Long-term value
At Montgomery Investment Management, we invite you to invest with us if your investment philosophy is aligned with our own. We might be smaller than we would if adopting an all-things-to-all-people approach but life is short and working with people whose philosophy aligns with ours makes that life a lot more enjoyable. In any event, it takes time for the businesses we acquire to realise value, and discipline is required to maintain confidence in the investment process amidst short-term volatility. With so many people gambling on quick profits, it is perfectly understandable that our approach doesn’t appeal to everyone. Perhaps more intriguingly, our approach is also shared by the management of some of our invested companies and CSL is one of them.
We were fortunate to see CSL present at a recent conference. The Chief Financial Officer described in detail the company’s approach to allocating capital. It can take ten years for a product to be developed, which requires thoughtful consideration of a number of risks. For instance, while the average tenure of a CSL employee is high, there are employees that will start working on a project and not see it through to completion, if it even reaches completion at all. Management is fully aware that after committing extensive time, energy and resources, there is a very real risk that the product may be unprofitable. This inherent risk requires a very disciplined approach to managing capital in order to generate meaningful returns over the long run. As such, management is cautious, does not over-promote its prospects, and does not pursue fads, but has a view to invest in products that have the potential to transform the industry and deliver significant value to its customers.
CSL’s philosophy aligns with our investment approach. As fund managers, our job is to generate returns with an appropriate exposure to risk. Like CSL, there will be times when decisions are made where the end result is skewed to the downside. But our disciplined approach of investing in high quality companies with bright prospects at attractive prices, means that over the long term we expect to deliver material value to our clients.
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.
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