our investment style
With a relative value methodology underpinning our investment style we base portfolio decisions on stocks representing good value, that is, cheap relative to the investment universe and industry sector.
Our investment style can be characterised as:
- active with relative value approach;
- using fundamental company analysis focused on understanding the composition and drivers of our earnings forecasts;
- assessing whether the market’s forecasts are realistic and whether the relative market rating (RMR) that is being paid for these earnings is appropriate;
- using a capitalisation of earnings methodology for valuing all stocks in the investment universe to ensure consistency of approach;
- placing a greater emphasis on near term earnings forecasts;
- focusing on buying stocks identified as relatively undervalued and selling stocks identified as relatively over valued;
- producing concentrated stock portfolios with no specific bias targets towards large or small capitalisation stocks;
- being tracking error and stock specific risk aware with a view to managing and controlling investment risk; and
- process driven with a disciplined methodology in stock selection and risk management.
While our investment style aligns with a value investment approach, the ATI AM investment philosophy was developed to mitigate some of the short comings of value investing that the founders had observed throughout their careers. As such the ATI AM process reflects:
- the desire to avoid value traps (often being too early into stocks) by placing a greater emphasis on nearer term EPS forecasts;
- an ability to reduce the extent of underperformance that may result from a value style process at certain stages of the market cycle (especially growth phases); and
- investment risks that can be identified and should be managed and controlled.