As I step back, I wanted to take the opportunity to write to you directly about AMCIL, a portfolio that, more than any other in our group, reflects a concentrated, high-conviction approach to investing in quality companies.
It has been a genuine privilege to manage this fund on your behalf. As I hand over the reins, I want to be honest with you about both the wins and the challenges of the past year, and why I remain confident in the philosophy underpinning this portfolio.
A tougher year for quality, and how we responded
AMCIL runs a more concentrated portfolio than some of our other funds, and that means returns can be more volatile from year to year. The past 12 months have been a good example of that. Our bias towards quality companies worked against us at times, with some portfolio holdings that meet our criteria for quality underperforming while smaller resources stocks, an area we tend to be cautious on, performed incredibly well.
When markets move like that, the temptation is to chase what's working. We didn't. Instead, we went back to first principles and asked the question we always ask: are these still good companies, well run, with real opportunities to grow profits? In almost every case, the answer was yes — so we held on.
That said, I'll be candid: in hindsight, a couple of our better holdings were priced a little too fully going into this period. But staying true to our discipline matters more than chasing short-term sentiment. We've always said we want to own better quality companies for as long as the outlook remains sustainable, and that hasn't changed. What has changed is that we're now more active around valuation when prices get pushed too hard.
Where it worked, and where it hurt
Across large, mid and small-cap stocks, some calls played out very well. We added meaningfully to Woolworths and Woodside at attractive prices, and both have performed strongly since. Technology One has also been a pleasing contributor.
Conversely, some established holdings such as Cochlear and ResMed saw larger share price falls. But in line with our long-term view, these stocks have moved from high valuations to levels we now consider attractive. We've held on, because the businesses themselves haven't changed. The same is true of names like CAR Group, where broader market concerns around AI created pressure on share prices without changing the underlying quality of the businesses.
Put simply: where we previously had very good companies at very full prices, we now see very good companies at very fair prices. That shift gives us real encouragement about how this portfolio is positioned going forward.
5 key benchmarks to assess quality
A question I'm often asked is how we actually define a "quality company." It comes down to five things: unique assets with a defined competitive advantage, consistent earnings, a strong balance sheet, a sustainable business model that's resistant to disruption, and — perhaps most importantly — the quality of the people running the business. That last one is the first lesson I was ever taught in this industry, and it has stayed with me throughout my career.
We run all four of our listed investment companies, managing around $12 billion in funds under management, from one team — not separate desks. That scale means we meet company management on a regular basis, which gives us real insight beyond the numbers: understanding growth potential, industry headwinds and tailwinds, and ultimately, what a fair price looks like for a business with those characteristics.
A confident handover
As I step away and pass the reins to Alison, I do so with real confidence in this approach and in the team who will continue to apply it on your behalf. Markets will always have tougher years — that's the nature of a concentrated, quality-focused strategy. But the discipline behind AMCIL hasn't wavered, and I’m confident our investment approach will continue to make AMCIL a valuable addition to a diversified investment portfolio.