Transcription of Finance News Network Interview with Antares Australian Equities Fund Portfolio Manager, Glenn Hart Lelde Smits: Hello I’m Lelde Smits for the Finance News Network and joining me from the Antares Australian Equities Fund is Portfolio Manager, Glenn Hart. Glenn, welcome back to FNN.
Glenn Hart: Thank you.
Lelde Smits: The Fund is on the lookout for unloved and undervalued companies. Could you give us an example with a recent position?
Glenn Hart: So by definition, undervalued companies have generally had bad price performance, and we have to assess whether it’s permanent or temporary. So certain stocks where we think the medium term prospects are good, but the short-term share price has been poor. Stocks like Crown Resorts Limited
(ASX:CWN) we’ve added to, added to some of the banks in the recent weakness, added to some selected energy stocks and selected mining stocks.
Lelde Smits: Energy and mining sectors have recently come off last year’s lows. How has your exposure to both changed?
Glenn Hart: It’s very stock specific. So in general, we’ve been adding to energy, there’re a couple of stocks that we think are still very cheap. And we’ve also added to positions in the weakness in mining, but we have sold some and bought others. So it’s very stock specific.
Lelde Smits: The Fund’s top ten positions include the Big Four banks. What do you make of the recent bank selloff?
Glenn Hart: We’re at the position right now as we speak, we’ve had the big capital raising from National Bank
(ASX:NAB) and Westpac
(ASX:WBC) DRP underwrite, which is just finishing. So you’re talking something like $6/$7 billion of capital raisings by the banks. It’s put a lot of pressure on the share prices. Now that’s a supply/demand issue. We would expect once you get through this period, the fundamentals with reassert themselves. They should start to perform better.
Lelde Smits: The Fund also holds major miners, BHP Billiton Limited
(ASX:BHP) and Rio Tinto Limited
(ASX:RIO). What is your view of the price of iron ore and more generally, commodities?
Glenn Hart: For the first time in the last four years, you now have BHP and Rio earnings estimates are trading, way below spot by the brokers. So the brokers’ estimates are estimating commodity prices, much lower than the current spot prices. Whereas for the past four years, you’ve seen poor share price performance, where the analysts have been perpetually bullish.
So it is starting to look like you might be getting towards an inflection point, where the market has become too bearish. And there could be earnings upgrades big substantial for BHP and Rio.
Lelde Smits: Are you still holding onto your allocation of BHP Billiton spinoff, South32 Limited
(ASX:S32)?
Glenn Hart: Yes and added to it. So there again on a three-year view, we think that there’s a lot of value to be unlocked in business. Although short-term, it’s a tough environment for a lot of their businesses. But as a general concept, spinoffs perform very well once they’re liberated from their parent. And we see a lot of similarities with this and other spinoffs that have been successful.
Lelde Smits: Turning to your performance. How has the Fund performed over the past quarter and further back?
Glenn Hart: The Fund’s had a good year of performance. So a lot of our contrarian type positions have done really well, over the past 12 months. So that’s a strategy that’s been working.
Lelde Smits: Finally Glenn. What is your Australian interest rate outlook and accordingly, your sector allocation?
Glenn Hart: Generally speaking, in terms of short-term interest rate moves, I really doubt that there’ll be any more cuts. But if they are, it’s getting so close to the end that they will have virtually nil impact on the share market, because the share market is going to be forward looking. So the bigger issue for interest rates really to me is: Where do the long bonds in Australia and the US finish, and where does this kind of short rate sit in relation to that?
But the other issue that related to interest rate, it’s not just about interest rate, it’s about the growth in companies. So historically, there is really no way that you can just look at an interest rate and work out whether the market, is going to go up or down. There’s almost no correlation whatsoever, because at different levels of interest rate, people have different levels of expectations about earnings. So that’s the bigger issue.
Lelde Smits: Glenn Hart, thank you for the update from Antares Australian Equities Fund.
Glenn Hart: Thank you.
Ends
