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 prides itself on being bottom up stock pickers. What does this mean in terms of your day to day approach?
Glenn Hart: We tend to look at companies in depth and do our own individual research, value the cash flows of the companies. So when we do that, we tend to find that stocks that are undervalued on our numbers tend to be unloved, and therefore, very unpopular in the markets. So our day to day approach really is when you’re doing the individual stock work, you find you’ve got to follow your process. Identify the undervaluations and then invest accordingly, which often means you’re investing in unpopular situation stocks.
Lelde Smits: The Fund is also focused on behaving in a selectively contrarian way. Could you give us an example of this approach?
Glenn Hart: So being selectively contrary means that you have to have the courage of your convictions. So the work that we do on the stocks, we identify the valuations and all the factors, we value stocks in a very holistic way. And then even if the stock is unpopular, if you’ve got a really big discount to valuation, that gives you the margin for error that you’re really looking for. And that’s the whole idea of trying to buy stocks cheaply, is to give yourself a bit of margin for error. And that really is the benefit of being contrarian, that normally you can only find stocks like that that are unpopular for a reason. So the skill is, using our philosophy, is to try and identify where companies are sold off for permanent or non-permanent reasons.
Lelde Smits: How did the Fund perform over the September quarter and what were the drivers behind your result?
Glenn Hart: The Fund’s had a good year to date. It’s performed about 3.9 per cent against the market 2.4 per cent. So a number of the types of stocks that I spoke about, which were significantly undervalued last year, the market has decided to look at in a different light this year. And we’ve reaped the benefits of that.
Lelde Smits: Last time we spoke the Fund was overweight energy. What is your outlook for the sector now?
Glenn Hart: Energy’s had a very poor quarter with the oil price falling significantly. We believe now that we’re close to the end of the seasonally weak period in oil, which we’re in October, so there’re a lot of refineries that have been out. Therefore, the demand for oil crude has been lower. So we think into November/December that you’ll see a little bit of strength come back, which would stabilise the oil price. And the stocks that we’re invested in the sector, we’re invested in for organic growth, so it wasn’t a play on the oil price; it was a play on new projects generating cash flow. So the fall in the oil price has given us the opportunity to increase our position in some of those stocks.
Lelde Smits: Finally Glenn, which other sectors are looking attractive to you, or which may you be steering away from?
Glenn Hart: The recent selloff in the market has somewhat tiered the market, and that is defensive type stocks have held up quite well and are looking quite fully valued. And there’ve been a number of more cyclical type stocks which have been sold off more heavily. So that’s what we’re looking, we’re looking to recycle money out of fully valued positions, into stocks with more upside that give us more margin for error.
Lelde Smits: Glenn Hart, thank you for the update from Antares Australian Equities Fund.
Glenn Hart: Thank you.
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