Outperforming Australia Stock Fund Picks Medical Equipment, Gold
Outperforming Australia Stock Fund Picks Medical Equipment, Gold
(Bloomberg) --
An Australian equities fund that managed to post a gain last month as the market tumbled is betting on a manufacturer of products used to treat coronavirus patients as well as mining services and gold.
The CC Sage Capital Absolute Return Fund gained 6.2% in March, far outperforming the S&P/ASX 200 Index’s 21% slump. The long-short fund scored success by cutting its exposure to travel stocks and beefing up positions in health firms, supermarkets and telecommunications, said Sean Fenton, chief investment officer at Sage Capital Pty Ltd.
The fund is up 7.5% since its inception in August, according to its latest performance report. Its top holdings include Service Stream Ltd., National Australia Bank Ltd. and Coles Group Ltd.
The market stabilization seen this month on central bank and government action prompted Fenton to adjust some positions, reducing gross stock exposure as volatility came back down.
“That was an opportunity for us to lock in profits on some of our shorts and look for companies that had been a little bit beaten up,” said Fenton.
One of the fund’s current longs is Fisher & Paykel Healthcare Corp., a maker of medical equipment for treating respiratory illnesses. Shares of the New Zealand-based company have soared amid the outbreak on demand for products used to care for virus patients. Fenton also sees potential for longer term growth as hospitals put more emphasis on pandemic preparedness.
Elsewhere in the health sector, private hospital operator Ramsay Health Care Ltd. is on the fund’s short list given recent restrictions on elective surgery due to coronavirus response planning.
Gold is likely to thrive as governments try to cushion the negative economic impact of the outbreak, Fenton said. The fund is also long mining services firms and short bulk commodity producers. Companies like Seven Group Holdings Ltd. and NRW Holdings Ltd. are less exposed to downturns in commodity prices, and benefit when prices rally, he said.
Within financials, the fund is overweight insurers given their defensive nature. It has an underweight position on banks given risks around bad debts and net-interest margin pressures from rate cuts, Fenton said.
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