By James Thomson
Bravery can take many forms. Running into a burning building, for example. Getting into a boxing ring with a heavyweight champion. Or even nominating AMP as one of your top stock picks.
Wilson Asset Management chairman Geoff Wilson has gone where so many others have feared to tread for the past five years, arguing the much-maligned wealth group is an example of buying $1 for 80¢.
The stock is trading at $1.12, but it has a net tangible asset of $1.35. Plus AMP is tipped to return somewhere between 50¢ and 60¢ when it completes the sale of its funds management business.
“So you’re buying at a 20 per cent discount now, and when they pay back half the money it’s what, a 30-plus per cent discount,” Wilson says.
The WAM founder provided the tip during the recent national roadshow for the Future Generation listed investment companies he helped start.
Future Generation runs an ASX-focused LIC and a global one, with a roster of top-notch fund managers – including Paradice Investment Management, Regal Funds Management, Magellan and of course WAM – providing their services for free, allowing the entities to donate 1 per cent of their assets to charity.
One of the perks for shareholders in the LICs is regular access to the roster of fund managers, who provided stock picks across the roadshow; we’ve collected these tips, which focus on the long term, below.
In addition to AMP, Wilson plumped for engineering giant Worley, which WAM believes is on track to beat market expectations at their full-year result for the first time in a long time. The company is trading at 16 times earnings and growing at 20 per cent per annum, Wilson says, but a profit beat should deliver a re-rating.
Regal Funds Management founder and chief investment officer Phil King likes demerger candidate Incitec Pivot, which is benefiting from dual commodity tailwinds.
“I think the outlook for both the fertiliser division, which is benefiting from a huge increase in fertiliser prices, plus the explosives division, which is benefiting from rising commodity prices, is very, very positive.”
But King also says the research on demergers in Australia shows they generally produce good results for shareholders and Regal is confident that will be the case with Incitec Pivot.
“I think there’s better capital allocation [with a demerger]. It means that management’s a lot more focused. And in this environment we think … both parts of the company are quite bite sized for private equity.”
Tribeca Investment Partners portfolio manager Jun Bei Liu provided several stock picks during the Future Generation events, including Treasury Wine Estates, accounting software group Xero and perennial market darling CSL.
“I’m quite big on healthcare simply because I feel quality companies are being sold off,” she says.
Her other pick in the sector is hearing implant giant Cochlear. While the company suffered during the pandemic as health priorities changed around the world, Lei believes the group can bounce back hard.
“Now with the world reopening, earnings are looking incredibly strong. Regardless of whether there’s a recession, whatever happens around the world, it’s going to be a bottom-drawer type of stock.”
Several other picks from Future Generation fundies were focused on the health sector. Oscar Oberg from WAM nominated allied health provider Healthia as a stock to watch, while Antipodes’s fund manager Jacob Mitchell likes New York-listed pharmaceuticals giant Merck & Co and German conglomerate Siemens, which has a large healthcare division.
With commodities booming, it was no surprise that several managers nominated resources and energy stocks as their top picks. Paradice’s Tom Richardson likes rare earths group Lynas and Origin Energy, while Phil King also likes West Australian gold explorer DeGrey Mining.
Lanyon Asset Management portfolio manager David Prescott is also looking towards the mining sector with Austin Engineering, which supplies customised equipment to large global miners and contractors.
Stock selections from Centennial Asset Management duo Matthew Kidman and Gary Joffe covered a fair bit of sectoral ground. Kidman is looking towards Michael Hill Jewellers and residential property developer Cedar Woods Properties, while Joffee likes theme park operator Ardent Leisure and funeral home operator InvoCare.
Firetrail’s Kyle Macintyre is looking Stateside for his picks, with two ASX-listed companies that are headquartered in the US: gaming machine manufacturer Aristocrat Leisure and building products giant James Hardie Industries.