Oc Funds Management

Investment Philosophy

Markets can be emotional and inefficient

Underpinning OC's investment philosophy is the team's belief that the intrinsic value of many underlying businesses is not always reflected in the market price of its securities.

"Our view is that equity markets can be emotional, backward looking and inefficient, particularly in small caps where there can be a lot market 'noise'. We believe this can provide opportunities for prudent investors who make considered investment decisions based on thorough analysis." Robert Frost, Head of Investments

The team believes undertaking detailed fundamental analysis allows it to identify securities trading below their intrinsic value and with sound long-term investment fundamentals. It is these companies OC believes are more likely to generate strong investment returns.

Investment-process

Investment Process

Internally driven research effort

OC focuses on smaller businesses listed, or about to list, on the Australian Securities Exchange (ASX).

"When choosing stocks for our portfolios, we focus on smaller businesses outside the ASX top 100 because we believe they are easier to understand, simpler to value and more accessible to research." Robert Frost, Head of Investments

OC looks to invest in high quality smaller companies with:

  • strong management
  • simple and transparent business models
  • capital light and high cash conversion
  • sustainable competitive advantages
  • favourable operational risk characteristics, and
  • attractive valuation metrics based on OC's proven proprietary financial analysis and valuation techniques.

Stocks included in the portfolio are rigorously analysed with the team undertaking a disciplined and repeatable four-stage process:

  1. Initial screen
  2. Operational risk assessment
  3. Valuation screen
  4. Potential portfolio holdings

Incorporated in OC's process is also a strong focus on risk management, as well as a strong sell discipline. 

Investment-process