We focus on what is within our control when we make investment decisions.
We cannot control global events and so it is dangerous to rely on macro data
Investors appear to be very concerned about the potential impact of global economic, political and environmental events on investment returns in equity markets. However, focusing on these kinds of events can often paralyse investors and stop them from making sound investment decisions. In my view, the main thing that really matters when you buy any asset is the price that you are prepared to pay and the value you are receiving. It isn’t easy to do the necessary research to determine value, and one is easily distracted by exhaustive news flow on macroeconomic issues. Given the insatiable appetite for information and forecasting, economists and professional commentators feel compelled to provide their opinions and projections. However, as we often lament, they rarely get it right. Yet, investors continue to listen to these comments.
It is crucial to be disciplined about having a margin of safety
The disciplined investor knows that it is impossible to predict global factors with any real consistency, and therefore it is impossible to account for these in valuations. The best that you can do is to buy assets with a margin of safety that protects you from mistakes, omissions, assumptions and the inaccurate predictions of economic and political commentators.
Focus on factors that drive performance
Factors such as strong population growth, a stable political environment, a strong dividend paying culture amongst companies, and an abundance of natural resources continue to underpin the long-term performance of the Australian market. However, if you aim to do better than average, price and value must be at the heart of every investment decision. Buying businesses (stocks) for much less than they are worth provides the best potential to outperform the market and the greatest protection from permanent loss.
At Allan Gray, we focus our efforts on fundamental analysis and the facts
By dealing in fact rather than opinion, and irrespective of our best efforts, investing is inherently uncertain. Managing money globally, according to a disciplined contrarian, fundamental and long-term approach for over 40 years has yielded very good outcomes for our clients. To maintain our successful long-term track record, the focus continues to be:
- The long term
- Price and value
- Ensuring that we maintain a margin of safety
- Understanding why a seller is selling
- Remaining dispassionate regardless of any profits or losses
- Accepting the odds, quite simply because nobody is right all the time, and lastly
- That you cannot do the same as everyone else and get better than average results
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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.