“For us, it’s really around predictability of cash flows. It’s great to get amazing revenue growth. But if you’re not profitable, we’re probably not going to invest in you,” says Wood. A good business is broadly defined as an established company with a robust balance sheet, astute management, and operating within an attractive industry.“The great thing about being value investors is there’s always stocks and sectors that come in and out of favour.
The interim profit season beginning this week will be an optimal time to hear how companies are coping with inflation“Remember, it was only 12 months ago where there was a huge shortage of most things. And so companies were perhaps not selling as much, but they were selling at much higher margins because they weren’t having to discount their products. I think we’re in a very different dynamic.”
“What we think will happen is, as we roll off La Nina into a more benign cycle, we should see claims costs come down. And so we should hopefully see profitability improve for Suncorp and IAG, where we have big positions.”IML also owns Steadfast, an insurance broking service to small and medium businesses that need bespoke cover. “So with premiums going up, and them clipping the ticket on every premium, we think profit growth for companies like Steadfast will be very strong as well.
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