Firetrail Australian High Conviction Fund

The Firetrail Australian High Conviction Fund is a concentrated portfolio (approximately 25 companies) of our most compelling equity ideas. The strategy is built on fundamental, deep dive research guided by the philosophy that ‘every company has a price’.

The Fund aims to outperform the S&P/ASX 200 Accumulation Index over the medium to long term.

Firetrail’s investment philosophy is built on four key principles:

1. Every company has a price: Any company may be an investment opportunity if it is mispriced. In Firetrail’s experience, investment opportunities are not confined to a particular industry, company type or investment style (e.g. value or growth).
2. Share prices follow earnings: No matter how undervalued a company may seem, if earnings expectations are downgraded, the share price will generally fall.
3. Entities become mispriced when recent information is incorrectly extrapolated: The market is generally trying to value a company by pricing the future. Often, the market will take current information and extrapolate it. But in Firetrail’s experience, the status quo rarely prevails. For example, an industry cycle may turn, or a company’s fortunes may change. Significant investment opportunities arise when the market’s view on the future is inaccurate. To uncover and capitalise on these opportunities, you must be willing to look beyond the present.
4. Fundamental analysis allows the flexibility to capture unique opportunities: Every entity is different. So is every investment opportunity. Firetrail believes that fundamental analysis is the best way to capture all the different opportunities available in the market through time; a simple rules-based approach is not effective.

1. Idea Generation

There are three key areas that generate ideas in the Investment Manager’s research process:

• Investment team ideas
• Proprietary valuation screening
• Market events and corporate activity

2. Focused Research

The Investment Manager conducts deep-dive fundamental research focused on what it believes to be the key driver(s) of a company’s earnings and the share price.

The research process often includes, but is not limited to:

• Detailed financial modelling
• Engagement with management, competitors, customers, suppliers, employees and industry experts
• Peer review and rigorous team debate

3. Team Investment Committee

Investment decisions are made as a team. For a potential company to enter the portfolio each individual member of the portfolio management team must have high conviction in the investment idea.

4. Portfolio Construction & Risk Management

The Investment Manager aims to construct a high conviction portfolio of companies which the portfolio management team believes to be undervalued over a 3-year investment horizon.

The portfolio construction methodology takes into account the Investment Manager’s conviction in a company, stock specific factors such as a company’s volatility and liquidity, the portfolio’s overall exposure to macroeconomic or thematic risk, as well as the total risk within the portfolio. Each of these factors will determine a potential investment’s suitability and position size in the portfolio.

While the portfolio may hold cash for liquidity purposes, it is typically expected to be close to fully invested.

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All content in respect of the Firetrail Absolute Return Fund (ARSN 624 135 879), the Firetrail Australian High Conviction Fund (ARSN 624 136 045), the Firetrail Australian Small Companies Fund (ARSN 638 792 113), and the Firetrail S3 Global Opportunities Fund (ARSN 653 717 625) (“the Funds”) is prepared by Firetrail Investments Pty Limited (ABN 98 622 377 913 AFSL 516821) (“Firetrail”) as the investment manager of the Funds. Pinnacle Fund Services Limited ABN 29 082 494 362 AFSL 238371 (“PFSL”) is the issuer of the Funds. PFSL is not licensed to provide financial product advice.

The information provided is of a general nature only and has been prepared without taking into account your objectives, financial situation or needs. Before making an investment decision in respect of the Fund, you should consider the current product disclosure statement (PDS) and Target Market Determination (‘TMD’) of the Fund which are available at https://firetrail.com/invest/, and assess whether the Fund is appropriate given your objectives, financial situation or needs. If you require advice that takes into account your personal circumstances, you should consult a licensed or authorised financial adviser.

Neither PFSL nor Firetrail guarantees repayment of capital or any particular rate of return from the Fund. Neither PFSL nor Firetrail gives any representation or warranty as to the currency, reliability, completeness or accuracy of the information contained in this website. All opinions and estimates included in this website constitute judgments of Firetrail as at the date of website creation and are subject to change without notice. Past performance is not a reliable indicator of future performance.

The Zenith Investment Partners (“Zenith”) Australian Financial Services License No. 226872 rating (WHT3810AU assigned June 2022) referred to in this document is limited to “General Advice” (s766B Corporations Act 2001) for Wholesale clients only. This advice has been prepared without taking into account the objectives, financial situation or needs of any individual and is subject to change at any time without prior notice. It is not a specific recommendation to purchase, sell or hold the relevant product(s). Investors should seek independent financial advice before making an investment decision and should consider the appropriateness of this advice in light of their own objectives, financial situation and needs. Investors should obtain a copy of, and consider the PDS or offer document before making any decision and refer to the full Zenith Product Assessment available on the Zenith website. Past performance is not an indication of future performance. Zenith usually charges the product issuer, fund manager or related party to conduct Product Assessments. Full details regarding Zenith’s methodology, ratings definitions and regulatory compliance are available on our Product Assessments and at Fund Research Regulatory Guidelines.

Firetrail Australian High Conviction Fund received a Morningstar Analyst RatingTM of ‘Bronze’ on 14 September 2022. © 2022 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. Any general advice or ‘class service’ have been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. Refer to our Financial Services Guide (FSG) for more information at www.morningstar.com.au/s/fsg.pdf. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser.

The rating issued 10/2022 is published by Lonsec Research Pty Ltd ABN 11 151 658 561 AFSL 421 445 (Lonsec). Ratings are general advice only, and have been prepared without taking account of your objectives, financial situation or needs. Consider your personal circumstances, read the product disclosure statement and seek independent financial advice before investing. The rating is not a recommendation to purchase, sell or hold any product. Past performance information is not indicative of future performance. Ratings are subject to change without notice and Lonsec assumes no obligation to update. Lonsec uses objective criteria and receives a fee from the Fund Manager. Visit lonsec.com.au for ratings information and to access the full report. © 2022 Lonsec. All rights reserved.