When it comes to investment selection, arcinvest utilises a value investing approach for each client.
Value Investing
Value investing is an investment technique that uses a 'bottom-up' approach to researching, identifying, and valuing quality companies.
arcinvest selected investments include direct shares by selecting and holding shares directly, so clients can better manage income flow and tax issues as well as lowering ongoing management fee cost. If more appropriate for individual clients' needs, we select fund managers who follow a value approach. We do rigorous assessment to ensure fund managers not only espouse value investing in their promotional material, but actually follow a strong value investment philosophy with a disciplined, rigorous process.
Valuation is obtained by quantifying first and most importantly the current earnings, and then assessing the sustainability, quality and growth potential of the company’s future earnings. The earnings stream is important as it enables the payment of dividends and the reinvestment back into the company to further grow earnings. The probability of suffering a permanent loss of capital on each investment is also considered.
Our Investment Selection Strategy
Our investment strategy is systematic, disciplined and focuses on finding companies that meet our investment selection criteria and subsequently determining an appropriate valuation for those companies. We believe that the underlying value of a company is best determined by quantifying and valuing the sustainability, quality, and growth potential of a company's future earnings stream.
The earnings stream from a company is important because it enables both the payment of dividends to shareholders as well as the reinvestment into the business for future growth. We conduct detailed in-house research and valuation on every investment being considered for your portfolio and on every investment held.
Individual investments will generally be selected on the basis of their ability to fulfil all or part of your individual goals and objectives.
As such, we seek investments that we believe offer the following characteristics:
- provide an absolute real return over the long term to investors
- will pay a regular and growing income stream
- are trading below value compared to the market in which they trade and therefore should minimise the impact of a falling market on the value of your investment
- achieve high returns on equity and can reinvest those into further high returns
As markets move through different cycles over time, some assets will increase or decrease in attractiveness in their ability to deliver on your needs and goals. This means that your portfolio requires regular review.
Responsible Investing
When selecting and retaining investments, arcinvest also considers the implications of environmental, social, and ethical concerns and corporate governance issues. We believe in responsible investment, and therefore take the time to evaluate these issues as they may have a material financial impact on an individual investment.
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