Investment Philosophy

We believe people are motivated by short-term outcomes, overemphasise recent information and are uncomfortable having unpopular views.

A Long-Term Perspective

  • We only pay for what is sustainable
  • We look through fads and fashions
  • We aim to understand the risk of losing long-term capital

Independent Thinking

  • We are always sceptical
  • We are wary of popular opinion
  • We do all our own research

A Culture of Ownership

  • We own our business
  • We co-invest in our funds
  • We actively engage with companies

The Merlon process is simple: we invest in undervalued companies where we think market participants have become too pessimistic.

Sustainable Cash Flow

Supported by:

  • Sound industry structure
  • Competitive advantage
  • Sensible boards and management

Market Misperception

  • Undemanding broker forecasts
  • Market concerns factored in
  • Limited risk of permanent loss

Portfolio Construction

  • Portfolio driven by research outputs
  • Prudent risk, liquidity & other constraints

 

For further information, please click here to view our Investment Philosophy.

Value Investing: An Australian Perspective

While the long term returns from ‘value investing’ are strong and well documented, the approach has struggled over the past decade, prompting many investors to question its merits.

Our three part series discusses value investing from an Australian perspective:

Part I: Examines alternative classifications of ‘value’.
Part II: Explores the question of why value strategies based on free-cash-flow outperform the market.
Part III: Discusses behavioural biases in investor risk assessments and expectations.