Top-Performing Fund Isn’t Swayed by Travel, Stay-at-Home Trends

(Bloomberg) -- A high-performing equity fund manager isn’t buying into Covid-19 thematics like the so-called stay-at-home or reopening trades that are sensitive to virus developments.

Instead, Castle Point Funds Management Ltd.’s Richard Stubbs said he’s targeting companies with strong fundamentals that he expects can withstand such short-term market gyrations. Focusing on near-term earnings, election outcomes and other uncontrollable factors can often prove unproductive in times of volatility, said the Auckland-based fund manager, who invests in Australian and New Zealand shares.

News about a possible vaccine breakthrough earlier this week prompted a global shift among equity investors from fast-growing companies into parts of the market that have struggled with lockdowns and economic pain. That transition has since tempered on the realization that a return to normalcy is still a ways off.

“Trying to predict what sectors are going to do better than others in this period of extreme uncertainty is unlikely to be successful,” said Stubbs. His Castle Point Ranger Fund has returned about 22% this year, beating 92% of peers, according to data compiled by Bloomberg.

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Stubbs’s bets on some of his top holdings, such as Corporate Travel Management Ltd. and online marketplace Redbubble Ltd., have been driven by their long-term fundamentals. He also owns shares in engineering contractor Macmahon Holdings Ltd. and Auckland-based Fletcher Building Ltd.

Corporate Travel rallied on the vaccine news while Redbubble slumped. Stubbs didn’t make significant changes to his NZ$154.3 million ($105.9 million) fund, but used the rotation out of technology stocks to increase his position in Redbubble. The stock advanced 4.3% on Friday.

Equity derivatives along with cash and debt have helped protect the fund during unexpected downturns, Stubbs said. Derivatives make up about 1% of the fund, while cash and debt instruments account for almost 19%, according to the fund’s latest performance report.

The fund used to hold Afterpay Ltd., one of Asia-Pacific’s hottest technology shares this year. Stubbs offloaded the stock in February as the payment company’s market capitalization approached what he considered to be the firm’s potential value.

“We exited, in hindsight, obviously way too early,” he said. “But you just never know how exuberant the market can get.”

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