dow Jones Real Estate ETF DJRE is a sensible option for investors seeking exposure to diversified global real estate. DJRE tracks the Dow Jones Global Select Real Estate Securities Index, a market-cap-weighted index (rebalanced quarterly) via full replication. The fund derives strong support from the global reach and execution capabilities of its parent State Street. With around 250 total holdings and less than 30% exposure in the top 10 holdings, the target benchmark is well diversified. The index consists of globally traded real estate investment trusts and real estate operating companies–companies generating most of their revenue from rent

(Source: Morningstar)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

Categories
Shares Technology Stocks

Xero Ltd. delivered strong results with improving key metrics

Modern financier with papers sitting in front of computer monitor with chart and graph of sales rate

Investment Thesis:

  • Competent leadership team with a proven track record of delivering strong growth (Strong top-line momentum driven by strong support of accountants and bookkeepers with annualised monthly recurring revenue increasing at CAGR 32% and strong subscriber growth with positive LTV (Lifetime Value) trends (over FY15-19, ANZ LTV grew at CAGR 48% and International LTV grew at CAGR 65%)). 
  • Solid product offering that is secure, scalable and efficient technology which is competing against competitors with technology that has legacy issues. We note that XRO’s small business platform is an ecosystem of more than 700 connected apps backed by a community of more than 50,000 users of XRO’s API developer tools. Going forward the Company could potentially increase its revenue by monetising its platform in other ways like charging third party app developers. 
  • Potential for meaningful acquisitions to fill gaps in product capability. In our view, the Company is well positioned to make acquisitions going forward (given its balance sheet and funding status). 
  • The Company continues to focus on cloud accounting, and we see significant upside potential in the sector given the fact that the current levels of small business cloud accounting adoption globally is estimated to be less than 20% of the total market or opportunity across English-speaking countries in which the Company operates.

Key Risks:

  • Decrease of migration to cloud software. 
  • Currency headwinds due to weakening of NZ$ relative to AUD, USD and Pound. 
  • Deteriorating sentiment if the economy and IT spending weakens. 
  • Excessive competition from other established players like Intuit leading to loss of market share. 
  • Inability to extract higher operational efficiencies as the Company scales up. 
  • Issues in gaining market share especially in markets with established incumbents.

Key highlights:

  • Improving trends in key metrics – (1) subscriber growth; (2) higher ARPUs (average revenue per user); and (3) lower churn.
  • A key catalyst for XRO’s share price going forward will be execution and growth in North America. 
  • Despite relatively mature markets in New Zealand and Australia, XRO’s subscriber growth in 1H22 in both markets (NZ +16% and Aus +22%) was a standout from our perspective.
  • The Company finished 1H22 with net cash position of NZ$125m and has total available liquidity of NZ$1.2bn.
  • Operating revenue was up +23% (or up +26% in constant currency) to NZ$505.7m, with total subscribers up +23% to 3.0m and ARPU (average revenue per user) up +5% to NZ$31.32
  • The financial position for different markets of Xero are as follows:
  • Australia: Segment revenue was up +22% to NZ$225m, with net additions up +24% and subscribers up +22% to 1.24m. 
  • New Zealand: Segment revenue was up +13% to NZ$72m, with net additions up +55% and subscribers up +16% to 480,000. 
  • United Kingdom: Segment revenue was up +33% to NZ$133m, with net additions up +160% and subscribers up +23% to 785,000. 
  • North America: Segment revenue was up +5% to NZ$30m, with net additions up +130% and subscribers up +23% to 308,000. 
  • Rest of World: Segment revenue was up +72% to NZ$46m. with net additions up +136% and subscribers up +48% to 201,000.

Company Description: 

Xero Ltd (XRO) is a software as a service (SaaS) company, engaged in the provision of a platform for online accounting and business services to small businesses and their advisors. The Company operates through two operating segments: Australia and New Zealand (ANZ), and International (UK + North America + Rest of the World).

