Atlas Concentrated Australian Equity Portfolio

Our approach to investing in Australian shares is founded on fundamental company analysis earnings quality and sensible risk management principles. The objective is to build a portfolio of high-quality companies that can deliver consistent and growing dividends with easily forecastable earnings. The Portfolio focuses on companies with strong profit and dividend growth. 

The portfolio aims to outperform the S&P ASX 200 (TR) Index, over rolling five-year periods, after fees.

The portfolio will also aim to deliver investors long-term capital growth and a higher dividend yield and franking credits than the portfolio benchmark.

The portfolio is designed for investors: 

• Seeking a concentrated portfolio of listed Australian equity companies,
• Seeking consistent tax-effective distributions above that offered by the ASX 200 accept the risk of price fluctuations, particularly over periods less than the minimum investment timeframe and that capital preservation is not guaranteed, and
• Are prepared to invest for the minimum investment timeframe of five years. 

Investment Philosophy

Atlas is founded on the below three core beliefs:

1. Investment success through making fewer mistakes: Rather than chasing high return and higher risk investments, Atlas believe that superior performance and lower volatility of returns are best delivered by concentrating on avoiding mistakes.

2. Smaller certain returns today are worth more than larger uncertain future returns: Atlas prefer to invest in companies paying certain dividends today which can be distributed to investors, rather than deploying investors’ capital in companies promising more variable returns in the future.

3. Markets are not efficient: Efficient market theory underpins many professional portfolio management processes around the world. As elegant as these theories are Atlas believe they simply do not accord with what happens in the real world of managing investor’s portfolios.

Investment Approach

The underlying investment philosophy behind the portfolio is based on the concept of quality investing. By focusing in on the quality of a company and its earnings statements, Atlas seeks to avoid ‘risky’ companies, where ‘risky’ is defined as companies with high leverage and volatile earnings.

Atlas use a Quality Filter Model (‘QFM’) to filter the investment universe to remove any companies that do not meet their criteria. Companies that pass the filters can be considered at the next stage – detailed company analysis & relative attractiveness assessment. This stage includes the fundamental analysis of a company’s quality; focusing on on-site visits,  management meetings and internally generated forecasting models.

This approach results in Atlas aiming to populate the portfolio with a select group of companies with high-quality recurring earnings and improving quality. In the case of improving quality, Atlas believe at times the market may be mispricing a  company’s earnings as low quality when the underlying fundamentals of that company are improving.

The portfolio is managed with the goal of:

• Constructing a concentrated portfolio of 18-30 investments which are not trading at excessive valuations, relative to the peer group; and
  
  
• Maximizing after-tax returns for investors, based on favouring stocks that pay a high franked yield, and capital gains deferral through reduced turnover and by utilising long-term capital gains tax concessions. 

The portfolio’s investment strategy is based on the concept of quality investing. By focusing in on the quality of a company and its earnings statements, Atlas seeks to invest in a select group of companies with high quality recurring earnings.

The portfolio actively uses franking as a signal of earnings quality and sustainability and is managed in a tax-aware manner in order to potentially benefit from franking credits.