As investors we often look to follow the philosophies of the capital allocators with best track records, Buffett, Munger, Graham, Lynch the list goes on. However, Chris Hall, Chief Investment Officer of Ellerston Capital, says his biggest influence comes from Michael Chaney the current Chairman of Australian conglomerate Wesfarmers. Hall says that Chaney’s focus on return on investment capital (ROIC) has stuck with him through his career and is the single most important metric in his investment process.

Hall is responsible for managing Ellerston’s low volatility income strategy which has topped its peer group for performance over the last 12 months, according to Lonsec data. However, the quirky thing about Hall’s approach is that a big dividend yield is often an alarm bell that tells him to avoid investing in the stock.

“We’ve had about 30% of companies in the ASX300 who have either cut their dividends by more than 15% or suspended them altogether. So there has been a real shock to the system and we are not through that yet.”

In this interview, Hall explains his process in more detail, digs into his current outlook for equities and shares the sectors that look most appealing as well as two compelling ideas with sustainable income.