'Investing in quality undervalued companies entering an earnings upgrade cycle'


 

Relative Earnings Surprise

We believe that a company's earnings growth and expected earnings growth ultimately drives its share price performance, and that there is a systematic mispricing of individual equities over the short to medium term - due to under, or over, estimation of a company's earnings ability.

This provides us with an opportunity for increased investment returns as the true earnings path of a company becomes apparent to the market. 

Using a combination of fundamental and quantitative research, we objectively compare companies both across and within sectors, helping to construct efficient portfolios.

As such we describe our investment style as 'relative earnings surprise'.

Buying and selling are of equal importance

We also believe that when investing, the 'sell' decision is as important to overall long term performance as the 'buy' decision - which is typically an investor's main focus.  As such, our research efforts, investment tools and portfolio construction techniques give equal weight and attention to both sides of the investment decision. This is strongly aligned to our aim of consistent performance through market cycles.

Earnings Per Share chart

To find out more about the Alphinity investment philosophy, download our research paper Finding alpha in an earnings upgrade cycle.

Company Earnings Lifecycle

The focus of our research is on bottom-up company specific factors.

The diagram below depicts a company's earnings life cycle and demonstrates our preferred time to invest in a company.

We look for quality undervalued companies entering an earnings upgrade cycle.  This is regardless of their particular level of earnings growth at the time. We believe these types of investments can be found at any point in the broader market or economic cycle.

 

Company earnings lifecycle

Note:  EPS (Earnings Per Share).

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