Listed security SMA update
By Andrea Theouli
One of the core exercises, since Madison joined Clime, was to ensure that we looked at potential synergies within the group which would enhance the support we provide Advisers. As part of this process, we identified that leveraging the internal investment capability coupled with the relationship Clime has with Mercer was the best outcome for all stakeholders. This will ensure that we provide a reputable and robust service with support around:
- Strategic and dynamic asset allocation;
- Portfolio construction;
- Management of the group’s managed account portfolios.
Clime’s in-house equities team has been providing research and support for the Australian equities portion of the listed security SMA portfolios. Here is an introduction to Clime’s Investment Philosophy and Process:
Clime’s investment approach can be summarised as being high-conviction and research intensive with a longer-term focus than many of their peers. Clime believes that attractive long-term risk adjusted investment returns can be achieved through the implementation of a disciplined investment framework, using bottom-up fundamental analysis with a macro view overlay coupled with an emphasis on high-quality companies.
Investment process
Clime follows a 6-step process:
Step 1: Idea Generation and total Universe of stocks for consideration
This stage of the process is where Clime’s universe of opportunity is formulated. There are over 2,000 ASX listed stocks in Australia but only half have revenue or are past the start up phase.
Step 2: Qualitative & Quantitative Metrics: High-Level Review
This step involves applying Clime’s ‘Quality Filter’ to the universe identified during step 1. The ‘Quality Filter’ takes into account financial strength, profitability, and margin. The goal is to identify companies with low financial leverage, relatively low capital requirements, earnings per share growth etc. that can deliver genuine sustainable long-term growth. The outcome is approximately 150 potential companies.
Step 3: Potential Investments Review
A deeper, more detailed review of qualitative and quantitative metrics is undertaken including:
- A detailed review of key financial metrics like profitability (ROE & ROIC), margins (GP & EBIT margin, level, and trends), balance sheet strength.
- A detailed review of macro and micro risks.
- A review of competitive and industry position.
The outcome is a shortlist of approximately 30 companies.
Step 4: Short List Review
This involves consideration of whether securities in the shortlisted companies can be purchased at an appropriate price with a margin for safety. Further modelling with historical & forecast earnings and share price targets is conducted. If the results of this analysis are favourable the team will endeavour to meet with the company to confirm their investment thesis.
Step 5: Portfolio Construction
The team will look at things like stock weightings, sector weightings, average daily liquidity etc. to determine position size.
Step 6: Ongoing Portfolio Management
The portfolio is reviewed weekly (more regularly in volatile times).
The ten person investment team has extensive experience over multiple investment cycles, clarity of approach, and a willingness to listen and learn. The team follows a well-structured proven process with a collaborative approach which allows them to identify investments that have:
- A competitive advantage, leadership within a specific niche, and a soundtrack record.
- Strong financial strength, high levels of profitability, and margin.
- Low financial leverage.
- Relatively low capital requirements allowing a business to generate cash while growing.
- Highly capable management team aligned with creating shareholder value.
- Companies that can deliver genuine sustainable long-term growth.
- Investments that can be purchased at appropriate prices with a margin of safety
In This Edition:
| · A note from Annick
· Investment Services Transition |
· Setting up a referral arrangement
· Kaplan professional Study Period 6 · Government Stimulus for self funded retirees |
Listed security SMA update
By Andrea Theouli
One of the core exercises, since Madison joined Clime, was to ensure that we looked at potential synergies within the group which would enhance the support we provide Advisers. As part of this process, we identified that leveraging the internal investment capability coupled with the relationship Clime has with Mercer was the best outcome for all stakeholders. This will ensure that we provide a reputable and robust service with support around:
- Strategic and dynamic asset allocation;
- Portfolio construction;
- Management of the group’s managed account portfolios.
Clime’s in-house equities team has been providing research and support for the Australian equities portion of the listed security SMA portfolios. Here is an introduction to Clime’s Investment Philosophy and Process:
Clime’s investment approach can be summarised as being high-conviction and research intensive with a longer-term focus than many of their peers. Clime believes that attractive long-term risk adjusted investment returns can be achieved through the implementation of a disciplined investment framework, using bottom-up fundamental analysis with a macro view overlay coupled with an emphasis on high-quality companies.
Investment process
Clime follows a 6-step process:
Step 1: Idea Generation and total Universe of stocks for consideration
This stage of the process is where Clime’s universe of opportunity is formulated. There are over 2,000 ASX listed stocks in Australia but only half have revenue or are past the start up phase.
Step 2: Qualitative & Quantitative Metrics: High-Level Review
This step involves applying Clime’s ‘Quality Filter’ to the universe identified during step 1. The ‘Quality Filter’ takes into account financial strength, profitability, and margin. The goal is to identify companies with low financial leverage, relatively low capital requirements, earnings per share growth etc. that can deliver genuine sustainable long-term growth. The outcome is approximately 150 potential companies.
Step 3: Potential Investments Review
A deeper, more detailed review of qualitative and quantitative metrics is undertaken including:
- A detailed review of key financial metrics like profitability (ROE & ROIC), margins (GP & EBIT margin, level, and trends), balance sheet strength.
- A detailed review of macro and micro risks.
- A review of competitive and industry position.
The outcome is a shortlist of approximately 30 companies.
Step 4: Short List Review
This involves consideration of whether securities in the shortlisted companies can be purchased at an appropriate price with a margin for safety. Further modelling with historical & forecast earnings and share price targets is conducted. If the results of this analysis are favourable the team will endeavour to meet with the company to confirm their investment thesis.
Step 5: Portfolio Construction
The team will look at things like stock weightings, sector weightings, average daily liquidity etc. to determine position size.
Step 6: Ongoing Portfolio Management
The portfolio is reviewed weekly (more regularly in volatile times).
The ten person investment team has extensive experience over multiple investment cycles, clarity of approach, and a willingness to listen and learn. The team follows a well-structured proven process with a collaborative approach which allows them to identify investments that have:
- A competitive advantage, leadership within a specific niche, and a soundtrack record.
- Strong financial strength, high levels of profitability, and margin.
- Low financial leverage.
- Relatively low capital requirements allowing a business to generate cash while growing.
- Highly capable management team aligned with creating shareholder value.
- Companies that can deliver genuine sustainable long-term growth.
- Investments that can be purchased at appropriate prices with a margin of safety
In This Edition:
| · A note from Annick
· Investment Services Transition |
· Setting up a referral arrangement
· Kaplan professional Study Period 6 · Government Stimulus for self funded retirees |