#20 (part 2) Investing in good quality companies on the Australian stockmarket will remain a sensible strategy for the patient investor looking to build long-term wealth
Since our inception in 1998, IML’s investment philosophy has always been to focus on populating our portfolios with companies that fulfil the following criteria:
- competitive advantage (as discussed in detail in Lesson 6)
- recurring earnings (as discussed in detail in Lesson 9)
- with capable management (as discussed in Lesson 7)
- ...and trading at a reasonable price (as discussed in Lesson 11 and Lesson 12)
We refer to this as our quality and value philosophy, and it’s this philosophy that guides the selection process for the investments in all of our Funds. From our experience of investing in the stockmarket through many economic cycles, we have found that investing in thoroughly-researched, good quality companies at reasonable prices, yields the best long-term results - as opposed to jumping on speculative themes and ‘hot’ stocks or sectors in the market.
In the first part of Lesson 20 we outlined reasons to be optimistic about the long-term prospects of the Australian economy. We also flagged some challenges to the outlook going forward.
Despite the challenges to many companies’ earnings growth prospects in the years ahead, we have sought to populate our portfolios with companies that we believe can grow their earnings in the next 3 to 5 years and that on our analysis, are trading at reasonable prices.
Below is a summary of the logic behind IML’s thoughts on various sectors and how we are positioning our portfolios for the next 3 to 5 years: