How an information edge can improve your ASX portfolio (and the 10 stocks that stack up)

It's generally acknowledged that there are three kinds of edges in investing. 

One is the behavioural or time advantage. That is, having a five to 10-year time horizon allows you to weather short-term volatility and is a more certain way to make great returns than having a monthly or quarterly time horizon. 

Another is the analytical advantage - can you interpret the available information in a better way, or have you created a process that allows you to identify winning names and styles?

Then, there's the third and most important kind of advantage - the information edge. Put simply, it's all about what you know (given it doesn't tread into the realm of insider trading) and more often than not, this is one advantage that has traditionally been held by fund managers and hedge fund investors. 

There are stories of analysts counting cars in parking lots or breaking down trade data in an attempt to work out where retail sales are going (and which companies stand to benefit the most). 

MarketMeter runs research twice a year, asking fund managers and analysts from more than 130 firms to rate ASX-listed companies on a bunch of metrics. At Livewire, we're fortunate to have exclusive access to all of this data - the kind of data that can help open up the information edge that fund managers have always had.

In this wire, I'll show you how much an information edge can make a difference to your investing with the help of a model portfolio. 

The need-to-know about MarketMeter

MarketMeter is an interactive market insights platform that measures and benchmarks institutional investor perceptions of Australian listed companies, who find it is a reliable risk management tool to understand their performance in the eyes of institutional investors.

The platform enables institutions to score companies from 1-10 on a range of factors. Participants are then able to see how their views compare to those of other professional investors. Companies are evaluated across 27 factors grouped in categories of financials, ESG, management, strategy and engagement.

MarketMeter's first-half calendar year 2023 research saw 138 institutions participate, including buy and sell-side organisations - many of whom feature on the Livewire platform. 

Using a combination of quantitative and qualitative research (in other words, both numbers-based and non-numerical) insights, MarketMeter helps gauge the sentiment of these professional investors.

The data collected by MarketMeter is used by the Australasian Investor Relations Association (AIRA) every year for their Best Practice Investor Relations Awards - over 150 of the ASX200 are members of AIRA. It is also supported by super funds including Aware Super. 

The key factors

MarketMeter founder Nicholas Coles shared with us the 10 ASX 100 companies that recorded the highest average scores across five of the 27 factors in the MarketMeter research library. 

The five factors in question were rated by the participating fund managers and analysts as the most important factors in their investment process. They are as follows:

• Execution of Strategy
• Effectiveness of CEO
• Credibility
• Clarity of Strategy
• Earnings Quality