Ibbotson Australian Shares High Alpha - Orbis

Orbis                   

Investment Style: Contrarian

Orbis Investment Management (Australia) Pty Limited (Orbis) established an Australian equities capability in 2005. Orbis is ultimately jointly-owned by Simon Marais (Managing Director and Portfolio Manager) and Orbis Holdings Limited, a member of the Bermuda-based Orbis Group (founded by Allan Gray of South African-based Allan Gray Limited).

Orbis believes that while sharemarket prices are the best indicator of value for companies over very long periods of time, substantial deviations of those prices from true value do occur over the short to medium term. Orbis focuses its efforts on calculating the real underlying value of various companies using the extensive technology developed by the Orbis Group.

Equity portfolios managed by Orbis are expected to vary significantly from the underlying market benchmarks and exhibit contrarian characteristics such as holding stocks out of favour with the market and which have significant negative news surrounding the company or industry. Portfolios typically exhibit value characteristics such as low price/earnings and price/book ratios. Portfolios are expected to hold 30-60 stocks on average over the long term.

Orbis' investment process has four main steps. These are ideas generation and quantitative screening, fundamental analysis and peer review, portfolio construction, and trading. The process begins by screening the investible universe for ideas using Orbis' proprietary quantitative screening tools. Analysts have the ability to tailor the factors within the quantitative framework to suit the individual sector's characteristics.

The output then forms a list of stocks for further fundamental research. Analysts construct a valuation model and research report which typically includes earnings forecasts, an investment thesis, major company-specific risks, analysis of financial accounts, and latest operating results. The firm keeps valuation models relatively simple in an attempt to isolate key drivers of a company's expected return.

This analysis is then presented for peer review at a Policy Group meeting of all investment team members. Once the team is comfortable with the investment thesis, the stock is purchased for the portfolio. Portfolio weights are derived from discussion with the team but are ultimately the decision of Simon Marais. Orbis uses proprietary analytical tools to assess the incremental impact on the characteristics of the overall portfolio of changing an individual stock position. Portfolios are expected to hold 30-60 stocks.

The investment team is led by Simon Marais (Managing Director and Portfolio Manager) and includes three analysts who conduct quantitative screening and fundamental research. All trading is conducted out of Bermuda by Orbis' global trading desk.