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This is a bargain ASX share of expensive stocks in the ocean

Ask the fund manager

Motley Fool can chat with fund managers to gain insights into expert thinking. In this edition, Sage Capital’s portfolio manager, Kelli Meagher, discusses how they survived last year’s COVID crash and which companies are due to take off in 2021.

Investment style

Motley Fool: What is the philosophy of your fund?

Kelly Meeger: There are two funds. There are Sage Equity Plus Fund and Sage Absolute Return Fund. The difference is that absolute return funds are market neutral and their returns are uncorrelated with the equity market. Sage Equity Plus Fund S & P / ASX200 Index (ASX: XJO).. The overall stock selection and risk management strategies for both of these funds are the same.

We basically aim to invest in a wide range of stocks, both long and short.And to Build a diversified portfolio Because it’s style-neutral Value stock Or Growth stock..

A unique element of our strategy is to use our own Sage Groups. It groups companies according to their performance in different market conditions. This is quite different from grouping companies by the GICS sector. This enables inventory comparison of “apples and apples” and helps manage macro risk.

Ultimately, you’ll be in about 80 to 100 positions, both long and short.

We also use very rigorous risk management overlays to minimize systemic risk in the market. A wide range of completely unpredictable macro risks such as bond yields, FX changes, sudden emotional changes, growth and value boosts.

We are basically focused on managing the stock selection, making it profitable and eliminating all other external risk factors. By doing so, we can provide investors with a portfolio that can generate good returns anywhere in the cycle.

MF: For long positions, how long is the investment period usually?

KM: I’d like to say one to two years, but it’s actually different. Some companies have been good investments for years and years, and the underlying fundamentals support it. If not, sometimes it’s a short-term stock price move, and it’s time to move on to something more attractive.

MF: How did you play last year?

KM: We actually had a really good year. It has significantly exceeded the benchmark and has been down for several months. So it was a really good start for our money, especially in the context of a pandemic.

MF: Did you manage to buy back the stock in March or April?

KM: We take long and short positions, so what we really did well COVID In short, portfolio placement was fairly early.Looking at the numbers in China every day, we were worried about COVID quite early on, so we were able to position ourselves by selling out and buying travel stocks before the market collapsed. ResMed CDI (ASX: RMD) And buy Fisher & Paykel Healthcare Corporation (ASX: FPH), COVID winner. We also focused on supermarkets.

So we were in a good position when the market retreated significantly.When that happened, we started to enter the market and started buying some of the stocks we sold. Flight Center Travel Group Ltd (ASX: FLT), Corporate Travel Management Co., Ltd. (ASX: CTD) And various strains destroyed. I am happy to get a pretty good return.

Buy and sell

MF: What do you look carefully at when thinking about buying stock?

KM: We are looking at everything. We do a lot of fundamental analysis on the quality of the company, which determines the amount we are willing to pay. We spend a lot of time investigating the structure of the industry in which the company operates, the competitiveness of the industry, the position of the company in that industry, the difficulty of barriers to entry, the competitive advantage of the company, etc. I’m spending. What is regulatory risk?

We are also always looking forward to seeing changes in the industry structure and whether it can have a positive or negative impact on the company.

Next, carefully consider the company details. Get management and board quality, long-term advantage, what shareholders’ interests in capital have brought to the company, long-term growth prospects, the amount of cash they generate, their general trade record To do.

And we evaluate the company Interest, taxes, depreciation and profit before depreciation (EBITDA) Or Price earnings ratio (P / E), Then it is the combination of quality and our evaluation that determines whether we take a position and how big that position is.

MF: And, as you said before, are you an agnostic about growth and value?

KM: That’s right, that’s right. We are very committed to neutralizing the style of our portfolio and can generate good returns for investors, whatever the latest. [fad] Stocks are on the market – growth, value, large amounts of cash, small amounts of cash, takeoffs, takeoffs.

MF: What triggers you to sell your stock?

KM: I would like to say that the inventory has risen to the evaluation. The fundamentals of the business may have matured. There may be a major sale or a danger signal that many senior managers are running towards the exit. It will be a great danger signal for us to dig a little deeper.Or just a change [that] It basically affects the original purchased treatise.

And because we are active investors, we may just adjust our positions and invest money to work elsewhere where we have better opportunities.

MF: Are you fully invested in most cases or do you have some cash on hand?

KM: We always strive to invest fully. I have very little cash.

