Transcription of Finance News Network Interview with Ausbil Active Equity Fund, CEO and Head of Equities, Paul Xiridis
Lelde Smits: Hello I’m Lelde Smits for the Finance News Network and joining me from Ausbil to discuss its Ausbil Active Equity Fund, is its CEO and Head of Equities, Paul Xiridis. Paul welcome back to FNN.
Paul Xiridis: Glad to be here.
Lelde Smits: After a strong start to the year the benchmark index has now given up the year’s gains. Where did you note strength over the year?
Paul Xiridis: It was a very interesting year this year, so far, I mean we’ve seen a fair bit of volatility. Certainly the beginning of this year, the focus was on growth. And then later in the year the focus was on non-growth, in the sense that we were seeing some question marks about growth, particularly coming out of Europe and also out of China. So it’s been a bit of a rocky road as far as that’s concerned. And then the focus was really on yield and that’s where we’ve seen very, very strong performance in those sectors, which were high yielding.
So where we were positioned is that we had an extra both during the course of the year. I mean some of the stocks and sectors that we’re exposed to, such as healthcare, certainly performed very well. Energy has been an interesting one this year clearly, but we’ve been underweight the energy sector. So we’ve added a bit of value there, certainly, but it’s been a bit more on the stock specific that we’ve really added a lot of value. And they’ve been a lot of companies which have been more US facing, rather than domestically orientated. And certainly they’ve been the real winners for us.
The sectors which also performed poorly this year was the sector which was in the past, have been a market darling, such as food retailing. And there’s been a real question mark about the competitive pressures that are likely to occur in this country, and we have seen a fairly hefty selloff over recent times. Materials have been another which has suffered, clearly with commodity prices being fairly volatile. You know we are of the view that that’s probably being a little bit overdone right now. But certainly we see some pickup next year.
Lelde Smits: Which were your standout performers over the year?
Paul Xiridis: We had a real strong focus at the beginning of the year to identify some stocks, which we think were going to be the clear winners for this year. And certainly two of those, the two new entrants that we put in are ResMed Incorporated (ASX:RMD) and Aristocrat Leisure Limited (ASX:ALL), proved to be correct in the sense that earnings were recovering quite strongly. And also both those stocks have very strong international earning streams as well. So they’ve been real standouts for us.
A long standing one which we’ve held for some time has been Lend Lease Group (ASX:LLC). I mean Lend Lease has been a stock that we’ve held for a number of years. And certainly I think the penny’s dropped as far as their earnings are concerned, for this year and also for the next few years. And that’s proven to be a very good performer for us as well. But on the other side, clearly there has been some lot of volatility in resource names, and we have been impacted as far as that’s concerned. But all in all, we’ve done pretty well.
Lelde Smits: The IPO market had a particularly good year capped off with the recent debut of Medibank Private Limited (ASX:MPL). Does Ausbil own Medibank Private and what are your expectations for trading over the coming year?
Paul Xiridis: That was a company that we did participate in the IPO. We looked at it in a fair bit of detail and certainly it is a pretty full price, but the opportunities we think over the next little while, are pretty promising. One of the areas that I think is really exciting from our point of view is the amount of data capture, that this group will have. And also they’ll use that to their advantage going forward. So it’s going to be interesting to see how they negotiate with the private health funds, sorry with the private health operators, going forward. But all in all, we think there’re some pretty exciting and pretty good prospects for this group, over the longer term.
Lelde Smits: The Fund really benefitted from M&A activity over the year, including positions with David Jones Limited (ASX:DJS) and Aurora Oil & Gas Limited (ASX:AUT). Which sectors or stocks have you identified as potential M&A targets in the following year?
Paul Xiridis: It’s always interesting; I mean we don’t set out to buy stocks or sectors which are likely to be targeted for takeover. And certainly if that happens it’s just a windfall for us. But certainly I think that where there may be some activity, is some of the weak sectors. So I think there may be some consolidation in the mining services end, because they really are struggling at this point. There could be some consolidation in the resources end as well; again they’ve been under a fair bit of pressure. But there’re no real obvious standouts to us, in the sense of where there may be some corporate activity. But certainly as we said, we just look for stocks and try to find the best value. And if they get taken out, well that’s just a bit of an added bonus for us.
Lelde Smits: Finally Paul, what themes do you see emerging over the year ahead and how will you be positioning the Fund to take advantage of them?
Paul Xiridis: We’re pretty excited about 2015 I must say, a lot of things have come together. In the sense if I sat here 12/15 months ago, and said I think we’re going to see global growth close to 4 per cent, interest rates unchanged and the oil price down to where it is today, you would have thought that I would be quite crazy. But in fact that’s where we are today.
So I think the next 12 months, we’re going to see the benefits of all that, in the sense of growth is recovering, particularly the US. And we certainly have a really good exposure towards those US dollar earnings. We do believe that the oil price coming down is going to prove to be beneficial to global growth. No-one’s really focusing on that at this point, but we think that will be the focus next year.
We also do believe that because of that, the earnings could actually surprise in some areas. And what I mean by that, if the cost of doing business is going to be a lot less and even for the household, running the household is going to be a lot less. So I think there could be some added opportunities, I think in the sense of spending and activity next year. So we’re pretty excited about the prospect. And this is in an environment where we think interest rates still are going to remain fairly low, because inflation is still very much under control.
Lelde Smits: Paul Xiridis, thank you for the update from Ausbil.
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