This content was originally published by Livewire on 24th April 2026.
This interview was filmed April 1st, 2026.
Earnings are back in focus for Australian investors, but it’s a market where the signals are increasingly difficult to read. Banks have had a historic run, resources performed a comeback in the second half of 2025, and now the Middle East conflict is threatening to cloud the outlook for both. Meanwhile, the RBA is juggling sticky inflation against a softening consumer.
Andrew Martin, portfolio manager at Alphinity Investment Management, spoke to Livewire about how the firm approaches that problem via their two Aussie equity strategies. The Alphinity Australian Share Fund and the Alphinity Concentrated Australian Share Fund are both built around the same earnings-first framework. Martin breaks down how both funds are positioned today and what’s driving the team’s thinking. You can watch the full interview above or read the summary below.
INTERVIEW SUMMARY
Earnings leadership
Alphinity’s approach centres on earnings leadership – that is, finding companies that are performing better than the market expects, and as a result, having their earnings forecasts revised upward.
“Our belief is that earnings drive share prices…but we take another step and say the thing that drives alpha is the change in earnings expectations.”
Crucially, those upgrades tend to keep coming. As Martin explains, once analysts start revising a company’s earnings higher, they often continue to do so.
“Earnings upgrades or downgrades are serially correlated. So once you get one, you’re more likely to get another and another after that. And that’s all based on behavioural patterns… So you can get these long periods of upgrades and downgrades that you can take advantage of to get alpha in the market.”
In practice, the Alphinity team screens for three things at once: value, an active earnings upgrade cycle and quality.
Value alone doesn’t tell you when to buy or sell, Martin explains. “It tells us how much risk we’re taking. So if something’s notionally cheap, we’re taking less risk. If something’s notionally expensive, we’re taking more risk and we adjust our positions for that.”
Earnings upgrades and downgrades are the second factor and inform where a stock is in its cycle.
And finally, quality screening is all about risk. “If you’re going to deal with earnings, you need to see if those earnings are actually real, and if they’re quality, and if they can get that serial correlation going and stability of earnings going forward,” says Martin.
In order to find the companies that combine all three, the team uses a two-pronged approach to research. The research combines old-fashioned fundamental analysis – financial modelling, management access, industry expertise – with quantitative analysis.
“At different points in the cycle, quant works well. Sometimes it doesn’t. Sometimes fundamental works better,” says Martin.
Our view is if you can get the best of both worlds and when all the information points towards the same factors working…that’s when you have the best chance of being right.”
Banks, miners, and what to avoid
The past three years in Australian equities offers a clear illustration of the Alphinity philosophy in practice. Banks were the standout performer, at a time when almost every other sector was seeing downgrades.
“Everyone will point to how expensive the banks are, but the thing that was missed was that they kept beating from an earnings perspective…no one really cared about the valuation because that was the only thing getting upgrades.” says Martin.
Resources told the opposite story for most of that period – they might have been cheap, but they were stuck in a downgrade cycle and consistently underperforming. That shifted in the second half of 2025 and a significant upgrade cycle followed.
Avoiding the wrong stocks matters just as much. Martin uses CSL (ASX: CSL) as an example – a genuinely high-quality business that nonetheless dragged on returns for investors who held on too long during its downgrade cycle. “Value doesn’t matter if earnings keep getting worse,” says Martin.
What’s in the portfolio
With both banks and resources having run hard, and the Middle East conflict clouding the global growth outlook, Alphinity has grown more cautious on both sectors. Attention has shifted toward companies whose earnings stories are less dependent on what happens in the world economy.
Martin highlights three current holdings:
A2 Milk (ASX: A2M)– growth in China, new product development, and improving manufacturing efficiency. A self-contained story that doesn’t hinge on commodity prices or interest rates.
QBE (ASX: QBE)– the investment case is about the insurer reshaping the risk profile of its book and improving the quality of its earnings over time. An internal execution story.
Hub24 (ASX: HUB) – markets will always have some bearing on a platform business, but the core driver here is market share gains and ongoing platform development.
The two funds
Alfinity runs two Australian equity strategies – the Australian Share Fund holds 35 to 55 stocks and is the firm’s core vehicle. “Everyone works on that fund, everyone looks at that fund and we’ve got to get that fund right,” says Martin.
The Australian Concentrated Fund narrows that to 20 to 30 of the highest-conviction ideas, with a slightly larger-cap skew and more expected volatility in exchange for higher return potential over time. “It really comes down to what your risk tolerance is, but the underlying drivers of both funds is exactly the same,” he explains.
On risk management more broadly, Martin says, “We’re trying to add a little bit of alpha a lot of the time, not trying to get a lot of alpha sometimes.” He frames it as a cricket analogy.
“We’re just trying to hit ones consistently over a long period of time. Not play 2020 and swing for the fences, and sometimes it works, sometimes it doesn’t. It’s so much more about that long-term stability over time.”
