Transcription of Finance News Network Interview with Ausbil CEO & Head of Equities, Paul XiradisDallas Baird: Hello and welcome to FNN. I’m Dallas Baird and joining me is Paul Xiradis the Manager of Ausbil Australian Equities Fund. Paul thanks for joining us.
Paul Xiradis: Thank you for having us.
Dallas Baird: Reporting season is over for another six months. How do you see the Company’s fared?
Paul Xiradis: Look overall the reporting season was very strong; it exceeded expectation in aggregate terms. We did for the first time since 2009 see aggregate earnings actually increase by about one per cent. Obviously there’s always going to be some surprises, there’s also going to be both on the up and down. But overall, very much in line with what we thought was likely to be the case.
Dallas Baird: Looking at your Active Equities Fund, you’re overweight in your positions on BHP
(ASX:BHP) and Rio
(ASX:RIO). You must have been encouraged by the Company’s results?
Paul Xiradis: Both companies actually reported very good results and exceeded expectations. It really was a cost out story, which is clearly what’s driving the underlying result. But also that you know the commodity itself, they’re largely exposed to also perform pretty well and also volumes are increasing. So for those three factors, it was a pretty good outcome.
But the other thing that we are encouraged by, because we have met with the Companies following their results, is they’re talking more and more about capital management. And this is the first time that we’ve actually had management, at the most senior level and also at the Chair level, actually discuss capital management with us.
Dallas Baird: You’re also overweight in ANZ
(ASX:ANZ) and NAB
(ASX:NAB), but underweight in Commonwealth Bank
(ASX:CBA). Can you give me some insights into your thinking there?
Paul Xiradis: Look all the banks are fairly similar in a lot of regards, but they also have a competitive edge in some other areas and CBA is a very well-run organisation. But compared to say National Bank and ANZ on a relative PE basis, it’s looking a little expensive compared to them. That’s not to say the banking sector is expensive, but on a relative basis it’s looking a little expensive.
Dallas Baird: Yet you’re also underweight in Telstra
(ASX:TLS). Is this the case of a stock that’s had a hard run and is due for consolidation?
Paul Xiradis: Look this is a group that we bought some years ago, when it was really unloved I must say. And that’s proven to be a really good outcome for us, we bought it well. And the reason for that is it’s not necessarily to say the outlook is actually going to deteriorate markedly. But it’s more that we’re looking for other opportunities elsewhere in the market, because of the strong outperformance that this stock has delivered.
Dallas Baird: So outside of resources and financials, where’s the Fund overweight and why?
Paul Xiradis: Yeah look one of the key things we have been following for 18 months, at least now is that we have been positioning ourselves to companies, which have good offshore earning streams. And that’s part of the – and we’ve benefitted from that certainly over the past 12 months with the Australian dollar correcting. You know, from 105 effectively at its peak some 12 months ago to where it is now, around 90 cents. But we also want to be exposed to the US; we think the outlook for the US economy is very positive indeed.
We have been building up our position to where we think there’s going to be a nice recovery in Australia, which has been housing. We’ve always had a tilt – not always I should say, we’ve had a tilt for the past 18 months towards housing in the form of Boral
(ASX:BLD) and also James Hardie
(ASX:JHX). But we’ve expanded that over recent times, we’ve introduced BlueScope Steel
(ASX:BSL) which would be nicely positioned for that. So that’s another thematic that we are running through our portfolio.
We have also increased our exposure towards media and that was really in the form of Fairfax
(ASX:FXJ), where we bought that stock 12 months ago and fortunately that’s almost doubled in 12 months. And also selectively in retail as well, particularly those groups which we think are going to benefit from the housing pickup, or activity that we do expect over the next 12/18 months to two years.
Dallas Baird: You mentioned Fairfax as a nice pleasant surprise. What other stocks have surprised you?
Paul Xiradis: Yeah look SEEK
(ASX:SEK) is one that we introduced to the portfolio and that had a really good outcome, in the sense of its profit and forecast, but also made a very clever acquisition to our way of thinking. It is now very well positioned in a number of high growth population areas, and I think that over the next 12/18 months to two years, it looks pretty good for me. BlueScope was another which we positioned ourselves in.
Dallas Baird: And on the other side of that coin, what stocks have surprised you in a negative way?
Paul Xiradis: Yeah there’s always going to be some negative surprises. I think, initially that Suncorp
(ASX:SUN) came out with a result that was a little bit less than what the market was expecting. But we just think it’s more of a timing issue, we’re still in that stock. But they’re in a very strong position from a capital perspective; they’ve paid a special dividend. We think that the balance sheet is still quite strong, so therefore there’s a bit of upside there.
Dallas Baird: Finally Paul, the market’s been performing pretty well despite some negative headlines. Where do you see it all going over the next 12 months?
Paul Xiradis: We still remain positive; you know it’s not too different from where we were last 12 months. We felt that this year was going to be another reasonably good year, despite some of the concerns as you indicated. We still have the world worries that we still climb as far as concerns, and the most recent one has obviously been what’s happening in the Ukraine as well. But apart from that, we still think that we are in a stage of a recovery phase globally. And that’s got to be good for earnings overall and hence, that’s got to be good for stocks.
Equally here, we think we are in a phase of recovery particularly from a domestic point of view and we are seeing some pickup in activity. So the next 12 months, we think the market will definitely trade higher.
Dallas Baird: Paul Xiradis thanks for joining us on FNN and congratulations on a very solid 12 months.
Paul Xiradis: Thank you very much.
Ends
