By James Thomson

Veteran investor David Paradice, whose eponymous funds management firm manages almost $16 billion, is a noted contraction investor. He says the best time to buy is when others are cautious – and there’s nothing better than finding a diamond among the stocks the market has turned its back on.

“I love it when there’s a bombed-out situation,” Paradice told an event held by the philanthropy-focused listed investment company operator Future Generation in Melbourne on Tuesday.

Paradice recalled how in 2007, when “everybody was throwing everything out with the bathwater” future stars such as Seek, and REA Group were heavily sold off.

History, he says, has repeated in the last year. “What’s happened in America especially, and here, is there’s a lot of tech companies that have been belted, and that’s created a lot of opportunities.”

The fundie refused to be drawn on any stocks he’s buying, but Chanticleer would note Paradice Investment Management’s Australian mid-cap fund added to its positions in both REA and Carsales in the March quarter, while its global equities strategy did well from Taiwanese tech heavyweights TSMC and Alchip Technologies during the same period.

Wilson Asset Management founder Geoff Wilson, who used to share an office with Paradice 25 years ago, is another noted contrarian, who repeats his mantra “buy $1 of asset for 80¢” so often that Chanticleer is sure he has it tattooed somewhere.


True to form, he gave a stock tip that recent history says is crazy brave: AMP.

The Wilson thesis is simple. First, you’re buying somewhere between $1.70 and $1.80 worth of assets for about $1.10. Second, Wilson believes chief executive Alexis George can deliver. And third, and perhaps most importantly, Wilson believes activist investors and a more broadly dissatisfied shareholder base are ready to hold the board to account if the company doesn’t start to turn around, as shown by the big protest vote at last month’s annual general meeting.

Paradice says his firm also has a position in AMP.

Matt Haput, portfolio manager for the WAM Leaders listed invested company, knows he’s taking a punt on what he described as one of the most hated stocks on the ASX, in arguably the most hated sector on the planet: office property landlord Dexus.

As my Chanticleer colleague, Anthony Macdonald, reported, the appearance by Dexus chief investment officer Ross Du Vernet at the Macquarie Australia Conference attracted a standing-room-only crowd and plenty of scepticism.

While Haupt acknowledged the widespread worries about office property valuations and debt levels, he argued most of this stems from concerns about the US sector, which is being hampered by an oversupply of property and a funding model that is heavily reliant on debt from the struggling US regional banks.


Dexus, Haupt says, is very different, with a solid balance sheet and a portfolio of A-grade portfolios that is trading at a 40 per cent discount to book value, despite a recent transaction of what Haupt called a marginal property coming in at a 15 per cent discount to book.

“It’s 60¢ for $1 of assets, so the margin of safety is there. We’ll probably ride through another three to six months of pain, potentially, but we think the share price is factoring in all that already.”

It’s a bet that’s not without risk; valuations across the Australian property sector have been held too high for too long, and will come down sharply in a process that will start just after the financial year ends on June 30.

Still, that crowd at the Macquarie conference says Haupt isn’t the only fundie tempted.

Licensed by Copyright Agency. You must not copy this work without permission.
Back to blog