OC Funds Management was the one of the few asset managers last year to hold market-leading stocks such as Redbubble and Kogan.
Last week, Money Management explored how certain e-commerce stocks had been among the fastest risers in 2020. This included stocks such as Redbubble, which rose 388%, and Temple & Webster, which saw gains of 306%.
Redbubble was held in the top five weightings of both the OC Premium Small Companies and OC Dynamic Equity fund. The two funds also held a smaller weighting to Kogan, which rose 155% during 2020, but the firm said it was reducing its exposure to this in light of the recent growth.
The funds also held technology stock NextDC, which had risen 85%, and the team were similarly reducing the exposure to this stock.
In its November update, the firm said: “We have been reducing our exposure to perceived COVID-19 beneficiaries such as Kogan and NextDC which had served us well in the preceding six months, but were likely to face near-term headwinds in the event of a rotation toward more cyclical stocks, which would likely come from successful vaccine trials.
“While both companies have long-term structural tailwinds that we expect will continue to drive growth in the coming years, we sought to get ahead of the herd who were likely to follow suit using perceived COVID-19 beneficiaries as a funding mechanism for more cyclical or value-style companies.”
According to FE Analytics, the OC Premium Small Companies fund rose 9% over one year to 30 November, 2020, while the Dynamic Equity fund rose 13.2% over the same period.
Another profitable decision for the two funds had been taking exposure to Helloworld Travel and Flight Centre, two stocks which were severely hurt at the start of the pandemic due to the travel restrictions and border closures.
While the two stocks still ended the year in negative territory with losses of 46% and 60% respectively during 2020, the stocks rose from November on the back of the successful vaccine trials. Flight Centre rose 39% while Helloworld Travel rose 50%.
“Although ‘normal’ travel conditions are still some way off, both companies are quality operators who will eventually bounce back, whilst many of their less well-capitalised competitors will either go out of business or move forward with significantly scaled back operations,” the firm said.
“In the case of Helloworld, we have reduced our position into the recent share price strength. The journey for both firms back to solid profitability is still a long way off and somewhat uncertain with the structure of the travel industry likely to change materially in the coming years.
“We will therefore continue to keep a close eye on the valuation of both stocks and trim or exit them should their share prices get ahead of our assessed value.”
