In a previous post we talked about the paradox at the core of fundamental investing: the future is unpredictable and yet to value an asset one needs to have a view of the future. A successful investment strategy must address the paradox.
Our investment strategy embraces the investor’s paradox
The future is unpredictable and we embrace this with our fundamental approach: in-depth company analysis is the foundation of our work. But the aim of the analysis is not to predict the future but rather to assess what different futures may mean for a company. In other words, we respect unpredictability, we prepare for it, and – and this defines our strategy – we make unpredictability our ally.
1. We respect unpredictability
We can’t predict the future and we don’t try. Instead, we work out what resources a company has to meet the challenges and opportunities the future might bring. Through this disciplined process, we map out what’s possible for a company and what may be likely.
2. We prepare for it
We diversify. We cannot know in advance which companies will have great futures and which ones will fail. What we aim to achieve is that the ‘winners’’ winnings more than offset the ‘losers’’ losses, and the portfolio delivers healthy returns overall.
3. We make unpredictability our ally
When the future of a company appears ‘obvious and certain’, we remain mindful of unpredictability, but become confident of one thing: that the future will surprise.
We therefore avoid the ‘obvious winner’, because among all the things that are going right, at least one or two are likely to sputter. Most importantly, we take a closer look at the ‘obvious loser’, because among all the things that are going wrong, at least one or two are likely to go right.
Long-term, fundamental, contrarian
As the English philosopher Francis Bacon said: ‘If a man will begin with certainties, he shall end in doubts; but if he will be content to begin with doubts, he shall end in certainties.’ Embracing uncertainty is at the core of our long-term, fundamental, contrarian approach to investing. The way we invest is more than a ‘style’. It is a way of thinking based on working with our real, unpredictable world from the most rational standpoint available to us today.
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Equity Trustees Limited ABN 46 004 031 298, AFSL No. 240975 is the issuer of units in the Allan Gray Australia Balanced Fund ARSN 615 145 974, Allan Gray Australia Equity Fund ARSN 117 746 666 and Allan Gray Australia Stable Fund, ARSN 149 681 774 (Allan Gray Funds) and units in the Orbis Global Equity Fund (Australia registered) ARSN 147 222 535, Orbis Global Equity LE Fund (Australia registered) ARSN 613 753 030 and Orbis Global Balanced Fund (Australia registered) ARSN 615 545 170 (Orbis Funds). Allan Gray Australia Pty Limited ABN 48 112 316 168, AFSL No. 298487 is the investment manager of the Allan Gray Funds.
Past performance is not a reliable indicator of future performance. There are risks involved with investing and the value of your investments may fall as well as rise. This represents Allan Gray Australia Pty Limited and Orbis Investment Advisory Pty Limited’s view at a point in time and may provide reasoning or rationale on why we bought or sold a particular security for the Allan Gray or Orbis Funds or our clients. We may take the opposite view/position from that stated, as our view may change. If this article is authored by Orbis, it does not prohibit the Orbis Funds from dealing in the securities before or after this article is published. This article constitutes general advice or information only and not personal financial product, tax, legal, or investment advice. It does not take into account the specific investment objectives, financial situation or individual needs of any particular person and may not be appropriate for you. We have tried to ensure that the information here is accurate in all material respects, but cannot guarantee that it is.
You should consider the relevant funds’ Product Disclosure Statement (PDS) or Information Memorandum (IM), as applicable, before acquiring, holding or disposing units in the Allan Gray or Orbis Funds. The PDS or IM can be obtained from
www.orbis.com.au and www.allangray.com.au.
Target Market Determinations (TMDs) for the Allan Gray products can be found at
allangray.com.au/PDS-TMD-documents,
while TMDs for the Orbis Funds can be found at www.orbis.com.au on the 'Forms' page under 'How to Invest'. Each TMD sets out who an investment in the relevant Allan Gray or Orbis Funds might be appropriate for and the circumstances that trigger a review of the TMD.
Managed investment schemes are generally medium to long-term investments. They are traded at prevailing prices and the value of units may go down as well as up. There are risks with investing the Fund and there is no guarantee of repayment of capital or return on your investment. Subject to relevant disclosure documents, managed investments can engage in borrowing and securities lending. A schedule of fees and charges is available in the PDS.