• Shopping for retail stocks - 3 to watch read here

How we use short-side research to identify great businesses


How we use short-side research to identify great businesses

The Montgomery Global Fund is one of Australia’s leading global equity funds. Since inception in July 2015, the fund has turned $100 into $116. A unique feature is that our global equity fund has actively benefited from short-side research.

Montaka is the Montgomery Global Fund’s sister strategy. The two funds hold the same 15 to 30 long positions in common. In addition, Montaka holds a portfolio of 25 to 40 short positions – essentially, investments that profit as deteriorating businesses fall in value. Apart from being money-making opportunities in their own right, the research process used to identify great short candidates often throws up some wonderful investment opportunities on the long side which both Montaka and the Montgomery Global Fund benefit from.

Take the airline industry as an example. The airline business is typically highly capital intensive and highly competitive, which has led to poor returns over time. On the short side, at various times, Montaka has been able to profit from shorting certain full service European carriers. This work led our global research team to the aircraft leasing companies. They too suffer from overcapitalization and commoditization. Montaka had some success being short certain aircraft lessors as well. Yet the broader commercial aviation space is not all doom and gloom.

During the course of our work on all things planes, we identified two businesses that were capturing a lot of the value in moving people and products by air. They were the plane manufacturers Boeing and Airbus. Effectively, the companies form a duopoly in jet planes allowing them to generate high returns on capital, and a backlog of orders stretching out more than eight years sustains strong growth. At a share price less than EUR50 in the middle of last year we believed that the market’s growth and cash flow expectations for Airbus were particularly conservative – i.e. the stock was cheap. In fact, we thought the shares should be worth at least EUR75. The Montgomery Global Fund bought a position in Airbus.

Fast forward to today and Airbus shares now trade at more than EUR70, representing a gain of more than 40 per cent since the fund first started purchasing the company’s stock in 2016. A fantastic result for our global clients that originated from the nuts and bolts of Montaka’s short research process.

This is a unique attribute of the Montgomery Global Fund. We are the only global equity fund in the marketplace that benefits from proprietary short-side research.

You can learn more about the Montgomery Global Fund here.

Montgomery Global funds own shares in Airbus.

Christopher is a Portfolio Manager at Montgomery Global Investment Management. Christopher joined Montgomery in January 2015 after spending more than four years at LFG, the private investment group of the Lowy family, where he was most recently a senior member of the research team based in New York. Prior to this Christopher worked as a research analyst at One East Partners, a hedge fund based in New York, and as an investment banker at Goldman Sachs in Sydney.


Why every investor should read Roger’s book VALUE.ABLE


find out more


This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564) and may contain general financial advice 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 advice from a financial advisor if necessary.


  1. Hi Chris, I understand that recently Andrew has done an interview with Raoul Pal at Real Vision TV. Can you post it on this blog?
    Thanks very much.

Post your comments