ASX Top 50 Investment Mandate - Income & Growth

 

Investment objective–Client portfolio performance is benchmarked against the S&P/ASX Top 50 Index, (after fees). The investment objective is to ensure on a rolling 5 year basis significant value (or performance) is added over and above the index.

 

Asset selection- is on an “Absolute Return” basis, meaning that the portfolio will at times hold both long and short exposure, therefore, creating the opportunity to profit from both a rising and falling market.

 

Investments are carefully selected from ASX instruments within the S&P Top 50 Index, to build a diversified portfolio of Australian Equities and Exchange Traded funds. Derivatives or Exchange Traded Options, such as covered calls are used to seek enhanced returns. 

 

Australian equities investment strategy - growth at a reasonable price, (GARP), is the investment model applied to stock selections.  Positions will be established in approximately 15 - 20 S&P/ASX Top 50 listed companies, (although selective exposure outside of the S&P/ASX Top 50  will occasionally occur), and are selected on the basis of their return on equity and solid earnings per share growth profile.  Investment selection within the ASX Top 50 provides exposure to industry leaders, a thematic that will result in investing outside the ASX Top 50 Index will most often be predicated by potential corporate action.

 

No additional leverage will be applied to the portfolio, therefore, the notional exposure of the investments will not exceed the portfolio funds. Risk management includes:-

1. Cash allocation – during periods of increased volatility a shift back to an increased cash position can occur;

2. Asset allocation – establishing the right mix of defensive assets versus growth;

3. Using income from covered calls to offer some downside protection; and

4. ishare and PowerShares ETF’s to obtain short positions, enabling the portfolio to benefit from either a falling index or specific asset classes.

 

 

Stock selection will be based on:-

• Strong cash flow;

• PE valuation and dividend yield, (confirmed by earnings certainty);

• Forecast growth in earnings;

• Low debt and strong free cash flow;

• Sector trends and industry dynamic;

• Pricing power and protective moat relative to competition; and

• Technical trends utilising algorithms to analyse market patterns in price and volume.

 

Based on the investment criteria, the approach will identify companies with a high probability of outperformance.  Combining this approach with the derivative overlay, Investor Signals’ account holders have a high probability of generating above average returns combined with reduced volatility.