Stick to the investment process

Peter Meany

First Sentier Investors

With key equity markets at all-time highs, bond yields racing to zero, central banks out of dry powder and governments consumed by politics, 2020 promises to be a year of uncertainty for investors. The one thing investors can’t ignore is the investment process.

There is a Zen proverb, which says:

“Before enlightenment; chop wood, carry water.
… After enlightenment; chop wood, carry water.” 

For investors confronted by market noise and volatility, there is no more important time to do the basics well. 

This means consistently executing the investment process.

  1. Focus on companies with pricing power, an industry or regulatory structure that allows price increases at or above inflation, and structural growth, where growth reflects long-term change rather than the ebb and flow of the economic cycle. Infrastructure companies like toll roads and mobile towers offer these characteristics and can be particularly valuable to a portfolio during periods of uncertainty.

  2. Spend time with management to understand what motivates them, where they are going and what contingencies they have in place if things don’t go to plan. Our team conducts over 500 management, site visit and regulator meetings each year – we will do 500 if markets are up and 500 if markets are down.

  3. Assess the quality of companies, from barriers to entry and financial leverage to management incentives and board independence. Infrastructure companies with positive environmental and social impacts should minimise political and regulatory risks and preserve their licence to operate.

  4. Identify companies with value, relative to history or a considered range of risk scenarios.  When stocks trade above these scenarios, have the discipline to sell. When stocks trade below, have the conviction to buy.  

  5. Be aware of changing macro conditions when constructing portfolios, to ensure these conviction stock calls remain the primary driver of returns.

In times of stress, it pays to do the basics well. 

Keep informed in 2020

Stay up to date with my latest content by hitting the follow button below and you'll be notified every time I publish a wire.

This wire is part of the ‘One thing investors can’t ignore in 2020’ series. To download the full ebook please click here.

Peter Meany
Head of Global Listed Infrastructure
First Sentier Investors

Peter established the Global Listed Infrastructure Securities strategy in 2007 and has more than 20 years' investment experience. Prior to joining CFSGAM, Peter was a Director and Head of Infrastructure and Utilities Research at Credit Suisse...

I would like to

Only to be used for sending genuine email enquiries to the Contributor. Livewire Markets Pty Ltd reserves its right to take any legal or other appropriate action in relation to misuse of this service.

Personal Information Collection Statement
Your personal information will be passed to the Contributor and/or its authorised service provider to assist the Contributor to contact you about your investment enquiry. They are required not to use your information for any other purpose. Our privacy policy explains how we store personal information and how you may access, correct or complain about the handling of personal information.


Sign In or Join Free to comment