(Source: Banyantree)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

Categories
ETFs ETFs

Betashares Global Sustainability Leaders ETF: ESG – Oriented global equities exposure with a distinctive returns Profile

Approach

ETHI tracks the Nasdaq Future Global Sustainable Leaders Index, a benchmark co-developed with BetaShares in November 2016. ETHI comprises 200 stocks that have above-average ESG characteristics. It uses a float-adjusted market-cap-weighted approach, starting with a universe of 6,000 stocks listed in North America, Europe, or Asia (ex-Australia). By adding ESG considerations, the index differs markedly from other passive and ESG indexes. A carbon screen identifies companies that lead in terms of carbon efficiency; these tend to be in the top one third of their industry for carbon efficiency. A minimum of five Scope 4 leaders is required in the index. A market cap and developed markets screen cuts the investable list to under 500. Analysts then perform negative screens until the 200-name portfolio is left.

Portfolio

A change in April 2020 has led to the portfolio providing exposure to the largest 200 global ex-AUS stocks by capitalisation that are considered climate change leaders. Further they must not be materially engaged in activities deemed inconsistent with responsible investment considerations. Stocks must have a market cap of more than USD 3 billion and three month trading volume of over USD 1 million. The index differs largely from other passive and active indexes with sector skews to healthcare, consumer cyclicals, financials and technology.

Top 10 Holdings

CompanyWeighting (%)
NIVDIA Crop 6.0%
Apple Inc. 4.3%
Home Depot3.8%
Visa Inc.3.4%
Adobe Inc.2.8%
Mastercard Inc.2.8%
ASML Holding NV2.7%
PayPal Holdings 2.6%
Toyota Motor Corp.2.3%
Cisco Systems Inc.2.3%
Sector Allocation.png

People

Nguyen was an equity analyst at Three Pillars Portfolio Managers, where his responsibilities included systems development, risk management, and securities analysis. The committee comprises Betashares co-founder David Nathanson and Adam Verwey, a managing director of large investor Future Super. In September 2020, Simon Sheikh stood down and was replaced with Kylie Charlton, managing director of Australian Impact Investments.

Performance

However, from its Feb. 21, 2020, peak the strategy actually fell 22.74% to March 23, 2020. Since then, the strategy has made a remarkable turnaround. ETHI closed the calendar year 2020 with a n absolute return of 24.94%. The rally continued into 2021 and as of Sept. 30, 2021, the fund’s returns for the calendar year are 20.85%.The fund has remained within the 15-basis-point tracking error and the bid/offer spread was indicated to have remained below 30 basis points, averaging around 20 basis points.

Performance.png

About the Fund

ETHI aims to track the performance of an index (before fees and expenses) that includes a portfolio of large global stocks identified as “Climate Leaders” that have also passed screens to exclude companies with direct or significant exposure to fossil fuels or engaged in activities deemed inconsistent with responsible investment considerations.

(Source: MorningStar)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

Categories
Funds Funds

Franklin Income Fund Class C- a solid yield generating fund

The fund seeks to maximize income, while maintaining prospects for capital appreciation, by investing in a diversified portfolio of stocks and bonds. The fund tracks Linked Blended 50% MSCI USA High Dividend Yield Index + 25% Bloomberg High Yield Very Liquid Index + 25% Bloomberg US Aggregate Index

Process:

This fund aims to deliver income and capital appreciation using a flexible, valuation-conscious approach. Management invests in a mix of dividend-paying stocks, bonds, bank loans, convertibles, and equity-linked securities. But a heavy reliance on credit risk and the lack of an identifiable edge warrant a Process rating of Average. Management has significant flexibility to shift the portfolio, relying on bottom-up security selection, and yield in particular, to drive asset allocation without regard to sector weights or credit quality. The portfolio has averaged roughly 40% in equities. Within equities, management gravitates toward large-cap dividend-payers, which often results in big slugs of utilities, materials, and energy stocks. While this approach has consistently produced a relatively high yield and, at times, solid total returns, it has done so by relying heavily on high-yield bonds.

People:

This fund is backed by veterans, but the team doesn’t possess a clear advantage. Its People rating remains Average. Lead manager Edward Perks has helmed this fund since 2002 and Franklin Managed Income FBLAX since 2006. His comanagers possess complementary experience.

