The Lincoln Australian Share Fund in 2010
As we enter 2010 full of optimism, positivity and New Year resolutions, we put behind us the tumultuous year that was 2009, with the challenges and uncertainties investors faced due to the GFC.
Last year saw the sharemarket hit its lowest point on 6 March 2009 falling 55% since its high in November 2007. Since then the sharemarket recovery has been faster than many had expected, growing 58%* since the All Ordinaries low of 3111.70. It’s no wonder that with the New Year many investors resolutions is to get their finances in order.
As a proud Australian equities fund manager we continue to expertly manage your money and deliver you the highest standard of service possible. We understand the challenges and uncertainties of recent times and have outlined how we are positioning the Lincoln Australian Share Fund in 2010.
Micro to macro
There are two approaches to conducting fundamental analysis: top-down and bottom-up. We take a bottom-up approach to investing rather than a top-down approach – meaning we start with the individual company (micro) before proceeding to the general economic and market conditions (macro).
Our investment process
The Lincoln Australian Share Fund incorporates Financial Health analysis with a qualitative overlay to identify the best long term growth prospects.
Investment process
Health
overlay
valuation
decisions
management
1. Financial Health
We initially analyse the Financial Health of all ASX listed companies. We source research from various research houses, brokers and of course Lincoln’s Stock Doctor. Stock Doctor is our core research tool and allows us to identify companies with:
- Sufficient operating cash flow
- Sustainable profits
- Manageable gearing levels.
2. Qualitative overlay
We then apply a qualitative overlay which includes the analysis of:
- Management structure
- Company activities
- Industry trends.
3. Share price valuation
We then look at the share price valuation calculated using a variety of methods.
4. Investment decisions
Investment decisions are then made after assessing the current portfolio positions and risk parameters, using our portfolio analytic system.
5. Ongoing portfolio management
Our Managed Investments team continually monitors the portfolio to ensure we are changing and refining the portfolio.
Inclusion of Stock Doctor Star Stocks in the Lincoln Australian Share Fund
We have had some questions regarding the inclusion of Star Stocks within the Lincoln Australian Share Fund. Star Stocks are a select group of fundamentally superior companies identified utilising Stock Doctor and Lincoln’s Nine Golden Rules. We do select Star Stocks from the Star Stock/Emerging Star Stock/Borderline Star Stock pool and include them in the Lincoln Australian Share Fund, as long as they meet our rigorous investment criteria.
2010 – What to expect
We believe that 2010 will be another positive year for the market as the global economy comes out of its recession and back on the road to growth.
The catalyst for continued positive momentum is expected by the 2nd quarter 2010. We expect the global economic picture to improve which should flow on to the outlooks of Australian listed companies. The likelihood of this occurring is somewhat contingent on a strong interim reporting season in February, which we feel will occur. The greater risks however lie in cyclical companies, the type that Lincoln tend to avoid in favour of those with robust fundamentals in good times and bad.
There could be some bumpiness along the way which may result in short term volatility, with the recent Dubai World debt moratorium a prime example of this. Domestically, it is likely that homeowners will be able to absorb further interest rate hikes as the Reserve Bank of Australia returns rates to ‘normal’ levels. And while the emission trading scheme (ETS) is on ice for the moment, it will no doubt be a topic of discussion once again in 2010.
With interest rates on the rise it is likely we will see the Australian dollar reach parity with the US dollar, however this should not be too long an event as US manufacturing is expected to benefit from the lower US dollar and lead the economy back to a recovery of sorts. Inflation is expected to remain under control and that oil will rise in price gravitating to the US$90 level as the world's growth picks up pace. In fact we now find ourselves on the other side of the curve with a positive outlook, even though the market’s growth will likely not replicate the rapid recovery of 2009.
Like to know more?
To find out more about the Lincoln Australian Share Fund and investment approach, please call our Managed Investments Team on 1300 676 332.
*As at 15 January 2010
Important information. This information is issued by Lincoln Indicators Pty Ltd.
Investment Manager: Lincoln Indicators Pty Ltd (Lincoln) ACN 006 715 573, AFSL 237740. Responsible Entity of the Fund: Equity Trustees Limited ABN 46 004 031 298, AFSL 240975. All figures, information and illustrations are as at 22 January 2010 unless stated otherwise. Portfolio holdings and sector allocations are subject to change without notice. This communication contains general information only. It has been prepared without taking into account the objectives, financial situation or needs of any individual investor. As a result, you should consider its appropriateness in regard to your particular objectives, financial situation and needs. You should also consider obtaining your own independent advice before making any financial decisions. It should be read in conjunction with the Product Disclosure Statement (PDS) of the Lincoln Australian Share Fund; which can be obtained by contacting Lincoln on 1300 676 333, or via our website www.lincolnindicators.com.au. You should read and consider the PDS before making any decision about whether to acquire or continue to hold the product. Applications to acquire units can only be made on an Application Form attached to a current PDS. Lincoln, its employees and/or associates may hold interests in companies listed in this communication. This position may change at any time without notice.
Investments go up and down. Past performance is not a reliable indicator of future performance. Lincoln, as Investment Manager, will be remunerated based on funds invested. You should read and consider our Financial Services Guide, available by contacting Lincoln on 1300 676 333 or via our website www.lincolnindicators.com.au, which sets out key information about the services we provide. Neither Lincoln, Equity Trustees Limited, or their directors, employees or agents provide any guarantee, representation or warranty as to the reliability, accuracy or completeness of the information in this document; and do not accept any responsibility or liability arising in any way (including by reason of negligence) for errors in, or omissions from, this document. This disclaimer does not purport to exclude any warranties implied by law which may not be lawfully excluded. Neither Lincoln, Equity Trustees Limited, or their directors, employees or agents guarantees the performance of, or the repayment of capital or income invested in the Fund.
© Morningstar Research Pty Ltd ABN 83 062 096 342, AFSL 243161. All rights reserved. To the extent that any of the content above constitutes advice, it is general advice that has been prepared by Morningstar, without reference to your objectives, financial situation or needs. Before acting on any advice, you should consider the appropriateness of the advice and we recommend you obtain financial, legal and taxation advice before making any financial investment decision. If applicable, investors should obtain the relevant product disclosure statement and consider it before making any decision to invest. Please refer to our Financial Services Guide (FSG) for more information at www.morningstar.com.au/fsg.asp.
