ECP Emerging Growth Ltd (ASX: ECP)
Price: AU$ 1.06
At ECP, to know environmental, social, and corporate governance factors (ESG) affect performance. To protect the clients’ capital, therefore, one has always insisted on understanding ESG holistically to gauge investment potential. To operations to these standards.
The philosophy guides everything to do. There are two parts to it – to corporate values and the investment philosophy. Investors can expect continued market volatility as the market continues to react to these announcements. In times of stress or periods of change, investors are best placed when identifying sustainable investments. Understanding macro-environmental factors that may emerge, combined with resilient investment companies, will position equity portfolios well over the long term. Warren Buffett, in his Letter to Shareholders (1989), commented that “time is the friend of the wonderful business, the enemy of the mediocre”. For investors, identifying these quality companies is the true secret to success in growing one’s long-term wealth. To invest in a company in the growth stage of its life cycle, it is important to balance the company’s narrative alongside its numbers. It is vital not to get caught up in the hype and noise of the internet and daily market movements. A sound investment philosophy sets out several ‘rules’ or ‘procedures’ to fall back on when the market noise gets too loud. Companies with a Sustainable Competitive Advantage (SCA) will always be well-placed to withstand short-term headwinds, regardless of market conditions, maintain market share and ultimately find new ways to grow. Throughout reporting season, to continue to drill down into a company’s financials and growth plans in a careful, considered and committed way. This process ensures to identify the quality stocks that will prosper over the long term whilst remaining resilient through testing times.
INVESTMENT ACTIVITY:
During the quarter, Wisetech Global (ASX: WTC) was added to the portfolio, due to strong conviction in the investment thesis and the attractive valuation, while Nitro Software (ASX: NTO) was removed due to the ongoing takeover battle between Potentia and Alludo.
Financial Performance:
Team Approach:
At ECP to believe in the power of a strong team which is why they prioritise the team over an individual. No one has a monopoly on knowledge, so recruit the best and give them equal say and equal respect.
Review of Operations:
Investment performance for the six months to December 2022 was positive 11.1%, compared to the ASX Small Ordinaries Index increase of 5.4%. The result is an improvement on the prior year six month portfolio performance of positive 4.2% and is just under the 5 year average of 13.1%. Due to the global macro-economic environment equity valuations have been under pressure however pleasingly the investee businesses have generally performed in line with expectations with resultant dividend income increasing year on year by $119,103. Net profit increased compared to last year by $1,471,208, this is due to the portfolio performance mentioned above less the impact of interest costs associated with the convertible notes issued in April 2022 (ASX: ECPGA). During the six months to December 2022 the company paid the FY2022 Final Dividend of 2.75 cents per share, a total of $504,325.30. At 31 December 2022 the Company maintained sufficient reserves to maintain the annual fully franked dividend of 4.85 cents per share for a further 3.5 years.
About the company:
The past 20 years have been a stellar run for equities, characterised by steadily expanding production and few demand shocks. At times, this exuberance was impacted by sourcing sentiment and occasional collapses in spending, which have been managed by central banks through carefully raising or cutting rates. The current environment, however, indicates this environment is changing – production constraints, triggered by the pandemic and accelerated by the invasion of Ukraine, have driven inflation worldwide. Now living in a world that is shaped by supply, with the current inflationary environment being driven by these supply related issues as opposed to excessive demand.
ECP Asset Management (ECP) is a boutique equities fund management firm. The firm and affiliates manage equity portfolios for institutional, retail, and high-net-worth clients. At the time of writing, ECP managed in excess of A$2 billion across various mandates, providing investors exposure to the quality-growth investment portfolio. The organisational purpose is to Redefine Active Investing with the objective of maximising client wealth over the long term. To believe the only way to grow wealth that is resilient and sustainable, is to invest money in a careful, considered and committed way – to call this ‘active’ investing. To be known as thought and market leaders and the following document outlines how to ensure best practices. Furthermore, at ECP the Investment Philosophy is based on the belief that the economics of a business drives long-term investment returns and this is reflected in the investment process. At ECP, the consistency of the offering is most important, and one are focused on always delivering on the three key promises.
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