Transcription of Finance News Network Interview with Antares High Growth Shares Fund Senior Investment Manager, Richard Dixon
Clive Tompkins: Hello Clive Tompkins reporting for the Finance News Network. Joining me from the Antares High Growth Shares Fund is Senior Investment Manager, Richard Dixon. Richard welcome back.
Richard Dixon: Thanks for having me back.
Clive Tompkins: First up, can you explain how you manage the Fund?
Richard Dixon: Well the High Growth Shares Fund is an Australian long short shares fund. It aims to significantly outperform the ASX 200 Accumulation Index over the longer term. Now in doing that, we try and employ three key strategies to try and broaden the opportunities set of the Fund. So firstly there’s short selling, there’s enhanced long positions or larger overweights with the funds from the shorts, and also active trading. So really to try and take advantage of opportunistic opportunities in the market.
Clive Tompkins: So how did the Fund perform over the September quarter?
Richard Dixon: The Fund had a solid performance again during the quarter; it managed a small positive return, a net return of 0.1 per cent. That was versus a broader market that fell during the period which was down around 0.6 per cent. And really the broader market weakness was driven by the banking sector in particular; there were increased regulatory capital concerns around the market. Plus the other big part of the market being resources, which were way down by a significant decline in both the iron ore price and the oil price, which both fell more than 15 per cent during the period.
Clive Tompkins: Which stocks added to performance and which ones detracted?
Richard Dixon: Our large overweight position in Amcor Limited (ASX:AMC) was the biggest contributor. The stock rallied around 10 per cent in the period and the market was very pleased with their full year result, which included a higher than expected dividend. And also the company outlaid some pretty healthy organic growth opportunities, that the company has going forward. Another positive contributor was the decline in the share price of ALQ (ALS Limited ASX:ALQ), so an underweight position that we held there. And they basically warned their profits were going to be down around 35 per cent on the PCP. So the stock fell very heavily during the quarter, which boosted our performance.
In terms of negative contributors, there were two stocks that were quite small in terms of contribution, but they did weigh a little bit on the Fund. So that was Transpacific Industries Group Limited (ASX:TPI) and also Crown Resorts Limited (ASX:CWN), and they were really weighed down by firstly, Transpacific a fleet recall and a soft result that they delivered. And secondly, Crown which really was weighed down by a weakness in Macau gaming revenue.
Clive Tompkins: What changes have you made to the portfolio since we spoke at the end of June?
Richard Dixon: We added Westfield Group (ASX:WDC) into the portfolio when it was trading under $7.30, we viewed that as an attractive entry point. We really liked their US dollar earnings, their offshore exposure and really their focus on global mega flagship shopping malls. That’s really their key focus going forward now, post the demerger of the domestically focused ScentreGroup (ASX: SCG) earlier this year.
Secondly, we increased our position in Aristocrat Leisure Limited (ASX:ALL) which is stock we’ve held for a while, but we participated in the equity raising when it took at $5.26 early in the quarter. And the stock, really that was to fund their acquisition of VGT Systems in the US, which is highly accretive to earnings for Aristocrat. And the stock has reacted positively to that; it’s been rerated up towards $6.00 and actually continued up towards about $6.50 into October. So that’s been a good performer.
We reduced our position in Woodside Petroleum Limited (ASX:WPL) and actually moved underweight the stock, at around $42.00. And really just a bit of concern around the production growth outlook in the next few years, particularly in light of the weakness that we’ve seen in the ore price, which I mentioned previously fell quite sharply during the period.
Clive Tompkins: Last time you were here Richard, you had just increased your stake in Echo Entertainment Group Limited (ASX:EGP). How’s the stock been performing?
Richard Dixon: Echo’s continued to track along pretty well; I think it rallied about six per cent again during the quarter and in a weak market. So the market really quite likes their defensive earnings profile and we’ve seen quite a turn in their earnings, both in New South Wales and their Queensland businesses. And really in a market that’s lacking top line and revenue growth across the broader share market, it’s really quite appealing for a number of fronts. So that stock’s continued to perform well and has risen again into this quarter, through October. Yes so still going to stick with that position and we’re pleased with how it’s tracking along.
Clive Tompkins: Reporting season is behind us again, were there any major surprises or themes to emerge?
Richard Dixon: Generallythe reporting season was a bit ahead of expectations. I think there was around 35 per cent of the ASX 200 beat expectations, whereas about 24 per cent missed those expectations. A lot of those had been lowered coming in, so it sets the bar a bit lower, but generally it was a bit ahead. We saw some quite consistent themes come out that we’ve seen in the last few reporting seasons. So again top line or revenue growth, seeming quite hard to come by for many companies and really looking to cost cutting to sort of get the growth.
And that was very evident across the market. Plus capital management and either increased dividends or buybacks or special dividends, which we saw from a few companies such as Telstra (ASX:TLS) and Wesfarmers (ASX:WES). And really that’s in a market that’s desperate for yield and income, so a lot of companies are skewing there or increasing apparent ratios as they can.
In terms of individual stocks, there were a few that beat expectations and some of the off-shore exposed companies, such as Amcorwhich I mentioned previously, CSL Limited (ASX:CSL) delivered ahead of expectations. Suncorp Group Limited (ASX:SUN) had a strong result as well and again, they saw high dividends.
On the negative side, there’s a few that disappointed. In particular James Hardie Industries (ASX:JHX) seemed to have some operational issues. And I guess, a weaker than expected recovery or stalling in the recovery of the US housing market. We also saw Navitas Limited (ASX:NVT) disappoint quite significantly. And JB Hi-Fi Limited (ASX:JBH) also had a soft result as some of their ipad sales in particular, were very sluggish into the period. So they were the key themes and surprises.
Clive Tompkins: Richard Dixon, thanks for the update.
(20min delay)
