Stream Small Cap Synthetic Commodities Fund
Asset Class: Australian small companies
Management Style: Macro / Value
Stream's investment philosophy is based on the belief that stock markets are inefficient, which presents
opportunities for investors willing to undertake the necessary research to exploit market inefficiencies.
Utilising a macro commodity sector investment approach, Stream aims to deliver consistent outperformance
within a risk-controlled framework and without persistent biases to particular style characteristics. Stream's
investment process involves developing a macro view of each commodities forecast performance. Then an initial
screening of stocks within these sectors to exclude those that do not meet its criteria, including quality
(forecastable cash flows, management strength) and adequate stock liquidity.
Following this, Stream assesses companies by commodity sector on five key investment criteria. The relative
importance of each of these five measures can vary depending upon the stock being assessed. Two sources of
information used are company visits and peer comparisons of enterprise value to
resource. One of the investment criteria utilised by Stream is discount cash flow valuation. Stocks are assessed
for relative value according to the most relevant valuation methodology applicable for each company. As part of
this process, Stream compares its own internally generated views of valuation against its proprietary database
of market consensus views to identify mis-priced opportunities.
Portfolio construction is an integral part of the investment process. Portfolio weightings are determined by
the conviction of each analysts stock recommendations, tempered against the Manager's views on stock volatility
and liquidity risk.