#9 Companies with recurring earnings provide more consistent returns over the longer term
One of the key attributes that IML has sought in companies when investing in the Australian sharemarket since our inception in 1998 is to look for companies that will generate reliable, predictable earnings over the long term - what we have always referred to as a recurring earnings stream. Focusing on this key aspect has not only helped IML avoid virtually all the spectacular corporate failures of the last 20 years such as Onetel, Babcock and Brown and Onesteel but it has also helped IML's deliver returns which are far less volatile than the return of the overall sharemarket.
Companies that generate recurring earnings are generally found in sectors that have demonstrated stable to growing volumes over long periods of time – sectors such as the Healthcare, Gaming, Packaging and Supermarket sectors. Having said this, one has to regularly assess the regulatory and competitive landscape and risks in each of these sectors to select companies that can continue to generate predictable earnings into the future.