Avoiding weak spots lead to success
SMA Portfolio award
Winner
MPPM Growth Ex20 Australian Equity
Finalists
Perpetual Direct Equity Alpha SMA
Dalton Nicol Reid Australian Equities High Conviction Portfolio
Macquarie Bank was a star at this year's awards, and it demonstrated this in yet another category, with Lonsec crowning them for the Macquarie PPM Growth Ex20 Australian Equity fund in the SMA Portfolio Award category.
Senior portfolio manager for Macquarie Private Portfolio Management, Brad Partridge, said the firm focused on the ASX 300 excluding the top 20 stocks as the top 20 part of the market was quite weak in 2015. This strategy of focusing on high-quality industrial mid-cap companies suited their overall investment philosophy.
"We describe our investment philosophy as quality at a reasonable price," Partridge said.
"The way that we view quality is doing deep research on the industry structure that a company operates within to determine industries which we think are above average in terms of the barriers to entry and pricing power of customers and those types of factors."
The firm believes these types of businesses could outperform their competitors over the medium to long-term, Partridge added.
Hot on the heels of Macquarie was Perpetual, whose Perpetual Direct Equity Alpha SMA, was declared a finalist in the category.
Portfolio manager, Vince Pezzullo, said the success was as much about avoiding being underweight harmful stocks like Australian banks and resources as it was picking winners.
The firm also avoided companies with excessive debt and looked for quality of management by conducting over 1,000 meetings with companies a year.
"You're trying to assess how they behave, and everyone behaves a particular way when things are good," Pezzullo said.
"It's your understanding how they behave when they're bad. When industries go through changes, etc. will they protect shareholders, etc. or will they behave rationally?"
The key factor for the success of the other finalist, DNR Dalton Nicol Reid) Australian Equities High Conviction Portfolio, has been being overweight mid-cap stocks, stocks benefiting from the lower Australian dollar, and avoiding companies that were facing structural headwinds from new competitors.
DNR Capital director, Jamie Nicol, said: "It's finding quality stocks with attractive valuations: by that we mean the interplay between companies with earning strengths, in particular improving returns, good industry structure, strong balance sheets, good management, and low ESG risk".
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