What’s coming

MF: Where do you think the world is heading now?

KM: Great question. I think the world is in a pretty good place. Vaccines are clearly deployed worldwide and have a great deal of financial and financial stimulus.

However, the road has some irregularities. [Last year] The stock market has lost almost half, but after incorporating a lot of good news and recovery, it is now almost at its pre-COVID highs.

So it certainly won’t be a straight line [for] The market, and we are watching a little carefully to see what the impact is. JobKeeper has an expiration date and it is not yet known how long it will actually take to implement a vaccination program worldwide.

But given where interest rates are, stocks are clearly an attractive asset class – [you’re] I can’t profit from bank money.

In general, I’m optimistic about the market as long as you stay in the market for the long term.

MF: The Australian market underperformed last year compared to other regions. Do you think it will recover this year?

KM: I’m so … I think we’re pretty bullish on Australia. Obviously, we’ve managed to get through this pandemic and we’re in a really good place compared to many other countries.

With all the financial and financial stimuli, it’s pretty bullish in areas like housing. Australians love housing. We have received very strong data for approval and so on. Next year, we are positioning our portfolio for a strong housing market.

Overvalued and undervalued stocks

MF: What is the most undervalued stock at the moment?

KM: The question is interesting because the market is totally very strong and it is difficult to choose a stock that is truly undervalued.

MF: There aren’t many bargains left.

KM: There aren’t many bargains there. But what we really like is that we underperformed in the last quarter or so and think we have good long-term growth prospects. That is ResMed, a healthcare company.

There are two strong themes in the future of healthcare: technology and value. For healthcare companies [Resmed is] A very large amount of technology that is highly innovative and integrated into all products and services. And that technology is needed to be able to prove to payers that they are saving money.

COVID really emphasizes the importance of respiratory health and the value of being able to remotely manage and monitor patients … it has achieved great long-term global growth. It produces a huge amount of cash and it has a really good track record of good management and equity allocation.

Therefore, I think we will continue to grow really well in the long run.

MF: Is the healthcare technology subsector generally quite attractive in the long run due to the aging population?

KM: You can’t go either [wrong] About investing in that part of the market in the long run.

MF: What do you think is the most overvalued stock at the moment?

KM: There is an overvalued market pocket, and it’s purely a function of interest rates, and I guess a little escape to quality.

So, in fact, many really good quality companies are overrated at this point. Simply because you are trading valuations, your revenue will increase significantly and you may not be able to provide it.

MF: Do you think as a long / short manager Recent GameStop turmoil in the U.S.??

KM: We have seen the circus from a distance. I think it’s a sign of a large shift in inexperienced retail money chasing something. And I think many people have more time in their hands.

MF: Do you think structurally such a riot is unlikely to occur in the Australian market?

KM: Yes. I will do it.Indeed, our options market has a very different structure and we do not have the same society [pressure].. clearly, [Australian] It’s a chat room, but I don’t think it’s the same social media.

Think back

MF: Which stock are you most proud of in your past purchases?

KM: What I am most proud of is how to navigate COVID and be very agile in their position. In the early stages of reducing our exposure to the travel sector, we positioned the COVID winners and portfolios of healthcare stocks ResMed, Fisher & Paykel and supermarkets. JB Hi-Fi Limited (ASX: JBH)..

I know that’s probably not the answer you’re looking for.But there is no one [stock] Because there were many Volatility… I’m proud of how agile we were.

We are active investors and have always incorporated incremental information into our portfolio. I think our process really helped improve performance in the meantime.

MF: Did you buy back the travel share that sold out before the pandemic in anticipation of a recovery?

KM: I bought a flight center and corporate travel. We still own Corporate Travel. I think this is a long-term story about an acquisition in the United States. It’s not just picking up on a business trip, it’s doing better for it.

MF: Is there any movement you regret from the past? For example, you may miss an opportunity or buy stock at the wrong time or price.

KM: Yes, definitely missed the opportunity for online e-commerce stocks – retail online stocks.

[Meagher previously spoke of her regret at missing the rise of Temple & Webster Group Ltd (ASX: TPW)]

I think you regret how conservative valuation discipline was when it came to pure online retail stocks, which first started moving last year. And they climbed, doubled, tripled, and I realized I missed a chance – and they just continued. So there is definitely a remorse for sitting on the sidelines there.

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This is a bargain ASX share of expensive stocks in the ocean

Source link This is a bargain ASX share of expensive stocks in the ocean

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