By Alex Gluyas


A rotation out of the COVID-19 winners and into the laggards is under way this earnings season, as fund managers cash in their winnings and place bets on undervalued companies that they hope will be the next market leaders.

The strategy is backed by an analysis of US earnings conducted by Macquarie, which found that businesses that struggled during the pandemic last year posted better share price returns after announcing their results than those that excelled.

Local fund managers are putting this strategy into practice, parting ways with stocks that had their earnings propped up by the waves of stimulus provided last year.

“We’ll look to sell our winners and buy the losers this reporting season given it’s coming to the end of those one-off benefits seen during the pandemic last year,” said John Ayoub, portfolio manager at Wilson Asset Management.

“So any company that’s been a major beneficiary of lockdown, such as JB Hi-Fi, Endeavour, ResMed and Ansell, we’ll look to cycle out [of] a lot of those names and move towards the laggards where we see some green shoots coming through.”

Read more in the Australian Financial Review.