Liquidity (120 Days)
Qualitative evaluation (Includes ESG as 1 of 6 factors)
4+ years forecasts
500 Company meetings p.a.
Where recommended by analyst
Positive excess returns
Approved by team head
Our Investment Principles
- Solaris uses fundamental analysis to choose stocks, to exploit market inefficiencies in forecasts and valuations.
- Analyst management of the portfolio is the best way to capture market inefficiencies.
- Active Management can provide better investment returns than passive investment.
- To achieve superior returns, positions are taken which deviate from the benchmark portfolio, through skillful stock selection.
- All investment decisions are supported by detailed analysis of the securities and key financial markets, with an eye on the global perspective.
- We apply strict risk controls to minimise the exposure to downside risk.
- Selecting stocks is our main area of expertise. Our research aims to identify the ‘true’ value of each stock, based on qualitative and quantitative company fundamentals.
- We have no bias towards value or growth stocks (‘style-neutral’). We identify the stocks with the best-expected return, regardless of perceived style.
Investing With Solaris
As an active, style-neutral Equities Manager, Solaris uses fundamental analysis to select stocks. Industry positions are a function of this stock selection.
To formulate an investment portfolio, the following steps are taken:
- Risk Screening: Solaris conducts risk screening to arrive at an ‘Investable Universe’ of 200-250 companies.
- Stock Research: The Solaris team conducts industry analysis, takes company meetings, and undertakes modelling and valuations of all companies in the Investable Universe. Solaris uses both qualitative and quantitative techniques to arrive at an Expected Return of the stock.
- Expected Returns Platform: The Solaris analysts compare the Expected Return of a stock against the Expected Return for the Universe, to arrive at an ‘Excess Return’. The size of Excess Returns guides the stock selection that ultimately leads to the generation of the portfolios.
- The typical or core portfolio size is 40-70 stocks (or 20-40 in the case of Solaris’ High Alpha Australian Equity Fund).
- The Solaris analysts, who are most knowledgeable about a stock’s prospects, and are also the portfolio managers, are critical to the Solaris investment process.
- Awareness of after-tax management is also a fundamental component of the Solaris investment process. We apply our after-tax philosophy, along with learnings from many years experience in after-tax management, to all portfolios with no Alpha deterioration in optimising after-tax outcome. Solaris aims to:
Optimise Dividend Franking:
- – Harvest high, fully franked yields
- – Minimise 45-day rule breaches
Minimise Capital Gains Tax (CGT):
- – Stock cost-base parcel management (highest-in, first out)
- – Minimise loss of 12-month CGT 50% discount
Environmental, Social and Governance (ESG) Factors
The incorporation of ESG issues into Solaris’ investment decision making process is an integral part of our business. We believe that companies cognisant of environmental, social and governance issues may represent opportunities for outperformance and correspondingly those companies that do not effectively manage these areas of their businesses could experience underperformance.
ESG factors are considered at two stages within the Solaris Investment process – the initial risk screening stage and as one of the six Qualitative factors used to value companies.
Solaris aims to integrate material ESG factors into the valuation of each company included in, or considered for inclusion in, the portfolios we manage. Each company is assessed on a case by case basis with premiums/discounts for factors identified applied through the analyst’s valuation process.
Solaris has been a signatory to the UN backed Principles for Responsible Investment since 2009 and signed the Montreal Carbon Pledge in 2015.
In addition Solaris is a member of the Responsible Investment Association of Australia, ESG Research Australia and participates actively in a number of ESG related initiatives as detailed in Solaris’ ESG Policy.