The Bellmont Classic Value Portfolio is a true value investing portfolio. Following the lead of value investing greats like Warren Buffett, Charlie Munger and Benjamin Graham, our approach is more akin to buying businesses than trading stocks. Rather than attempting to predict short-term market movements, we simply aim to acquire at a sensible price, partial ownership in a range of easily understandable businesses, with excellent economics and able, honest management, whose earnings are virtually certain to be significantly higher in five and ten years time.

We see no need to hold any particular stock simply because of its weighting in a benchmark index. Instead, we analyse each investment purely on its merits and its potential to grow earnings significantly and sustainably over the medium to long term.

• ’Value Investing’ philosophy
• Low portfolio turnover, with long intended holding periods for underlying investments
• Portfolio constituents and performance largely uncorrelated with major benchmark indices
• Regular commentary on portfolio constituents and watchlist companies
• Transparent and tax-effective structure, with full beneficial ownership of underlying investments
• Comprehensive portfolio administration and reporting

Investing for the long term

In the short term, share prices can swing around wildly as a result of changes in market sentiment, yet in the long term it is the trajectory of earnings that will determine a companies value. Our aim is not to try and anticipate changes in sentiment, but rather to invest in a group of companies whose collective earnings rise steadily over time. If we are successful in doing that, the valuation aspect will take care of itself.

In order to profit from long term earnings growth, we must by definition be long term holders. We are not interested in purchasing any business unless we intend to hold it for at least 5 years. Of course if circumstances change, or if we were wrong with our initial thesis we may sell at any point. Over time though, we would expect that our average annual portfolio turnover (the inverse of which is the average holding period) should not exceed 20% – a fraction of the rate of most managed funds.

Founder Led Businesses

The quality and alignment of management is crucial in determining the long term success of a business. While their intelligence can rarely be questioned, unfortunately assessing the business nous of senior management is exceptionally difficult (note - 'business smarts' are not the same as 'book smarts'). In addition, with ASX CEO’s having an average tenure of only around five years (hence an average remaining tenure of half of that), and with the majority of their financial rewards coming through wages rather than ownership of the business, there is a clear and meaningful misalignment between the long term interests of shareholders and the often conflicting short term interests of management.

We believe the best way to deal with these difficulties is to focus heavily on founder-led businesses. There can be no questioning the capability or business smarts of a management team that has not only built a business from nothing to the point where it is large enough to list on the ASX, but then generated financial performance since listing sufficient to show up on our quality screens. Most founders also retain significant shareholdings in their business, often representing the vast majority of their family’s assets, ensuring that they are motivated not by short term KPI’s, but by maximising the long term value of the business. This unique combination of capability and alignment is exactly what we as long term shareholders are looking for.

Focused Portfolio

Traditional financial theory operates on the assumption that price volatility is risk, and that the best way to reduce risk is therefore to diversify widely - i.e. hold a large number of uncorrelated assets, each of which you know nothing about. 

We think differently, believing risk is more accurately defined as the likelihood of permanent loss or erosion of our capital. Given that our portfolio is comprised of a collection of individual businesses, and we’re concerned with a permanent loss of capital (rather than temporary swings in the market’s mood), risk is therefore determined by the stability, sustainability and trajectory of the earnings of our portfolio of businesses.

As a result, rather than diversify widely, we believe the best way to reduce risk is in fact to concentrate our holdings in a small number of high quality companies, with robust balance sheets, sustainable competitive advantages, steady and growing earnings, run by highly capable and aligned management. Regardless of price volatility, we believe this sort of portfolio is a far lower risk proposition than one that is more broadly diversified.

  Communication

One of the fundamental differences between a Bellmont Managed Account and a traditional managed fund is the level of transparency. At all times, you are able to view a full list of your portfolio holdings, see all transactions on your account, calculate performance, and even generate tax statements – by logging into your online portal.

In addition to this information, you will receive quarterly portfolio reviews (in January, April, July and October) where we discuss the portfolio’s overall performance in the preceding half year, and highlight those companies that have contributed to or detracted meaningfully from results. You will also receive daily news updates (when there is relevant news released) in regards to the portfolio’s constituent companies, in which we summarise the news released and provide our views on what this means for your portfolio holdings. None of this news requires any input from you, and you are free to pay as much or as little attention to it as you please, but it ensures that you are always kept fully informed in regards to your portfolio’s overall performance, as well as the underlying business performance of the companies that you are invested in.