The equity and credit analyst teams the managers rely on for ideas boast a wealth of experience, but our confidence in them is muted. And Franklin Equity Income FISEX, an all-stock fund that invests in some of the same dividend-payers as this offering, is backed by the equity analyst team that generates ideas for a broad range of mandates rather than tailored recommendations.

Performance:

This fund’s substantial risks have resulted in high volatility relative to peers and middling risk-adjusted returns. This fund tends to be much more sensitive to equity markets than its typical allocation – 30% to 50% equity category peer because of its hefty dose of credit risk and its often-double-digit combined stake in equity linked notes and convertible bonds.

Price:

The expenses are critical to evaluate as they come directly come out of the expense. The analysts at Morningstar suggest that this share class will not be able to generate positive alpha relative to the benchmark index.

Asset Allocation:

About Fund:

The Fund aims to maximise income while maintaining prospects for capital appreciation by investing primarily in equity securities and long & short-term debt securities. The Fund may invest up to 25% of its net assets in non-U.S. securities. It’s three properties are: a balanced portfolio with exposure to the US markets, best of equity and fixed income teams and attention to risk elements.

(Source: Morningstar)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

Categories
Global Markets Global stocks

Strong fertilizer prices result in good earnings for Incitec Pivot for FY21

Investment Thesis:

  • Operational excellence at the WALA ammonia plant, operating at or above nameplate capacity and subsequent cash flows. 
  • Current strength in commodity / fertilizer prices is expected to continue over the short term – consensus earnings may need to be upgraded for FY22 if current spot prices hold up. 
  • Leverage to a lower AUD/USD rate.
  • Ongoing focus on productivity gains help support earnings.
  • Strong balance sheet provides flexibility to undertake inorganic growth opportunities or implement capital management initiatives 

Key Risks:

  • Manufacturing disruptions including risk of larger incident 
  • Commodity / fertilizer prices normalize or correct sharply. 
  • Disappointment on capital management announcement
  • Further decline in key resources end market (Coal remains in a structural decline trend). 
  • Market volatility and oil price movement
  • Higher AUD/USD
  • Drought / bad weather impacts operations or impact fertilizer markets. 

Key highlights:

  • Incitec Pivot (IPL) FY21 results were a strong beat relative to consensus expectations due to the very strong fertilizer prices.
  • Group revenue was up +10% to $4.35bn, consisting of DNA up +5%, DNAP down -6% and Fertilisers APAC up +26%.
  • Excluding significant items, group operating earnings (EBIT) was up +51% to $566.4m, predominantly driven by the recovery in earnings in Fertilisers APAC which saw EBIT jump to $268.4m from $26.2m in pcp.
  • Group underlying NPAT was up +91% to $358.6m and free cashflow was up +34% to $267m.
  • Dyno Nobel Americas (DNA) FY21 segment EBIT fell -9% in constant currency terms to US$141.2m, driven higher by Explosives up +5% up US$126.7m and Agriculture & Industrial Chemicals delivering EBIT of US$10.9m (vs US$1.3m in pcp)
  • Dyno Nobel Asia Pacific (DNAP) FY21 EBIT declined -6% over pcp to $140.2m, with growth in Technology (up $14m and in line with guidance) and costs savings program ($9m sustainable cost savings), more than offset by impact from contract renewals ($12m net decline), turnaround impact at Moranbah ($15m), decline in international business and W.A. contracts ($3m).
  • WALA is delivering more consistent performance and is expected to run at nameplate capacity in FY22. The reliable performance of this plant is important to the IPL investment thesis, although it remains host to non-controllable factors
  • IPL is enjoying very strong fertiliser prices, which are expected to remain elevated well into FY22.
  • Coal exposure remains a weak spot in IPL’s investment case, however Q&C activity will be supported by infrastructure spend in the U.S.       

Company Description: 

Incitec Pivot Limited (IPL) is a global industrial chemicals company. The company manufactures and distributes a range of industrial explosives, fertilizers, related services, and products to the mining and agriculture industries. Its industrial explosives’ business is the number one manufacturer (by tonnes) in the US and number two distributor and manufacturer (by tonnes) in Australia. The company’s fertilizer business is the number one manufacturer in Australia (by volume and revenue) and the number one distributor in eastern Australia (by volume and revenue). The company operates the following key divisions: Dyno Nobel Americas (DNA), Dyno Nobel Asia Pacific (DNAP), Incitec Pivot Fertilisers (IPF) and Southern Cross International (SCI).

