Value, in the eye of the beholder

Australia Value Equity strategy

23 July 2018

Reece Birtles

The past few years have seen strong performance for momentum and growth strategies - but poor outcomes for some with a value bias. Is the value spread now, at last, widening? How you can capitalise depends on your perspective.

Reece Birtles explains how the Martin Currie Australia Value Equity strategy has navigated the tough environment and is in a strong position to capture future opportunities.

Reece Birtles

Chief Investment Officer, Martin Currie Australia

FULL REPORT (PDF)

Why has the Value Style Struggled?

Why has the Value Style Struggled?
  • Value style has struggled relative to momentum despite strong earnings per share (EPS) growth.
  • Is now the time for value to recover? Now may be the time to look for value opportunities.

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Is the growing valuation gap all it seems?

Is the growing valuation gap all it seems?
  • By some naïve measures, there is certainly evidence of a growing valuation spread, and greater valuation opportunities. But other quant measures are showing far narrower dispersions.
  • We believe that naïve and quant measures miss a layer of fundamental insight required to truly understand the level of opportunity.

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MCA looks deeper for value

MCA looks deeper for value
  • Despite the better outcomes that p/e and p/b measures do indicate, and the lower opportunities shown by quant measures, we do see that valuation spreads have somewhat widened, but only at the extremes.
  • This does not mean that our Value approach is compromised. Our multi lensed investment process allows us to carefully assess the potential reward versus risk on offer, regardless of the prevailing conditions

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POSITIONING THE PORTFOLIO FOR THE OPPORTUNITIES

POSITIONING THE PORTFOLIO FOR THE OPPORTUNITIES
  • Our current portfolio demonstrates our multi-lensed investment approach and outlook.
  • We are overweight stocks in consumer, non-bank financials and energy sectors, and holding higher-than-average Quality exposures

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Performance supported by process

Performance supported by process
  • Our investment approach has helped us to navigate the choppy conditions we have seen for Value investors over the last three years
  • As valuation spreads will continue to widen, new opportunities are opening for the portfolio. Our multi-lensed investment approach places us in a strong position to navigate this environment going forward.

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