Wallara

Investment Style: Core (Growth bias)

Wallara Asset Management Pty Ltd (Wallara) was established in 1995 and is an independent, privately-owned investment manager dedicated solely to the management of Australian equities. Wallara is effectively 100.0 percent-owned by its founder and Managing Director Peter Wetherall, although senior investment staff also have an economic interest in the firm.

Wallara is an active, fundamental, bottom-up manager with a focus on identifying companies that are creating ‘shareholder value' and can be purchased at reasonable prices. Wallara believes that superior investment returns are achieved by owning companies that are creating value for their shareholders by either increasing the return generated from their existing assets (increasing sales per dollar of assets and increasing profit per dollar of sales) or investing capital in new projects that will generate returns above the cost of that capital.

The investment process involves three key steps: fundamental research, portfolio construction, and trading.

The investible universe is focused on the 100 leaders with some selective additions. Fundamental research involves understanding a company's key performance drivers, the industry it operates within, the quality of assets and the team managing them, the capacity of the company to maintain its competitive edge, and the extent to which opportunities exist to receive returns on capital investment greater than the cost of that capital.

Quantitative analysis examines eight years of historical financial data and two years of projected data to analyse company performance thoroughly. Shareholder value analysis is undertaken using HOLT analysis software, which calculates the cashflow return on investment (CFROI), the cost of capital, and a discounted cashflow-based valuation. Variables incorporated into the HOLT approach include a company's returns, level of growth, financial structure, age of depreciating assets, and size. Wallara believes that using CFROI standardises company valuations, permitting meaningful comparisons across different industries.

Portfolio construction begins by ranking stocks based on four key purchase criteria: track record of shareholder value creation; rising trends in CFROI; stable or rising trends in consensus earnings revisions; and price relative to valuation. Portfolio construction is ultimately subjective with input from the full investment team, although Peter Wetherall is the prominent influence.

Wallara's investment team is led by Peter Wetherall (Managing Director) and includes a team of senior investment managers, namely David Rosenbloom, Greg Marks, and Ivan Reyneke.