Key stock picks 2020 – Half time score…

Zach Riaz

Banyantree Investment Group

At the start of each year our team publishes a list of stocks (no more than 10) which we believe are likely to outperform the market over the coming 12 months. These ideas are generated from our research program, which covers bottom up stock analysis and macro analysis. That is, we could be playing a macro theme or a stock specific catalyst. Our research program drives ideas for our portfolios.

If you go through our key picks list for 2020 and past 3 years (provided below), you may find one or two names which you may not be so familiar with. But, by and large, most of the stocks are well known, liquid (predominantly S&P/ASX 200), and come from a range of sectors.

As a basket, our key picks have outperformed the broader market for the past three years and 2020 picks are well ahead, so far. But that is not the most important part. Our goal as investment managers is to hit 50 – 70% win rate on a consistent basis. What constitutes a win? Positive return or at least better than the market. On this basis we are hitting our target. If we do this, the performance of our portfolios over the long-term will take care of itself. Year-to-date CY20 (Jun-20), our Australia large cap, Australian Small Cap and Global Core strategies are well head of their reference benchmarks. Since inception, all these strategies are also outperforming.

There are simple but very important reminders from this annual exercise:

- You do not need to get overly creative with your stock picks to deliver consistent performance. We aim to deliver 8 – 12% p.a. through the cycle and therefore we are not chasing “10 baggers”. Often the best plays are the ones in plain sight.

- Valuation is one part of the overall analytical framework. If we knocked out companies on a simple “high PE-multiple” measure at the screening level, we would have missed out on a2 Milk Co (A2M) and Afterpay (APT) – both of which have been or still part of our portfolios.

- Don’t follow a style (value, growth, momentum, quality) and assess each stock idea on its own merits. We went long Nine Entertainment at 9x PE-multiple and Afterpay at 83x PE-multiple. Trust your research and investment process. What gave us confidence investing in these stocks at the time was our “on the ground” research, not just spread sheet work.

Performance from the day the list was published to the end of the respective year (source: Bloomberg)

PLEASE NOTE - The content above is general in terms and does not take into account your objectives, financial situation or needs. You should always consider your unique personal circumstances and seek professional paid advice before making investment decisions. Past Performance is not an indication of future outcomes. Disclaimer This document is provided by Banyantree Investment Group (ACN 611 390 615; AFSL 486279) (“Banyantree”). The material in this document may contain general advice or recommendations which, while believed to be accurate at the time of publication, are not appropriate for all persons or accounts. This document does not purport to contain all the information that a prospective investor may require. The material contained in this document does not take into consideration an investor’s objectives, financial situation or needs. Before acting on the advice, investors should consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation and needs. The material contained in this document is for sales purposes. The material contained in this document is for information purposes only and is not an offer, solicitation or recommendation with respect to the subscription for, purchase or sale of securities or financial products and neither or anything in it shall form the basis of any contract or commitment. This document should not be regarded by recipients as a substitute for the exercise of their own judgement and recipients should seek independent advice. The material in this document has been obtained from sources believed to be true but neither Banyantree nor its associates make any recommendation or warranty concerning the accuracy, or reliability or completeness of the information or the performance of the companies referred to in this document. Past performance is not indicative of future performance. Any opinions and or recommendations expressed in this material are subject to change without notice and Banyantree is not under any obligation to update or keep current the information contained herein. References made to third parties are based on information believed to be reliable but are not guaranteed as being accurate. Banyantree and its respective officers may have an interest in the securities or derivatives of any entities referred to in this material. Banyantree does, and seeks to do, business with companies that are the subject of its research reports. The analyst(s) hereby certify that all the views expressed in this report accurately reflect their personal views about the subject investment theme and/or company securities. Although every attempt has been made to verify the accuracy of the information contained in the document, liability for any errors or omissions (except any statutory liability which cannot be excluded) is specifically excluded by Banyantree, its associates, officers, directors, employees and agents. Except for any liability which cannot be excluded, Banyantree, its directors, employees and agents accept no liability or responsibility for any loss or damage of any kind, direct or indirect, arising out of the use of all or any part of this material. Recipients of this document agree in advance that Banyantree is not liable to recipients in any matters whatsoever otherwise recipients should disregard, destroy or delete this document. All information is correct at the time of publication. Banyantree does not guarantee reliability and accuracy of the material contained in this document and is not liable for any unintentional errors in the document. The securities of any company(ies) mentioned in this document may not be eligible for sale in all jurisdictions or to all categories of investors. This document is provided to the recipient only and is not to be distributed to third parties without the prior consent of Banyantree.

Zach Riaz
Investment Manager / Director
Banyantree Investment Group

Investment Manager and Director at Banyantree Investment Group, with responsibilities across equity and multi-asset strategies. Zach has over twelve years’ experience including portfolio management and sell-side investment research.

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