At any given time, there are a limited number of great equity investment ideas. That’s why at SG Hiscock we manage concentrated, high-conviction portfolios that drive profitability. By taking larger positions in high conviction opportunities, we can deliver an unrivalled return for our investors that will far exceed expectations. Read on to find out more. 

What Is High Conviction Investing?

High conviction investing is often used to describe a particular type of investment style, “conviction” is increasingly popular in equity markets today. This type of strategy involves a concentrated portfolio invested in a small amount (usually 8 to 12) of the world’s best global stocks, typically considered to be “blue chip” stocks that have an extremely strong competitive position and high market share. Generally, because the number of stocks is quite small, the individual performance of the company makes a huge difference on the performance of the stock.

What Are the Characteristics Required to Have High Conviction in A Company?

  • An easily understandable business with a reasonably predictable future cash flows
  • A business that has control over its own destiny and a buffer against uncontrollable events
  • A business that generates more cash than is required to operate it
  • A business that is run by honest and trustworthy management who are known to treat shareholders as true partners

If a business meets these criteria, it’s worth consideration. An experienced fund manager will undertake fundamental analysis of the company, then perform full due diligence to determine its intrinsic value.

Examples of High Conviction Stocks

Traditionally blue chip stock that have met the above mentioned criteria are good examples of high conviction stocks. Banking stocks are one such example, as well as health insurance and telecommunications, but others over recent years include ones that have emerged such as Tesla with their investment in predicted future for how many people will be living their lives from travelling to heating and cooling their houses with batteries.

Not Without Risk

High conviction is great when a fund manager gets it right, but when it goes wrong, losses are magnified. Although the traditional blue chip investment has traditionally been a very solid, and long term profitable stock option for most investors, it too is not without risk. All it takes is one bad stock market plunge to ruin a years’ performance. A highly skilled and knowledgeable fund manager will be truly active all year round, and have the expertise to predict and minimise the losses during these plunges after years of closely monitoring the market trends.

Looking for Investment Funds? Melbourne Relies on SG Hiscock

With any investment funds it is highly recommended that you engage in a company who specializes in the field in which you are interested. With over 20 years’ experience, we offer a range of actively managed investment strategies specialising in Australian equities, property securities and high conviction actively managed investment strategies. If you would like to discover more or begin your investment journey today, enquire online or get in touch with us by calling 03 9612 4600 today.