Two high-quality stocks we own in The Montgomery Funds’ portfolio
In this video insight, David Buckland, CEO of Montgomery, and Sean Sequeira, Chief Investment Officer of Australian Eagle Asset Management, discuss the positive impact of Australian Eagle’s partnership with Montgomery. They delve into recent company earnings reports, highlighting Cochlear’s (ASX:COH) return to growth as indicative of its strong business quality and long-term potential, independent of external factors. They also mention QBE’s (ASX:QBE) efforts to improve margins through enhanced risk management for better earnings quality, potentially leading to a higher market rating.
I’m David Buckland, CEO at Montgomery, and welcome to this week’s video insight. Today, I’m accompanied by Sean Sequeira, who’s the chief investment officer of Australian Eagle Asset Management.
As many of you know, Australian Eagle Asset Management joined Montgomery about eleven months ago and Sean physically sits right next to Roger and myself, and his team of Dan and Alan and Mark Oliver, we’ve been very, very pleased with the cultural fit to date. Sean, how’s the first eleven months gone for you so far?
Well, it’s been a bit a bit of a change for It’s, it’s a little bit more exciting. Having more people in the office, we’re used to only having four to six people in the office, but having, having a team of people doing different aspects of the business has created a little bit more excitement, for us. And it’s probably a little bit more to come to work to see everyone.
Great. Great. Now we’re in the middle of reporting season, and there’ve been some interesting report for the, for the year to June two thousand twenty-three, and obviously some interesting guidance, for the year to June two thousand twenty four.
And I thought it might be a great opportunity for you just to touch on a couple of stocks in the Montgomery Fund portfolio and Montgomery Fund private fund portfolio, and just spend a few minutes on some of those some of those companies. Yeah.
A couple of companies that do come to mind. The first one I would like to mention is probably Cochlear that released their results on Tuesday.
They had highlighted and, this is important for our process, they highlighted, a return to growth post COVID Now that signifies to us, not necessarily, you know, we’re looking at the numbers. We like to see earnings growth, but more importantly, it’s the quality of the business that’s really highlighted by that return to growth. And what that indicates to us is that this is the type of company that can grow long term. You will have ebbs and flows of earnings growth that grows strongly, then ease back again, but consistent, growth over the medium term is something that a really good quality company will exhibit.
And that doesn’t matter what it doesn’t it doesn’t depend entirely upon what’s going on around the world. It depends upon the product itself and how they manage it. And they’re managing it. Great.
So that is something that, that was highlighted by their results, and that return to growth is well rewarded by the market, but more importantly for us It’s what it indicates about the medium to long term future for the company.
Good. Excellent. And what about a second stop, Sean?
Well, let’s talk about something like QBE, which is a different type of stock, is not necessarily, something that may, grow long term like, at above market rates like cochlear, but what we’re seeing and what they’re indicating from, not this most recent half, but the half coming is an improvement in their margins. And they’re looking to actually improve margins, not just from the tailwinds that they’re getting from higher interest rates, higher premiums, everyone will probably know about higher premiums, but they’re looking to improve their margins from, improving the way that they manage their risk. Now that’s something that we’re looking forward to over the next maybe year.
Should they do that, you’ll get an improved quality of earnings. And that should be rewarded by the market. It’s something that we’re highlighting in in their result, and their outlook statement, but, if they’re if they’re able to do that, then, we can see, an improved rating by the market. And they’ve, therefore, an increased, some support for their, for their share price.
Excellent. There you go, ladies and gentlemen, two high quality stocks, cochlear, and QBE, and just to just to sort of recapitulate.
Australian and Eagle asset management now have just passed through their eighteen-and-a-half-year track record on the long side and have added handsome value versus the, the, the broad market and their long, short fund has just had its seventh anniversary, and they’ve added at least five percent after expense value versus the broad market. So, I’ll leave it there, thanks very much for your time. And it’s good to sort of catch up with Sean and get to know a bit about the Oz Eagle team, particularly Alan and Dan, and Mark, and Sean’s the leader of that team.
And I hope you guys enjoyed that little presentation and got something out of it. And please continue to follow us on Facebook and Twitter.
The Montgomery Fund and The Montgomery [Private] Fund own shares in Cochlear and QBE. This video was prepared 17 August 2023 with the information we have today, and our view may change. It does not constitute formal advice or professional investment advice. If you wish to trade in both Cochlear and QBE you should seek financial advice.