Today is the Future Generation Investment Forum, where leading ASX fund managers name their top stock picks.
Future Generation refers to Future Generation Investment Company Ltd (ASX: FGX) and Future Generation Global Investment Co Ltd (ASX: FGG). These are two listed investment companies (LICs) that invest in fund managers who work for free, they don’t charge management fees or investment fees.
Instead, 1% of the NTA is donated to youth related charities. It’s a very good structure and cause.
The Forum brings together some of the fund managers for some investment tips, here are some of them:
Blake Henricks from Firetrail Investments chose Worleyparsons Limited (ASX: WOR), the Australian engineering business. He thinks it’s a good choice due to where we are in the resource cycle and it’s winning more business. Also, resource businesses will have to spend on capital expenditure just to maintain production. It has improved areas of its business like the balance sheet and costs in recent times. Mr Henricks has currently trading with a price/earnings ratio of around 12x.
Nick Griffin from Munro Partners chose Treasury Wine Estates Ltd (ASX: TWE), the owner of a portfolio of wine brands. China is powering its growth along and a rapidly growing middle class is increasing demand for quality Australian wine. Mr Griffin said it’s trading at 20x forward earnings and could grow earnings at 20% per annum for the next three years.
Geoff Wilson from Wilson Asset Management chose Blue Sky Alternatives Access Fund Ltd (ASX: BAF) and Myer Holdings Ltd (ASX: MYR). For Myer, Mr Wilson thinks the new management of John King will turn things around. For the Blue Sky LIC, he thinks the share price could return to the NTA if WAM are given the management of it.
Oscar Oberg from Wilson Asset Management chose Baby Bunting Group Ltd (ASX: BBN), the baby product retailer. He and the WAM team think Baby Bunting can win more of the $2.4 billion baby market. Quite a few competitors have closed in recent times, around 70 stores have left the market, including Babies R Us. He thinks it’s a defensive idea and can reach 80 stores faster than expected. Baby Bunting could grow private label sales, to up to 50% of sales, whilst also growing EBITDA margins from 6% to 10%. He thinks Baby bunting could grow earnings by 30%.
Lots of interesting picks here and all of them are good candidates to beat the ASX over the next 12 months. If I could only choose two choices it would be Treasury Wines and the Blue Sky LIC. They seem like well-priced, defensive options that could grow earnings at good rates over the next few years.