Simon Shields

In the relatively complex world of company valuations, share price fluctuations and forecasts, leading outcomes based equity managers Monash Investors has encouraged investors to think about smarter ways to price listed stocks.

Simon Shields, co portfolio manager at Monash Investors, says many of the firm’s investments are guided by a combination of four attributes, referred to as GIVE:

Growth Monash Investors wants to see strong growth in sales, earnings and/or cash flows for stocks that it looks to buy, and the opposite for stocks it would short.

Insight Monash Investors needs a stock to be misunderstood in some way by the market, and to anticipate how this will be resolved.

Value A payoff (the difference between the target price and the current price) that will meet the hurdles Monash Investors sets for returns.

Event A near term catalyst, if possible.

“We value stocks on an absolute basis, versus adopting a relative approach, because we are targeting absolute returns,” he said.

“We do this by relying on recurring business situations or patterns of behaviour – which we have observed over our careers – that inform our forecasting.”

“As investors, we prefer taking a ‘deep dive’ into interesting companies rather than pricing all companies all the time, which is a misallocation of scarce research resources, and which brings us back to our core objective.”

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