By Alex Gluyas
Which stocks have you changed up your position in, and why?
We have recently increased our positions in Crown Resorts and Ramsay Health Care. This was due to price weakness in Crown Resorts, and the improving outlook for Ramsay Health Care. With the worst of coronavirus behind us, Ramsay Health Care should start to have a multiyear re-rate story.
We have taken some profits from Computershare after anticipating short-end rate movements. As this has largely played out, we remain positive on the company name and will continue to hold a position.
We have sold our position in Sydney Airport because the stock has been trading close to the takeover bid price announced by Sydney Aviation Alliance and we think we have better opportunities to make money elsewhere.
Which stock in the WAM Leaders portfolio are you most bullish on?
South32, the company spun out of BHP, receiving the assets that were deemed unattractive. We think management have done an excellent job reshaping this business and instating financial discipline along the journey since the demerger.
We think South32 will re-rate over the next few years as the portfolio moves towards more attractive commodities and gains more interest from investors globally. The company’s recent move into copper is also a very attractive opportunity that will help the transition of the investor base.
Which deal do you think presents the best value? And which specific stocks do you think are attractive M&A targets?
I think the Santos and Oil Search merger is a deal that makes so much sense. Santos CEO Kevin Gallagher is one of the best in the business and we think he is the right person to extract maximum value out of these businesses. The combined businesses will produce synergies, including corporate costs, while the flexibility around its portfolio of assets will provide the best outcome for all shareholders. We are looking forward to seeing how the merger will play out over the next 12 months.
One stock that stands out as a sitting duck is Crown. With the royal commission into the company now concluded, Crown is severely undervalued. Calculating just the physical assets of the business and assuming its same use will get you pretty close to the current share price.
If you believe there is value in Crown as a casino operator in three states, you can start to build up significant upside to the current valuation. With two takeover bids for the company pre-royal commission and one still on the register, the company will be part of a transaction before too long.
As of your September update, WAM Leaders held all of the big four banks, plus Macquarie. Is this a signal that you think their best returns are ahead of them?
It would be hard for the banks to repeat the performance they had last year, so the best returns are largely behind them. We remain positive on the sector, with the Australian economy anticipated to perform well over the next 12 months as the suppression of low interest rates is expected to come to an end. The banks’ balance sheets remain sustainable and the sector’s excess liquidity will see banks through the next 12 months. We expect capital management will be an ongoing dynamic for these companies.
As far as upside goes, it is hard to go past National Australia Bank. Over the past few years, NAB has worked on its costs and streamlining their business, so we should see the benefits of this come through over the next few years.
Do BHP, Rio and FMG look cheap to you at current levels?
The iron ore stocks are really interesting. It may be a bit early to take a decent position in iron ore stocks. However, their value looks good if you believe China will begin loosening its credit controls.
China commenced a self-induced slowdown on property as part of their five-year plan to tackle some of the excesses and risk-taking among developers. Traditionally, the first two years of Chinese strategic plans are the most painful, but things will get easier.
The energy crisis within China as well as the rise in the producer price index (PPI) has complicated the matter and will need to be controlled before we get any stimulus out of China.
What are your passions outside of work?
Apart from family, I’ve always had a love for cars. I bought my first car when I was 13 for $200. I then took it apart with the intention to rebuild it, but had no cash and no skills. My mum ended up getting it towed away and we got $50 for scrap value.
My love for cars continued and eventually I got my dream car, a 1968 Holden HK Monaro. I ended up putting a new motor in the car and enjoyed that for a while. During high school, I would spend my holidays fixing up cars with my best mate; we would either fix it and keep the cars or sometimes sell them.
I would race my Valiant at the Adelaide drag racing track. I would take it to the street drag meets and run it down the quarter mile. I have now moved away from drag racing to track racing. There are a group of us that go out to track days at Eastern Creek [in Sydney’s west] to run around the track. It’s a great outlet and a test of skills and nerves.
What sort of fitness do you, or have you, enjoyed undertaking outside of work?
I love going to the gym and have been doing that on and off since I was 15. I used to train with friends that were into bodybuilding and this got me really interested in training.
In recent years, I discovered Olympic weightlifting, which is a whole different ballgame. Olympic lifting exposes so many weaknesses and, I think, requires a lot more discipline and thought process.
I remember trying to do some of the moves from the Olympic weightlifting for the first time and was unable to even get close. It was actually embarrassing trying, for example, the overhead squat. I fell apart halfway down and dropped the bar.
What’s your favourite restaurant in Sydney? And what’s your go-to food and beverage order?
Post lockdowns, any restaurant is my favourite at the moment. I am at my happiest with a pizza and a pale ale in my hand.
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