(Source: Banyantree)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

Categories
Global stocks

HALMA Plc: Private Equity with a Purpose

Investment Thesis:

  • High quality company with a history of earnings and dividend growth.
  • Management is looking to double EPS every five years. HLMA’s group earnings growth model is driven by organic and acquired growth. 
  • HLMA earnings are defensive as HLMA is exposed to attractive end markets which are niche and regulated in some shape or form – such as safety, medical and infrastructure.
  • HLMA consists of a strong diversified portfolio of companies (currently 45 companies). 
  • Strong management team with strong corporate culture. 
  • “Private Equity firm with a purpose” – the Company is not limited by a timeframe to exit positions. 
  • HLMA operates a decentralized operating structure with operating companies and management teams left to run their businesses. 
  • Scores well on ESG metrics – targeting a science-based emission target (1.5 degree-aligned 2030 target for Scope 1 & 2 emissions), a net zero target (scope 1 & 2 by 2040) and transitioning towards a circular economy. 

Key Risks:

  • Execution risk – specifically around acquired growth or the inability to source enough deals as the group grows larger.
  • Deterioration in global growth or consumption.
  • Turnover in senior management team. 

Key highlights:

HLMA can be thought of as a private equity company with a purpose, having a highly sustainable financial model, which focuses on maintaining portfolio companies’ growth and returns over the longer term (management aspires to double the size of the Group every 5-6 years), while delivering performance in the shorter term, through a combination of acquisition, venture partnerships and organic growth.

  • Strong top and bottom-line growth – Management prefers to be in markets delivering +3-5% year on year growth and invests in business that are typically one of top 3 players in their respective niches (market share can vary between 10-80% but on average market share across the group is 20%) which leads to strong top line growth, which combined with differentiated products leads to high gross margins (>60%) and strong EBIT margins (>20%). 
  • High return on capital – The Company remains capital light given it’s a final fixed assembler (don’t have huge production facilities with on average a production facility of 100-200 people) thus providing very high return on average capital across the group (70-75% return on average capital across the group and after intangibles and taxes its ~15% return on total capital in group). 
  • Strong cash flows making it self-funded – The Company has a self-funded model (doesn’t go to market for dilutive capital raise) and uses its strong cashflow (targets cash conversion of >90%) to first invest organically, and then to make further acquisitions to expand the addressable market and pay shareholder returns via dividends (+5-7% growth year on year. 

Company Description: 

Halma Plc (HLMA), listed on the London Stock Exchange, looks to acquire, and grow businesses in niche markets with a global reach. The Company focuses on markets such as medical, safety and environment. Management believes the earnings profile of these markets have a high degree of defensibility and long-term growth drivers. The Company is not like a Private Equity firm which looks to acquire businesses, reduce costs (to improve earnings profile) and then sell within a 5-year timeframe. HLMA looks to buy and hold companies over the long-term. They manage the mix of businesses in group portfolio to drive sustainable growth and returns over the long term. HLMA looks to acquire businesses to accelerate penetration of more markets, merge businesses where it markets sense, and exit markets if they become less attractive from a long-term growth and returns perspective.  

(Source: Banyantree)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

Categories
LICs Sectors

Qualitas Real Estate Income Fund Raises $171.6m through entitlement offer

Portrait of handsome man smiling and listening to female manager while discussing contract in meeting, copy space

The main Business area of Qualitas Real Estate Income Fund are Financial Services, Asset Management & Investment. Their Market Capitalisation is also 601.60 million. 

Net Profit till June 2021 is 22.93 Million while Revenue is 29.81 million. Net Tangible Asset per unit is $1.6054 Till 22 November 2021.

QRI Financial Summary

QRL Financial Summary.png

On 7 October 2021, QRI announced they were seeking to raise up to $214m through a 1-for-2 pro-rata non-renounceable entitlement offer to eligible unitholders and a shortfall offer to new investors at an Offer price of $1.60 per unit.

