Despite a bumpy 2016, quality investing is alive and well
Last year was certainly full of surprises. We saw Brexit, Donald Trump’s election victory, and iron ore prices tripling. We also witnessed the great sector rotation on the share market from high quality businesses to low quality businesses – a trend that continues today. And this led us to ask: is quality investing still the best approach?
Scott Phillips joined Montgomery Investment Management in 2013. Scott joined the firm from BlackRock Investment Management, where he was Managing Director, Head of Retail Australia for 12 years.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
ajgkelly1
:
Hi Scott.
RHC has had significant directors selling down their holdings substantially. The usual reason are given etc, how do you think this impacts on your impression of the company. It doesn’t promote confidence in their outlook for their business.
Kelvin Ng
:
Hi Roger, that’s fair enough. Investing in quality businesses does allow one to sleep better at night.
Kelvin
Kelvin Ng
:
Hi Scott, thanks. Quality investing is great, I believe in it and am invested in your funds. But there is nothing wrong with investing in lesser quality businesses, as long as they’re cheap relative to their value (and I don’t mean commodity businesses).
Howard Marks said the same in this recent lengthy interview, which includes many other gems:
https://www.bloomberg.com/news/audio/2017-02-17/interview-with-howard-marks-masters-in-business-audio
Kelvin
Roger Montgomery
:
Hi kelvin, I have a real issue with investing in lesser quality businesses or those with less than bright prospects because my experience in business has me concluding that tough business often disappoint on the downside thanks to their requirement that thier managers and owners continually make life-supporting decisions. On the other hand great businesses, by definition tend to surprise on the upside irrespective of who’s at the helm.