Equitable Investors believes the greatest opportunities to generate significant returns from equity investments are through the pursuit of attractively-priced investments in businesses with strong growth prospects and/or strategic value. Successful investment in businesses requires diligent research and analysis of each business, its key people, its industry, its opportunities and its risks. It also requires ongoing, disciplined and patient re-evaluation. We believe this holds true whether the investment is in the form of a share trade on an exchange or a private sale and purchase agreement for a tightly-held unlisted business.
Once invested, we believe it is in a shareholders' best interests to actively seek to contribute to value creation and maximisation.
We are advocates for our investors an our investments. Equitable Investors believes in maintaining frank and open dialogue with the entities in which investments have been made. The manager will offer support & constructive feedback, with the ultimate focus remaining always on maximising shareholder value. Where there are opportunities to leverage relationships and develop strategic initiatives for the benefit of the investee, Equitable Investors will seek to do so. We believe this active, constructive approach can enhance returns.
Quantitative Evidence & Proprietary Research
Investment is not a hard science but there is much that can be proven or disproven quantitatively. Equitable Investors is focused on investment strategies that are supported by quantitative evidence. Proprietary research drives a deeper understanding of quantifiable factors and drives higher levels of informed conviction in the portfolio constituents.
Equitable Investors considers people to be key assets of most companies and therefore seeks to know the people in and around the company and maintain ongoing dialogue with management and board. We take a strong interest in their incentives and a pragmatic view towards appropriate corporate governance structures.
Developed, liquid markets may be relatively efficient, in general, but there are always inefficiencies to be found. For example:
· information may not have been widely disseminated and analysed even if it is public;
· a market may be awash with so much information that the marginal investor does not know which information is significant and which is just noise;
· the balance between supply and demand may have been skewed by the activities of a significant investor with a different objective to other investors; or
· investors often display “herding” behaviour, shifting security prices excessively or missing out on opportunities that aren’t “popular”.
Inefficiencies are most likely found among lesser known stock listings, including those with smaller market capitalisations, little or no broker research coverage, lower "free floats" or a history of disappointments that have chastened investors.
Equitable Investors considers investments in the context of earnings, potential or future earnings and asset multiples and recognises the difference between a great business and a great business at an attractive price.
We ask why we believe a security is good value or mispriced and whether we have any analytical edge to justify our view.
Equitable Investors typically focuses on businesses that do or, in its investment thesis, will generate free cash flow, possess conservative financial gearing, hold competitive advantages and appear to have credibility in terms of the quality of their reported accounts and the capabilities of board and management. Equitable Investors prefers businesses that will not be driven predominantly by cyclicality and instead possess their own specific growth or value drivers.
The pursuit of higher returns must always be carefully counterbalanced by the management of risk. The specific risks of each investment will be considered stand-alone and within the context of the overall portfolio.
Equitable Investors Pty Ltd is licensed as an Australian Financial Services Licensee (AFSL No. 505824)