Equities

At the start of every year we publish our Equity Strategy Key Themes report, which as the name suggest discusses the key themes our team believes will impact asset prices and our equities portfolios over the coming 12 months. Within this report we also nominate a bucket of stocks (typically 5 to 10 stocks) which we believe will outperform over the next 12 months. These are not short-term, speculative trade ideas. These are quality companies (in our view) with positive long-term drivers, which we believe may have short-term share price catalysts.

Our 8 key picks for 2019 included Kidman Resources (KDR), which recently received a takeover bid from Wesfarmers (WES). We have been positive on lithium for some time now, publishing our first thematic report into the sector in October 2016. Whilst we never invest in a company with a view (or hope) it will be acquired, it is always nice to have your positive view on the assets and long-term prospects validated so quickly. Even minus the bid, we believe KDR on a long-term view, with its attractive long-dated, low cost assets with high-grade lithium deposits, is an attractive proposition. No doubt the path to realising the gains seen in recent days would have taken much longer and would not have been linear.

Our positive view on KDR was really solidified after our meeting with the CFO Frederick Kotzee late 2018. Whilst we were sold on the long-term drivers, the meeting really helped us understand the specific nuances with KDR including upcoming key share price catalysts. This is why we place significant emphasis on meeting with company management teams. It will not come as a surprise to anyone it is more critical in the small to mid-cap space. Most often than not the key picks which have performed the best over the coming 12 months have been on the back of management meetings and key share price catalysts.

Our past picks which were a standout

2017 (6 key picks) - The a2 Milk Co (A2M) +261.3%; Nine Entertainment (NEC) +56.4%
2018 (10 key picks) - Afterpay Touch Group (APT) +107.7%; Qantas Airways (QAN) +18.1%.

Our bucket of key picks (on average) in 2017 & 2018 outperformed the market. Our 2019 cohort is currently also outperforming the market.



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