There was strong demand for the Offer with QRI raising $171.6m. The raise takes the total capital of the Trust to $599.6m.

The capital raised will be invested as per the investment strategy of the Trust, with the raising providing unitholders the benefits of greater liquidity and portfolio diversification.

The Manager will waive its management fee with respect to any uninvested capital raised from the Entitlement Offer, ensuring unitholders are not paying fees on idle capital. We view this as a significant positive for unitholders.

Company Profile 

Qualitas Real Estate Income Fund is a listed investment trust incorporated in Australia. The Fund aims to achieve a Target Return of 8% p.a. and provide monthly cash income, capital preservation, and portfolio diversification. The Fund will invest in a portfolio that has direct or indirect exposure to Australian and New Zealand secured real estate loans.

(Source: FN Arena, Intelligent Investor)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

Categories
Australian Small Caps Sectors Small Cap

Nufarm Ltd board declared an unfranked dividend of 4cps

Investment Thesis

  • Currents earnings headwinds are seasonal rather than structural. 
  • Recent acquisitions of European products provide growth options.
  • Ongoing focus on operational efficiency to support earnings.  
  • Undemanding valuation relative to domestic chemicals’ peer group and international players. 
  • Launch of Omega-3 canola business. 
  • Sale of its South American crop protection and seed treatment businesses to simplify business model and reduce working capital volatility.  
  • Sector consolidation could see NUF potentially engaged in corporate activity. 

Key Risks 

  • Integration risk associated with recent acquisitions.
  • Adverse movements in commodities prices. 
  • Unfavorable seasonal impacts. 
  • Competitive pressures.
  • Adverse currency movements. 
  • Regulatory / litigation risks. 
  • South America transaction fails to proceed. 

FY21 Results Key Highlights

  • Revenues of $3.2bn, was up +10%.
  • Underlying EBITDA of $370m, was up +51%, driven by improved seasonal conditions, soft commodity prices and tight supply. NUF saw growth in all business segments and especially strong demand for NUF’s crop protection and seeds products. Segment earnings breakdown are as follows: APAC AU$112m, up +47%; North America US$79m, up +25%; Europe EUR€108m, up +80%, and Seed Technologies AU$46m, up 57%.
  • Underlying NPAT was $61m versus pro-forma loss of -$73m in FY20.
  • Management highlighted NUF’s performance improvement program achieved $20m in FY21, and $25m since inception.
  • FY21 saw NUF see significantly improve net working capital and cash generation, with $257m in free cash flow at 30 September 2021 (versus -$151m in FY20).
  • NUF’s balance sheet is now in a much stronger position, with leverage(net debt/EBITDA) to 0.9x from 2.5x in FY20.
  • The Board Declared an Unfranked dividend of 4cps (versus zero payment in FY20.)

Company Profile 

Nufarm Ltd (NUF) is one of the world’s leading crop protection and specialist seeds companies. The Company produces products to assist farmers in protecting their crops against damage caused by weeds, pests and disease. The Company has manufacturing and marketing operations in Australia, New Zealand, Asia, Europe and the Americas.  

(Source: BanyanTree)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

Categories
Sectors Technology Stocks

Aristocrat Leisure to gain strong boost through Playtech acquisition

Investment Thesis:

  • Fasting growing Digital business, with strong execution by management
  • Expectations of new product releases will gain significant traction with customers 
  • Increasing skew towards recurring revenue
  • Global gaming exposure
  • Growing market share in underpenetrated markets
  • Leveraged to a falling AUD
  • Strong balance sheet with ample liquidity provides management with significant flexibility to take advantage of value accretive acquisitions or pursue organic growth opportunities 

Key Risks:

  • Any further downside to the Japanese market
  • Low replacement/uptake in the US market
  • Competition risk
  • Loss in market share
  • Lack of product development
  • Adverse currency movements
  • Adverse outcome from any potential court case

Key highlights:

