Fat Prophets has developed the Investment Philosophy being employed by the Fund over many years, drawing on the experience the CIO Angus Geddes has gained as a stock broker, stock and market analyst and portfolio manager and which portfolio manager Simon Wheatley has gained as a very experienced multi decade sector focused analyst who has been leading domestic and international equity research teams. Fat Prophets believes that security markets are inefficient, particularly over short to medium periods of time.
In part this is due to inefficient dissemination of information but a more widespread cause is human behaviours such as collective emotional bias. As a result both individual stocks and whole sectors and markets can become either over or undervalued, often to a significant degree. Globally these mispricings can be more amplified particularly within a set asset class such as Real Estate where there is high tangible value underlying the share price.
Over time however, economic fundamentals will return market prices to their correct level, allowing value creation through active investment management. Fat Prophets has found that by identifying such valuation distortions through a combination of top down and bottom up research and then taking a contrarian stance to position portfolios appropriately it is possible to outperform markets as a whole after allowing for costs over the medium to long term. The fundamental investment philosophy is that the share market is not perfect in the short term at determining the appropriate price for every security (or there would not be share price volatility).
Rather, real estate fundamentals and the underlying drivers of demand and therefore rent and capital value revealed over time are the drivers of long term share price movements. By analysing the current long term worth of a company amidst the short term share price volatility there is an opportunity to ignore companies that are presently perceived to be over priced and attempt to purchase companies that are presently perceived by the Investment Manager to be good value.
To do this successfully takes an investment process that incorporates a regime of analytical rigour, dispassionate risk analysis and disciplined portfolio construction.
Investment decisions will be based on a regular assessment of which investment opportunities are likely to maximise capital appreciation and or dividend/distribution income generation.
The Investment Manager intends to utilise input from the Fat Prophets report as one source of potential investment ideas. The report is driven by an experienced and deep global team of equity research analysts The Investment Manager has full discretion to disregard recommendations sourced from the Fat Prophets report, as it does from all other sources of investment ideas.
The Investment Manager will additionally build on its investment ideas from efforts of its own investment team: interviewing management teams, talking with competitors of companies, building financial models on companies and sectors, and conducting industry and demographic research. The Investment Manager will also receive research from stockbrokers, industry publications and other sources.
Simon has over 20 years of listed markets experience, having started out in real estate equity research in 1996, before heading real estate equity research teams for JB Were and Goldman Sachs from 1999. Simon was head of international equity research for Goldman Sachs JBWere (GSJBW) based in New York from 2005 where he was also broker dealer licencee of the Goldman Sachs JBWere US business.