MoneyTalks: 3 fund managers that are hunting top returns for Glenmore’s Robert Gregory
MoneyTalks is Stockhead’s regular drill down into what stocks investors are looking at right now. We’ll tap our extensive list of experts to hear what’s hot, their top picks, and what they’re looking out for.
Today we hear from Glenmore Asset Management portfolio manager Robert Gregory.
“The sector I’m watching is the funds management sector – and I’m talking about the listed fund managers.
“Equities have been sold off so aggressively this year, and there’s been a material de-risking which means a lot of the stocks in the sector have seen their stock prices fall,” Gregory says.
“The reason why is because historically during periods where the markets have been sold off, this sector tends to be a good hunting ground for investors willing to take a medium-term view and look through that stock market weakness.
“Typically, what happens is they get sold off very aggressively, often too much relative to their longer-term fundamentals.”
Despite the really weak sentiment amongst investors, net flow data hasn’t been too bad for most of the listed fund managers that have strong performance, Gregory explains.
“One trend I’ve noticed is that companies with a higher exposure to listed equities have been hit harder and institutions seem to be more active in pulling their money out rather than retail investors.
“There is also more demand for alternative products such as long/short credit versus the traditional long-only funds.”
Gregory’s first pick is GQG, a fund management business based in America but listed in Australia.
“It has a very cheap valuation with a P/E of around 12x – all of its key funds have strong track records of outperformance since inception,” he says.
“It’s founder Rajiv James has a very distinguished track record as fund manager at GQG and before that at Vontobel in Switzerland, where he was the chief investment officer.
“Rajeev has very significant ownership in GQG and another interesting thing about GQG is that since its IPO last year the stock price has underperformed quite a bit but from an underlying operational perspective, the company has performed very well, generating strong relative returns and positive net inflows.
“This is during a period where many of its peers have been seeing net outflows.”
“My second pick would be Pinnacle who have been on the ASX for a long time – they have a management team that is well known and proven.
“It’s always been a high beta stock that in periods where the stock market is sold off – the stock price at Pinnacle gets sold off quite aggressively and the last 12 months have been no different in that regard.
“The stock price after reaching $18 has essentially halved as the stocks de-rated in line with many of its high growth high P/E peers.”
MA Financial is a more diversified financial services group rather than a fund manager but the majority of its earnings come from its asset management business, Gregory explains.
“The majority of its asset management earnings comes from real estate, credit and the hospitality sectors.
“The interesting thing about those sectors is, whilst there is some impact from the slowing economy, they don’t have that situation where the funds are listed on the stock market and the funds fall in sync with the stock market, so slightly more defensiveness.”