What does the Australian Eagle team mean by quality?
In this video Sean Sequeira joins me to discuss how we define quality for the companies held in The Montgomery Fund portfolio. Sean identifies the importance of quality when investing and how Australian Eagle Asset Management determine the quality of a business.
Transcript
Roger Montgomery: I’m Roger Montgomery from Montgomery Investment Management, and I’m with Sean Sequeira for the final time in this series where we’ve covered the investment philosophy and process of Sean, Alan, and the team. In this video, I ask Sean what he means by quality. It’s something we’ve talked a lot about here at Montgomery and it’s very important for investors in The Montgomery Fund. So, Sean, we’re both wedded to quality. We know what it means through experience for long term returns. When you talk about quality, tell me what you mean.
Sean Sequeira: When we talk about quality, what we want to do is determine the quality of the business, not necessarily the accounting metrics, as some others might do. A quality company from our perspective is operating in a growing market. It gives you a good tailwind, has a competitive advantage in their product, and the management have shown a history of taking advantage of those two key attributes. The next thing is that what we want to see they have a balance sheet and a capital structure that doesn’t take on too much risk, but can adequately finance their strategy. And, importantly, what we want to see is the management are minority shareholder centric when they consider their capital allocation decisions.
Roger Montgomery: So you’re looking for businesses that have great prospects, great management, a strong balance sheet to be able to fund it without diluting investors or taking on too much risk in terms of debt. And that definition of quality I know has produced the returns that you’ve generated over the last 17 years. So thanks for sharing that with us.
That’s all we have time for in this video. We look forward to talking with you again soon.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
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.
