Investment Methodology

Sentinel conducts its investment management based on a set of clearly defined principles and objectives.

These include:

Investment Principles

Portfolio investment is conducted under the following principles:

Overriding long term portfolio focus

  • Portfolio comprised of both Long term and Short term positions
  • Long term view however will override short term biases

Risk management (utilised in four primary ways)

  • Position sizing (controls in place around maximum weightings)
  • Flexibility to utilise direct and indirect hedging mechanisms
  • Flexibility to utilise high levels of cash
  • Flexibility to use stop losses
    Note: normal market volatility will still occur. Exposure to the share market carries underlying risk which cannot be mitigated.

Focus on quality end of the investment spectrum

  • Stability and quality of earnings
  • Stability and re-occurring nature of dividends
  • Focus on consensus data (no house stocks, no conflict of interests)

Investment Areas

There are three primary investment areas we look to invest in. A portfolio may comprise of one or more investment areas. Whether an area is invested in at any given time is entirely dependent on the availability of suitable investments. In the absence of acceptable investments cash will be the default investment and portfolios may move back/forth to cash as required.

Value (Core) Investments

  • Selection driven by both Macro-economic ('big picture' trends) and Micro (company specific) factors
  • These investments typically display:
    • Strong return characteristics (earnings growth and/or dividends)
    • Strong fundamental numbers with clear earnings drivers
    • Leverage to underlying Macro-economic themes
  • Positions generally maintained until themes play out, their value diminishes or underlying investment environment alters
  • Because of strong investment conviction, positions are generally less hedged and allowed more lee-way

Fair-Value (Non-Core) Investments

  • Investments which display solid underlying business models but which are considered within a 'fair-value' band
  • These investments are utilised to generate active return and extract value over shorter to medium term time frames
  • Multiple strategies and tools (for example, derivatives) often used in combination
  • Capital allocation and stop losses maintained with acceptable level of lee-way to give acceptable risk/reward payoffs

Trading Ideas/Angles

  • Investments which match a particular angle or investment idea
  • Can be on a stock, sector or index
  • Can be a positive (long) or negative (short) view
  • Held for varying time frames with strong risk control around:
    • Capital allocation (generally smaller weightings)
    • Stop Losses (rigid and tighter stop loss controls)
  • These investments are generally of a higher risk nature, but have risk control mechanisms around them and offer acceptable upside/downside payoffs.

Portfolio Returns

Our primary aim is to generate positive, absolute returns through a combination of our investment areas. Although we may use index-tracking implements and derivatives at times, we do not benchmark ourselves against any particular index. Returns will be dependent on market forces.

About Sentinel

Sentinel are specialist stockmarket Investment Managers assisting everyone from first time investors to experienced professionals to protect savings and build wealth through all market conditions.

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