Transcription of Finance News Network Interview with Pengana Australian Equities Market Neutral Fund Director of Portfolio Management and Strategy, Phillip BoustridgeLelde Smits: Hello I’m Lelde Smits for the Finance News Network and joining me from the Pengana Australian Equities Market Neutral Fund, is its Director of Portfolio Management and Strategy, Phillip Boustridge. Phillip welcome back to FNN.
Phillip Boustridge: Thank you, it’s good to be back.
Lelde Smits: Your portfolio includes about 130 stocks. How does the mix of long and short positions help to control risk?
Phillip Boustridge: The key here is that we’ve got a lot of stocks in the portfolio, so there aren’t any really large positions in either long or short stocks. And that helps to diversify the portfolio and offset the risks of any one particular stock, adversely affecting performance.
Lelde Smits: When we last spoke in April you had successfully been building a position in David Jones Limited
(ASX:DJS), which has since been successfully taken over. Which stocks are you now building a long position in?
Phillip Boustridge: We’re currently building a long position in a company called CSR Limited
(ASX:CSR), which is a building products company. Recent reporting results were in line with expectations, and the company showed an increase in profit across all divisions. More importantly, company guidance was maintained with a positive outlook into 2015.
Lelde Smits: And which stocks are you building a short position in?
Phillip Boustridge: We’re currently building a short position in Coca-Cola Amatil Limited
(ASX:CCL). Coca-Cola is facing real headwinds in the Australian supermarket distribution channels, with increased competition and price pressure. Carbonated drinks are also falling out of favour and bottled water remains the key growth market for Coca-Cola. However, price points plus pressure and margins are the real issue here, and difficult to maintain with water.
Lelde Smits: In April you were also short in Atlas Iron Limited
(ASX:AGO), the stock has since fallen about 30 per cent. What exposure do you now have to the company?
Phillip Boustridge: We’ve covered most of the short position in Atlas Iron, so we only have a tiny short position at this point in time. With the stock falling over 30 per cent and iron ore prices really at a five-year low, we aren’t seeing any real value starting to emerge for that company yet. However, the downside is somewhat capped, and we’ve got better positions that we can short in the portfolio right now.
Lelde Smits: Now reporting season is complete, which stock was a highlight for your Fund?
Phillip Boustridge: CSL Limited
(ASX:CSL) is a company that worked really well for us during reporting season. This is a biopharmaceutical company that reported a profit, net profit of 11 per cent, that was ahead of expectations. Margins are improving and this is despite of increased competition, and the company also announced a share buyback, which is positive for the share price.
Lelde Smits: Finally Phillip, many investors continue to sit with high yield stocks such as Telstra Corporation Limited
(ASX:TLS) and the banks. What do you believe are the best strategies to target consistent returns?
Phillip Boustridge: I would answer this in two parts. The first thing is, as an investor you have to consider your portfolio and a well-diversified portfolio is the best strategy that you can have, to achieve a consistent return. The biggest exposure you’ve got in your portfolio is equity market exposure. And the question is, ‘What have you got in your portfolio that can off-set that risk?’. When you come to talk about our strategy and the consistency of the performance of our Fund, what we aim to do is to provide a consistent return over time, over and above the cash rate. But that is always about a period of time, it’s not on a month-to-month basis, it is over the longer term.
So I would urge people to maintain their disciplines in their portfolio construction, not get sucked into highly into investment, just at the point in time when everybody thinks that that’s what they should be doing. Because quite often, it’s the complete opposite of what you should be doing.
Lelde Smits: Phillip Boustridge, thank you for the update from the Pengana Australian Equities Market Neutral Fund.
Phillip Boustridge: Thank you very much, look forward to seeing you soon.
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