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Positioning the portfolio for the opportunities

Australia Value Equity strategy

23 July 2018

Positioning the portfolio for the opportunities

Key points

Our current portfolio demonstrates our multi-lensed investment approach and outlook.
We are overweight stocks in consumer, non-bank financials and energy sectors, and holding higher-than-average Quality exposures.

FULL REPORT (PDF) | ARTICLE SUMMARY

Our Value Equity portfolios are currently overweight stocks in consumer, non-bank financials and energy sectors, and holding higher-than-average Quality exposures.

Below, we highlight some of the key holdings^* in the portfolio, all of which demonstrate our multi-lensed investment approach and outlook.

Jim Power - Research Analyst

JB Hi-Fi

JB Hi-Fi is a world-leading retailer with high sales productivity and low cost-of-doingbusiness ratios.

The retailer, which has produced above-market EPS growth, while improving its online and delivery options, is well-positioned against the much-feared arrival of Amazon in Australia.

Woolworths

For the consumer staples sector, there is a saying that should ring true for Woolworths: ‘when the elephants are fighting, the ants die first’. It will be the small independents that will suffer in any price wars, potentially with Amazon.

But the interesting point from discussions with Woolworths’ management is the plans for big data. It is now one of the biggest data owners in the country, with transaction data on baskets, line items and economic activity allowing the company to track customer behaviour and target individual promotions. Just 18 months ago it did not employ any big data software engineers employed, but now has a big team.

Matt Davison - Senior Research Analyst

Financial services company IOOF has demonstrated itself as a preferred home for financial planners and has significant opportunities from platform optimisation including the integration synergies of the ANZ Wealth business. We think there will continue to be growing demand for financial advice and IOOF continues to prove its worth as an efficient, cash-generative company exposed to the trend.

Michael Slack - Head of Research

Energy stocks have underperformed the market for 10 years, impacted by deflationary forces, lower bond yields, falling oil prices, and the perception that there is a glut of liquified natural gas (LNG).

With oil prices now regaining ground towards incentive cost, as well as strong demand growth and a likely shortage of LNG beyond 2020, energy companies such as Woodside are well-positioned with new projects to deliver growth into this demand window.

* The information provided should not be considered a recommendation to purchase or sell any particular security. It should not be assumed that any of the security transactions discussed here were, or will prove to be, profitable."