  • The proposed acquisition of Playtech is strategically and financially compelling. It will accelerate Aristocrat strategy and provide material scale in the already large and growing $70bn online RMG segment.
  • ALL’s share price has performed strongly and is up 34.9% over a one-year period
  • Enhanced market leading positions in gaming operations, measured by the number of machines and fee per day
  • Sustainable growth before share across key gaming outright sales markets globally
  • Further growth in Pixel United bookings with UA spend and expected to be within the recent range of 26% and 29% of overall Pixel United revenues, pending priming and success of new game launches during the year
  • Continued D%D investment to drive sustained long-term growth with investment likely to be modestly above the historical range of 11% to 12% of revenue
  • operating revenue of $4,736.1m was up +14.4% on a reported basis, or +24.8% in CC, whilst EBITDA of $1,542.9m was up +43% on a reported basis and +58% higher on a CC basis
  • ALL’s normalised profit after tax and before amortisation of acquired intangibles (NPATA) of $864.7m, was up +81% in reported terms, and +102% in constant currency (CC) relative to the prior corresponding period (pcp), driven by strong product and portfolio performance, and profitable growth across both Aristocrat Gaming and the Pixel United businesses

Company Description: 

Aristocrat Leisure Ltd (ASX: ALL) manufactures and sells gaming machines in Australia and globally, to casinos, clubs and hotels. In addition, ALL provides complementary products and services such as gaming systems and software, table gaming equipment and other related products.

(Source: Banyantree)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

Categories
Funds Funds Research Sectors

Bennelong ex-20 Australian Equities Fund: distils returns of the 20 largest companies on ASX

The Fund is suitable for investors seeking to distill out the influence of the returns of the largest 20 listed companies on the ASX and looking to tilt towards growth. As a result, the fund invests in stocks outside of the top 20 subsets of the market but with at least a minimum of $250m market cap. The manager is more of a purist stock picker who seeks to invest in companies he feels are on a genuine earnings growth path and feels that such companies are not common and to find these companies requires thorough and focused bottom up research process.

Investment Team:

The BAEP investment team consists of Mark East: Chief Investment Officer and Portfolio Manager, Keith Hwang: Director, Quantitative Research, Neale Goldstone-Morris: Senior Investment Analyst, Strategy, Kieran Sisson, Doug Macphillamy, Brad Clibborn, Jack Briggs: Senior Investment Analyst and Todd Briggs: Investment Analyst

Key Highlights:

  • The manager conducts deep dive, bottom-up research on companies it invests in. With a thorough understanding of their stock positions, the manager takes high conviction and genuinely active bets relative to the benchmark.
  • The fund has been investing since 2009 – the immediate aftermath of the global financial crisis. Since then, there have been several periods where market volatility has tested the manager’s ability to generate returns while following their investment process.
  • The Fund’s focus on stocks outside of top 20 ASX listed companies provides investors an opportunity to diversify and distil growth from typical core domestic equity strategies that are heavily influenced by the performance returns of shares in the top 20 listed companies.
  • The team of eight experienced analysts includes the PM.
  • The fund’s macro analyst provides top down insights on the macro and guides the team to where the team should focus their research.

Downside Risks: 

• An economic recession in Australia/globally, leading to earnings recession

• Stock selection fails to yield alpha 

• Key man risk – the PM (Mark East) departs – given he has the ultimate responsibility of running the strategy

Investment Process:

  • From all of the stock listed on the ASX, BAEP applies a screen to derive an Investment Grade Universe from which to find investment opportunities. The filters include a market capitalisation of greater than $250 million, sufficient liquidity, an earnings track record.
  • Idea Generation aims to identify those stocks within the Investment Grade Universe that warrant particular attention, thereby focusing research efforts on the most prospective candidates. The ideas build up into the Focus List.
  • Stock analysis is extensive and includes quantitative and qualitative analysis including field research.
  • Portfolios are constructed on a stock-by-stock basis. The inclusion, sale and weighting of a particular stock is determined by reference to a number of factors
  • The portfolio is constantly monitored, tested and optimised with ongoing changes.

Performance:

Fund Positioning:

About Fund:

The Fund’s objective is to outperform the S&P/ASX 300 Accumulation Index excluding the portion of return attributed to the S&P/ASX 20 Leaders Index, by 4% p.a. after fees on a rolling 3-year basis. The Fund invests primarily in Australian shares with high quality business models, strong growth, and underestimated earnings momentum and prospects.

(Source: Banyantree)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.