What we look at when considering an investment
At TelstraSuper there are 7 main areas that we look at when deciding whether to invest in a company
- Valuation – We want to buy companies that are cheaper than what we believe their true value to be. This means there’s scope to make money for members.
- Industry position – We look at where a company is placed compared to their competitors and the threats and opportunities for the company.
- Management strength – We want to invest in companies where there are good governance procedures in place and the management have a history of delivering on their promises.
- Balance sheet –We look at earnings and debt levels. Companies with more volatile earnings should typically use lower debt levels than those with more stable earnings profiles.
- Risks – We also look at downside scenarios. We try to estimate the impact of things going wrong, on the valuation of the business. This includes ESG factors like climate risk, reputational risks and operating risks to name a few!
- Earnings expectations compared to our expectations – What does the market expect short-term and long-term and why do we think it will be different? We look for companies where there is a gap in expectation that could provide value in the long-term.
- Catalyst – Sometimes companies can trade above or below fair value for an extended period of time. We see if there’s a catalyst that we can identify that will change how the market perceives the company which will provide a positive return on our investment?
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