Strong research combined with intrinsic value process
The fundamental, proprietary research into industries and companies combined with consistent application of intrinsic value process and cashflow valuation methodology has seen Eiger Australian Small Companies A take out the 2021 Money Management Emerging Fund Manager award.
Eiger’s principal and portfolio manager, Stephen Wood, said this process had been used by the team for over 10 years with comparable valuation history and it ranked companies according to their ability to generate cashflow.
“Discrepancies between the market price and estimated intrinsic value arise from market behaviour and differing fundamental estimates. This provides opportunities to outperform. This opportunity is particularly pronounced in the less-researched, small-cap segment of the market,” he explained.
The fund’s investment objective was to outperform the benchmark S&P/ASX Small Ordinaries Accumulation index after fees over rolling five-year periods.
As at 31 March, 2021, the five-year net return for the strategy was 15.26% compared to the index return of 10.69%.
Wood said that one of the differentiating factors of his fund was “Eiger’s nine commandments”, an investment thesis which consisted of a template completed for every investment and a document which formed the basis of the conviction level regarding the investment.
“These are aimed at ensuring that the team only invests in companies it understands, and that are managed by trustworthy management teams with an appropriate track record,” Wood said.
On top of this, the fund was managed by an experienced team with a focus on portfolio management.
“The three-member Eiger team has over 70 years in financial markets combined. In addition, the team do not get involved in share dealing or mandate compliance issues, which are handled by the responsible entity, Fidante Partners.”
Eiger also believed, over the long-term, a company’s operations were unsustainable if they caused irreparable damage to the environment, workplace or end consumers, and would not knowingly invest in such companies.
“All companies that Eiger considers for in-depth fundamental research must first pass a qualitative screening process that specifically measures and assesses a company’s governance structure and the environmental and social consequences of its business.”
AUTHOR
Oksana Patron
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