Insights for Investors by Investors

Which managers are leading the value investing boom?

•6-Allan Gray

In a nutshell, value investing is buying ‘quality’ companies at prices well below intrinsic value. Quality defined using four characteristics:

  1. Quality business that sells quality products, usually market leaders.
  2. Low debt – Tend to handle downturns better.
  3. Sound management
  4. Recurring earnings – Start-ups are not preferred.

Warren Buffett’s famous saying “Finding an outstanding company at a sensible price” is starting to ring true, with investors rotating out of growth and back into value, following a surprise uptick in bond yields earlier this year.

Value managers are back

In this article we compare two heavy weight value managers – Allan Gray and Perpetual Limited (ASX: PPT). The latest March performance numbers published by Morningstar highlight a great rotation back into value stocks have boosted leading value fund manager performance data and flows. Allan Gray and Perpetual have both posted excellent results.

The first fund is Allan Gray’s Australian Equity Fund – This contrarian value manager thrives by NOT following the crowd. As contrarians, their investment style is to ‘do the opposite’. Resist trends. Uncover opportunities in areas where nobody else is looking. Next to no competition, unloved and away from the herd is where Allan Gray finds its greatest opportunities.

The challenger is Perpetual’s Australian Share Fund – This isn’t so much a contrarian investor, more so a quality focused investor. The fund invests in a diverse portfolio of high quality Australian shares to achieve long-term capital growth and regular income. Quality companies with sound management, conservative debt levels, recurring earnings and a quality business. Perpetual uses a simple formula: Asses the quality of a business by looking at its products, positioning and brands, competitive advantage, barriers to entry and any issues influencing future performance. Perpetual goes long if the share price is attractive relative to the return potential.


Allan Gray’s Australian Equity fund was the top value performer over the last 6 months to the end of March 2021; by a nose at least. It returned a cool 26.20% beating the ASX 300 Accumulation index which returned 18.40%. It was up 49.30% for the year to the end of March. Perpetual wasn’t far behind Australian share fund which returned 26.10% for the last 6 months to the end of March, also beating the index. Over the year to the end of March it returned a whopping 50.45%. These performance figures highlight the great rotation into value stocks is back and has supported leading value fund managers, Allan Gray and Perpetual deliver terrific returns for long-suffering value unit holders over the past year.

Here are the individual holdings of both portfolios as at March 31, 2021


All in all, both funds returned near identical performance figures and use a similar value-based investment style, however both are very different in composition. Allan Gray has an obvious tilt towards Materials and Energy stocks (52%), the traditional domain of value investors, compared to Perpetual’s (30.2%) more broad-based allocation. The top four stocks being Materials & Energy stocks representing 30% of Allan Gray’s portfolio. On the flip side, Perpetual top four stocks are split between finance and gambling / entertainment.

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