The TAMIM Australian Equity Income Individually Managed Account (IMA) is a well-diversified Australian equities portfolio of between 25 and 35 stocks. The portfolio is benchmark unaware and comprises only the best ranked research ideas based on long-term cash-flow based valuation and a clear understanding of the market concerns creating the value opportunity. The portfolio has always generated a higher franked dividend yield than the market but this is an outcome of the philosophy and process to focus on sustainable cash-flow that ultimately pays the dividends. The investment universe comprises the 200 largest listed companies on the Australian Stock Exchange. This strategy does not employ derivatives
Why choose the TAMIM Australian Equity Income IMA:
Access to a boutique investment manager where the principals are shareholders and have material co-investments in the Strategy.
Investment philosophy and process designed to identify sustainable free cash flow that ultimately underpins attractive dividends and franking for investors.
Benchmark unaware approach with a portfolio significantly different to the index.
A proven track record of outperforming the market over the past 7 years.
The philosophy of the manager of the TAMIM Australia Equity Income IMA is based on fundamental research and risk management and has five key components
1.Value investing outperforms: We believe that a portfolio of stocks trading at discounts to fundamental value – as measured by sustainable free cash flow yield – will deliver superior investment performance over time.
2.Excessive returns on capital are rarely sustainable: To be sustained, we believe that excess returns on capital need to be supported by favourable industry structure, demonstrable competitive advantage and disciplined management.
3.Franking credits are valuable: We believe investors should be indifferent between cash and franking credits. We make investment decisions on this basis.
4.Markets are mostly efficient: Rarely is a stock under or over-valued without good reason. To be a good investment, we need to understand why the stock is mispriced and have an explicit view to the contrary.
5.Market timing is difficult: We believe that the value of a company is predominantly determined by the shape of the industry and its position in 3 to 5 years and as value investors this is where they should focus their efforts.
Our bottom up fundamental research process: (i) utilises projected free cash flow in three years as the key driver of valuation; (ii) tests the sustainability of individual company returns; (iii) recognises the value of franking credits; and, (iv) focuses our efforts on areas where we might have insight or a point of difference relative to market expectations.
We do not arbitrarily buy ‘apparent value’ on short-term metrics. Rather, we are disciplined in understanding why a stock is undervalued based on sustainable cash flows and why we believe its value can be restored, thereby generating alpha and sustainable income for our clients.
The objective of the TAMIM Australian Equity Income IMA is to outperform the ASX200 inclusive of franking credits. The Strategy does not have an explicit yield target but has typically generated a higher dividend and franking yield than the market as an outcome of the investment approach.
S&P/ASX 200 Accumulation Index including franking.
The portfolio will consist of 25-30 stocks each comprising a portfolio weight of between 1.5% and 5%. Stock-specific limits are 5% at the time of trade and sector limits are 25%. Liquidity is explicitly taken into account with smaller companies outside the top 100 largest typically having weights between 1.5% and 3%. Portfolio turnover is expected to be around 50% per annum. The portfolio can be expected to deliver above market levels of dividend yields and franking credits.
Our fundamental research process has been designed with reference to our philosophy and with a view to being consistent and disciplined.
A stock must be under formal coverage to be included in a portfolio. When a stock is under coverage it is assigned to an analyst who is responsible for providing and maintaining key outputs of their research to ensure that outputs accurately reflect latest financial results, major announcements, visits, industry contacts and so on.
Stocks under formal coverage will have a regular program of management meetings or conference calls, as well as contact with industry experts, suppliers, customers and on-site due diligence, equating to hundreds of management and industry calls/meetings per year. Members of the team also regularly travel internationally to review macro and industry- or company-specific themes of stocks under coverage.
Our fundamental research process is aimed at delivering 2 key outputs:
Standardised Valuations based on the capitalisation of free cash flow and franking credits in 3 years plus preceding gross dividends.
Conviction Scores premised around our philosophical belief that stocks are rarely under or over-valued without good reason. To be a good investment, we need to understand why the stock is mispriced and we need to have an explicit view to the contrary. Our analysts reflect this in a numerical score between 1 and 4.
Subject to constraints, it is these research outputs that drive suggested portfolio weights which in turn drive portfolio positioning.
Sell discipline is ensured as the research outputs are ranked and reduced valuation upside following outperformance and/or reduced analyst conviction will trigger ‘sell’ trades that will be subject to rigorous peer review and then implemented.
While research and stock picking is inherently subjective in nature, the Merlon process aims to deliver as much consistency and quality to research outputs as is possible. Elements of fundamental research are brought together in formal stock reviews which follow a prescribed format and research outputs are tested for integrity using a variety of quantitative tools.
Portfolio risk is managed at four levels:
Fundamental research: A deep understanding of the companies we invest in and higher conviction is typically linked to companies trading at a ‘bear case’ valuation assuming the market’s concerns prove to be valid;
Portfolio construction: A disciplined and transparent approach to portfolio construction with clear risk and liquidity constraints;
Statistical risk analysis: A proprietary risk model run daily with a clear understanding of strengths and limitations therein;
Qualitative judgement: Discrepancy between model portfolios and actual portfolios.
The information provided on this website should not be considered financial or investment advice and is general information intended only for wholesale clients ( as defined in the Corporations Act). If you are not a wholesale client, you should exit the website. The content has been prepared without taking into account your personal objectives, financial situations or needs. You should seek personal financial advice before making any financial or investment decisions. Where the website refers to a particular financial product, you should obtain a copy of the relevant product services guide or offer document for wholesale investors before making any decision in relation to the product. Investment returns are not guaranteed as all investments carry some risk. The value of an investment may rise or fall with the changes in the market. Past performance is no guarantee of future performance. This statement relates to any claims made regarding past performance of any Tamim (or associated companies) products. Tamim does not guarantee the accuracy of any information in this website, including information provided by third parties. Information can change without notice and Tamim will endeavour to update this website as soon as practicable after changes. Tamim Funds Management Pty Limited and CTSP Funds Management Pty Ltd trading as Tamim Asset Management and its related entities do not accept responsibility for any inaccuracy or any actions taken in reliance upon this advice. All information provided on this website is correct at the time of writing and is subject to change due to changes in legislation. Please contact Tamim if you wish to confirm the currency of any information on the website.