Investment Philosophy - Warren Buffett - Wayne Jones

INVESTMENT MANAGERS

ACN 102 319 675
AFSL 291 363

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Stock Selection

Our methodology comprises both quantitative and qualitative analysis commonly called fundamental analysis.

Quantitative analysis is used as a first screen when investigating potential investments and measures a number of financial ratios, including return on invested capital, profit margin and net interest cover to assess the financial strength and earnings potential of a company. As a result, our approach is to focus on companies with the demonstrated ability to earn superior returns on retained capital. This approach assists in reducing the risk of loss of capital upon which we place a high priority.

We also undertake qualitative analysis, which is less specific and comprises value judgements regarding management, the strength of the business model, and the general industry outlook which assists in determining an appropriate purchase price.

Our investment philosophy distills down to paying a reasonable price for a growing, quality business, and therefore is a process based upon individual stock selection to generate superior returns.

A ‘typical’ investment in the portfolio is that of a profitable, growing business with an easily understood business model that can be purchased at a price that will deliver, in our opinion, a superior return over the medium to long term.

However, we may also allocate a portion of the fund to stocks that lack a growing, quality business but, in our opinion, can be purchased for less than their break-up value.

Portfolio Management

We tend to allocate 1 to 2 percent of the fund’s assets to an initial purchase, then over time build a larger stake to around 5% as our comfort increases with the business and its management. Rarely will we make a purchase that will result in one stock representing more than 10% of the fund assets.

However, where we believe exceptional value is available we may allocate up to 15% of the fund to a single stock.

An ongoing process of research and evaluation is conducted on investments within the portfolio of the fund. Holding’s will be added to, reduced, or sold entirely as changes in the underlying economics of the business, market pricing, or our assessed value of the company occurs. We invest a great deal of time gaining an understanding of particular companies and their business and aim to profit from that insight over long time periods. In addition, highly competent, trustworthy and shareholder oriented managers with a track record of delivering exceptional returns are uncommon. When we find these people our preference is to hold the investment for the long-term. We are mindful that long term investments and low portfolio turnover brings tax benefits to unitholders in the form of the 50% Capital Gains Tax reduction, and the deferral of tax paid.

This not an index fund

An index fund seeks to replicate the portfolio of a selected market index, such as the ASX300 Index. The managers of the Ganes Focused Value Fund believe they add value through independent thinking and careful portfolio construction. Accordingly, the Ganes Focused Value Fund portfolio will not resemble the ASX300 index portfolio and so, over short periods, the performance of the fund portfolio is likely to be very different from the performance of the index portfolio.

Ganes Investment Strategy and Process

Investment Universe	Primarily 1,600+ shares listed on the Australian Stock Exchange.
Idea Generation	Daily scan of ASX company announcements and company news. Daily review of the financial press (printed and online sources). Computer-based search of company financials databases.
Quantitative Analysis	Assess a number of financial ratios, including return on invested capital, profit margin and net interest cover to assess the financial strength and earnings potential of a company.
Qualitative Analysis	Comprises value judgements regarding management, the strength of the business model, and the general industry outlook.
Value Screen	Look for a superior return over the medium to long term from dividends, profit growth and a beneficial market re-rating
Acquisition	Initial purchase of 1% to 2%. Further purchases as comfort increases with the business & management
Portfolio Management	Portfolio of 25 to 40 stocks. Aim to hold investments for the medium to long term with the added benefits of low portfolio turnover and tax deferral. Continuous monitoring of company announcements & performance. Sell when expected return over the medium term unacceptable.

*Disclaimer*

Applications can only be made on the form in the current Product Disclosure Statement (PDS) , or through IDPS products that include these Funds. *Investors should be aware that past performance is not indicative of future performance* and professional advice should be sought before investing in this Fund. Ganes Capital Management Ltd is not licensed to provide financial advice. This information does not account for your investment objectives, particular needs or financial situation.

While the information contained in this website has been prepared with all reasonable care, Ganes Capital Management Ltd accepts no responsibility or liability for any errors or omissions or misstatements however caused.

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Investment Philosophy - Warren Buffett - Wayne Jones - Clive Gaunt

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