Bellwether Partners’ investment methodology is active, research intensive and predominantly bottom up. The investment process of the Fund involves three main steps: stock screening, qualitative research, and portfolio construction.

Q1: Stock Screening

Beginning with the S&P/ASX 200 Index:

• Stocks without 4 or more broker coverage are excluded
• The top 150 stocks by market capitalisation are selected
• These stocks are then aggregated into five super sectors; Resources, Industrials, Consumers, Financials and Property & Utilities.

Each company is then ranked using a proprietary quantitative screen which ranks them within their respective super sectors. Stocks are screened over a number of equally weighted factors such as:

• Earnings momentum
• PE ratio

All the super sector stocks are combined and ranked to create the top 50 buy universe. Stocks currently held within the portfolio are not included in the buy universe.

This process imparts a large cap tilt, with a moderate growth bias.

Q2: Qualitative Research

The qualitative research is carried out by the highly experienced Investment Team. The objective of the stock selection process is to identify companies that we believe possess attributes that are likely to deliver superior growth over time.

In-depth qualitative stock reports are compiled using a modified Porter’s Five Forces analysis (i.e. looking at suppliers, customers, substitutes, industry, and new entrants).

In addition, the qualitative stock reports place significant emphasis on the risk factors a stock may face. These may include, but are not limited to:

• Earnings risk
• Pricing risk
• Reliance on acquisition for growth
• Investor perception risk
• Geographic risk

The qualitative research process is designed to complement, rather than replicate that which already exists in the market. Therefore internal research efforts are focused on high value-add (key areas often neglected by the wider research community).