Top-Performing Australian Fund Bets on Domestic Economy Revival
Top-Performing Australian Fund Bets on Domestic Economy Revival
(Bloomberg) --
An Australian equities fund manager is wagering that stocks linked to the domestic economy will become the biggest winners as coronavirus measures ease.
Firms tied to the country’s economic health should rebound quickly as restrictions unwind and consumption increases, said Jelena Stevanovic, portfolio manager at Platypus Asset Management Ltd. Australia is in a strong position, even as it heads toward its first recession in almost three decades, she added. The International Monetary Fund on Wednesday improved its forecast for Australia, while downgrading the outlook for the world economy.
“Australia seems to be coming out of this crisis better than a lot of other geographies around the world,” said Stevanovic, whose Platypus Australian Equities Fund has beaten 95% of peers over the last three years, according to Bloomberg-compiled data. As activity picks back up, “exposure to the domestic economy is likely to pay off.”
Electronics retailer JB Hi-Fi Ltd. and logistics firm Qube Holdings Ltd. are among companies that have been resilient during months of shutdowns and are set to be leaders amid reopenings, Stevanovic said. JB Hi-Fi’s sales soared on increased demand for work-from-home equipment, while Qube has maintained operations during the pandemic and earlier this week won a deal with supermarket operator Woolworths Ltd. for two distribution center leases.
Still, a spate of Covid-19 infections in Victoria state has raised concerns that a resurgence could trigger another economic hibernation. Australia’s second-most populous state recorded 30 new coronavirus cases on Friday and is ramping up testing across hotspots in Melbourne’s northern and eastern suburbs. A second wave would be a “clear negative” for stocks if it hampered a return to normal activity, Stevanovic said.
The Platypus fund bought shares in several capital raisings over the last few months, including those by private hospital operator Ramsay Health Care Ltd., malt producer United Malt Group Ltd. and hearing aid maker Cochlear Ltd.
More than 30 firms on Australia’s benchmark index have sought to raise about A$19 billion ($13 billion) from institutional investors since late March amid government-imposed lockdowns to slow the spread of Covid-19, according to data compiled by Bloomberg.
Stevanovic also dumped oil and gas producer Santos Ltd. as lockdowns took hold and a price war over crude roiled markets. The fund currently doesn’t hold any energy stocks.
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