WAM Research Limited is a company which has been formed to invest in a portfolio of permitted investments (refer below). The Company provides investors with the opportunity to invest in a diversified Portfolio and gain access to a defined investment process and the management experience of the Manager.
The Company will predominantly invest in ASX listed Securities. The Company will have a major bias to industrial companies. It will not invest a significant part of the Portfolio in the resource sector. The Directors consider that resource companies are subject to extreme volatility and are difficult to value according to conservative accounting and investment principles.
The investment objectives of the Company are to:
•(1) achieve a high real rate of return, comprising both income and capital growth, within risk
parameters acceptable to the Directors;•
(2) deliver investors a secure income stream in the form of fully franked dividends; and
•(3) preserve the capital of the Company.
Investment Philosophy
The investment philosophy of the Company is exemplified by the following broad principles:
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The Company’s philosophy is to invest predominantly in industrial companies with an emphasis on companies that are under-researched and mispriced.
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The Company’s preference is to invest in industrial companies that have a proven track record of profit and dividends.
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The Company will undertake investments on a portfolio basis. While all investments will be considered on a case-by-case basis, the Company will usually refrain from taking a majority position in investee entities unless the opportunity is compelling. This will assist the Company to diversify its investments and so reduce its exposure to abnormal falls in the market price of any single investment.
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The Company believes it will achieve acceptable diversification by owning Securities in 30-50 investee entities.
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The Company will seek to manage investment risk by spreading investments over a range of industry sectors.
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The Company may invest in Securities quoted on a securities exchange located outside Australia if the Board considers that the reporting obligations and trading procedures applicable to that exchange are no less rigorous than those of ASX.
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The universe of potential investments for the Company will be all Securities quoted on the ASX or other exchanges, bills of exchange, other negotiable investments, debentures and other permitted investments identified below. The prime focus will be on listed entities that exhibit the investment characteristics outlined below. The Company believes a number of these entities will be found in medium sized industrial companies but size will not be a limiting factor for inclusion in the Company’s Portfolio.
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The Manager has two investment approaches:
Research Driven – We undertake extensive research (over 700 company meetings each year), focusing on the free cashflow then rating the company with respect to management, earnings growth potential, valuation and industry position. We only buy when we can identify a catalyst or an event that will change the valuation the market gives to the company.
Investment Driven – The investee company has a sustainable business model, a track record of profit making and dividends, generates positive free cashflow, acceptable financial strength and generates a sound return on equity.
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Permitted Investments
The Company proposes to invest in the following investments:a)
a) listed Securities, being any Security quoted on ASX and other markets including, without limitation, shares, units or notes which are redeemable, preference or deferred, fully or partly paid, with or without any right, title or interest thereto or therein (including a right to subscribe for or convert to any such Security whether listed on ASX or not), and any Security of whatsoever nature which the Manager expects will be quoted on ASX within a 12 month period from the date of investment;
b)b) listed Securities on any global stock market where the Security is also listed on the ASX;c)
c) warrants and options to purchase any investment and warrants and options to sell any investment which is a permitted investment;
d) discount or purchase of bills of exchange, promissory notes or other negotiable instruments accepted, drawn or endorsed by any bank, or by any corporation of at least an investment grade credit rating granted by a recognised credit rating agency in Australia;e)
e) debentures, unsecured notes and bonds of a corporation of at least an investment grade credit rating granted by a recognised credit rating agency in Australia;f)
f) units or other interests in cash management trusts; andg)
g) any other financial products with which the Manager may use in the management of the Portfolio in accordance with its Australian Financial Services Licence.
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