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Transcription of Finance News Network Interview with Antares Elite Opportunities Fund Portfolio Manager, Nick Pashias
Lelde Smits: Hello I’m Lelde Smits for the Finance News Network and joining me from the Antares Elite Opportunities Fund is Portfolio Manager, Nick Pashias. Nick welcome to FNN.
Nick Pashias: Thank you, good to be back.
Lelde Smits: The Fund’s idea of high conviction is a portfolio with less than 30 stocks. Why does this approach work for you and what are the benefits of your strategy?
Nick Pashias: As you mentioned we only own up to 30 companies, generally a little bit less than that. These are companies that we’ve researched, we’ve done a lot of in-depth analysis and they’re the ones we’re most comfortable owning. And because it’s a concentrated portfolio, we actually own a significant amount of the portfolio in each of the companies. So it’s enough to make a difference to the return of the overall portfolio. There’s no small positons, there are just filler stocks. So we feel that’s the best way to grow long term value.
Lelde Smits: Can you explain how you select stocks with a contrarian approach?
Nick Pashias: As you mentioned, we’re contrarian and that’s a difficult place to be as a human being, because generally we like to conform and go with the herd. But we find that we best make money when we go against the herd. So we stand out on our own, we do our research like I mentioned earlier and generally we find that that’s where the value is. When we go into a company that’s unloved by the market, the share price has fallen for what we think is a short term reason. And based on our research, we feel that there’s value to be had in those companies, over the long term. And that’s generally where we make most of our money.
Lelde Smits: So what is your benchmark and how has the Fund performed against it, over the September quarter and past year?
Nick Pashias: The benchmark is the ASX 200 Accumulation Index, which returned -0.6 per cent for the quarter. The Elite Opportunities Fund actually returned +0.6 for the quarter, on a gross basis. Over the year it was a little bit behind the benchmark, which did 5.9 per cent, the Fund did 5.7 per cent. But over the September quarter, we had a number of stocks that went well that some of those contrarian positions that I mentioned, actually started to turn around. And the market actually started buying some of those companies.
So Aristocrat Leisure Limited (ASX:ALL), Echo Entertainment Group Limited (ASX:EGP), Qantas Airways Limited (ASX:QAN). Some of these companies that were really unloved not so long ago, are starting to be embraced by the market and that’s helped our performance.
Lelde Smits: Looking closer at your performance, over the March quarter AMP Limited (ASX:AMP) supported your performance. What were the standout stocks in the June and September quarters?
Nick Pashias: The September quarter, we didn’t own any Westpac Banking Corp (ASX:WBC) in the portfolio. Like I mentioned earlier, we only buy the companies that we like and even though Westpac is a large part of the index, we didn’t own any of it in the Fund. And over the quarter, Westpac actually underperformed the benchmark because of regulatory risks, the view from some participants that the banks would need to raise more capital.
So the stock fell and we didn’t own it, so we benefitted. Towards the very end of the quarter and into this quarter, we’ve started buying Westpac because we think it’s fallen to a level that is now a little more attractive. But that was one of the main contributors.
Lelde Smits: When we last spoke, following the March quarter you had sold out of Fortescue Metals Group Limited (ASX:FMG) and said the banks were overshot. What is your current exposure to the miners and banks?
Nick Pashias: We still haven’t bought back any Fortescue, despite the stock falling $2.00 since we sold it. I’ve just come back from China and we remain cautious on the iron ore space. We see a lot of supply coming on, continuing to come on and the demand hasn’t really turned around. And we don’t think it will anytime soon, so we’re happy to stay out of Fortescue.
In terms of the banks, we’ve started to buy back into some of them for different reasons. So Westpac as I mentioned earlier, has fallen to a level that is now more appealing. Whereas NAB (National Australia Bank Limited ASX:NAB) we’ve built an overweight position, really as a result of management and management change.
Lelde Smits: Finally Nick, which sectors or stocks are looking attractive to you now?
Nick Pashias: One stock that we’ve introduced into the portfolio this quarter, the December quarter, is Crown Resorts Limited (ASX:CWN). So Crown operates gaming assets around the region. In Australia they have one in Melbourne and Perth, but they also have a large business in Macau in China. The Australian businesses are travelling well; the market has concerns about the Asian assets.
In Macau they’ve introduced a smoking ban which has caused revenue to drop. They also have the austerity measures within China, which are influencing gambling spend in the area. So things are not travelling well. And that’s why the share price has fallen from around $US18.00 to $US13.50, where we’ve started to initiate a position. So that’s a contrarian position that we’ve just started to buy.
Lelde Smits: Nick Pashias, thank you for the update from Antares Elite Opportunities Fund.
Nick Pashias: Thank you, pleasure.
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