June quarter stocks to watch

Interviews

Transcription of Finance News Network Interview with Antares High Growth Shares Fund Portfolio Manager, Richard Dixon

Lelde Smits: Hello I’m Lelde Smits for the Finance News Network and joining me from the Antares High Growth Shares Fund is Portfolio Manager, Richard Dixon. Richard welcome back to FNN.

Richard Dixon: Thank you.

Lelde Smits: Could you explain how you manage the Antares High Growth Shares Fund?

Richard Dixon:
The High Growth Shares Fund is a long short Australian shares fund that aims to significantly outperform the ASX 200 Accumulation Index over the long term. Now we employ an actively managed approach, where we use three key strategies to try and broaden the opportunities set that the Fund has. And these are short selling, enhanced long positions or larger overweight positions and active trading.

Lelde Smits: Richard, how did the Fund perform over the June quarter?

Richard Dixon: The Fund had a very solid quarter with a net return of positive 1.7 per cent over the quarter, and the benchmark did around 0.8 per cent. So strong outperformance and it actually achieved outperformance in every month over that period, which was pleasing.

Lelde Smits: Which stocks added to your performance and which detracted?

Richard Dixon: The largest positive contributor to the Fund during the quarter was Echo Entertainment Group Limited (ASX:EGP) and it rallied around 28 per cent, during the quarter. Now we were overweight that stock and there were several bits of positive news during the period that led us to increase our position even further. So they talked about strong revenue trends during the March quarter and there was also a change in management, which we viewed favourably. So we initially added to our position on this news, when they saw these trends continue and they actually upgraded their earnings guidance for the full year, later in the quarter. So we actually added further to position on that driven by those strong revenue trends continuing, plus ongoing cost out performance.

An underweight position in Fortescue Metals Group Limited (ASX:FMG) also contributed to performance. Now Fortescue was hit pretty hard as the iron ore price fell 20 per cent through the period. And that was driven by a more patchy or weaker Chinese demand, plus ongoing concerns of low cost supply growth coming onto the market. So that also boosted performance. On the negative side, we had a couple of small modest impacts to performance in both Woodside Petroleum Limited (ASX:WPL) and Westfield Group (ASX:WDC).

Firstly Woodside, which we didn’t own for most of the period, it rose as the oil price was strong on geopolitical concerns in the period. And Westfield also was boosted by not only the rally in the bond market, which helped all of the listed property stocks, but also the eventual success of their demerger of the Scentre Group, which initially looked shaky and then got through later in the period. So it was actually boosted on the back of that, so they were small detractors during the period.

Lelde Smits: Last time we spoke you had recently added Sydney Airport (ASX:SYD) to the Fund. How is the stock performing now?

Richard Dixon: Sydney Airport continues to perform well since we added it into the portfolio late last year, when it was trading down below the $4.00 level. The stock’s now rallied up to around $4.40; it’s also paid about 23 cents of dividends in that time period. So it’s been quite a strong performer and really a couple of factors there. Firstly, it’s been helped by the rally in the bond market. So bond yields fell over 0.5 per cent during the quarter, so that was supportive of these types of long duration infrastructure assets. And also just the ongoing thematic of inbound and outbound international traffic numbers being supportive, for profits and the valuation of the company over time.

Lelde Smits: What were some of the individual stock changes you made to the Fund during the June quarter?

Richard Dixon: We added Aristocrat Leisure Limited (ASX:ALL) to the Fund during the period. Initially that was on the back of a stronger than expected profit result that they delivered for the first half. Now that was driven really on the back of some market share gains, both in the US and the Australian market. And also just an initial profit of their newly formed online gaming business, which has got into profitability much quicker than people expected.

And one that we sold, we actually exited our position in Brambles Limited (ASX:BXB) and really that was just a valuation call in our view. With the stock trading above $9.50, we feel it’s very fully valued at those levels. I think it’s trading at its highest premium to the market in about five years. So we just felt given some of their – there’s also some indications that some of their volumes may be slowing down, the volume growth that they’re getting through from their customers. So we just felt there were better opportunities elsewhere in the market to redeploy those funds.

Lelde Smits: Finally Richard, what is your Fund’s current outlook and strategy?

Richard Dixon: There are a couple of little things on the macro side that we think are slightly concerning. Valuations are quite full in the market, plus we’re awaiting the reporting season coming up next month in August where locally, we expect to see what might be partly a challenging period for some companies. It’s been through a period when we’ve had a major hit to consumer sentiment locally with the Budget, concerns around the tightness of the local Budget and the cost cutting that was evident in that. So that’ll be an interesting time for companies, but we welcome a refocus back on the bottom up fundamentals again.

Lelde Smits: Richard Dixon, thank you for the update from the Antares High Growth Shares Fund.

Richard Dixon: Thank you.


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