Eyes on Macau and US alternatives
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Majority of Australian retail investors have their financial assets onshore, when, in fact, they could be getting much better risk/return offerings overseas, PM Capital chairman and chief investment officer, Paul Moore said.
Moore said despite that, "When you find those genuine ideas, you'll be surprised how long a period it takes them to play out, and how long they do compound away".
He also warned that investors would not be successful if they bought "everything that other people own. You've got to be doing something different".
PM Capital was focusing on buying into two different two different markets of late: one was alternatives in the US, which, according to Moore, offered a great investment opportunity.
"From peak to trough the stocks fell down about 75 per cent. So it obviously catches your attention. The interesting thing is when we look at those businesses they are run by some very sharp people, and they're growing their market shares versus the tradition managers," Moore said.
As traditional managers tended to mimic the index, but charged active fees, investors were instead chasing passive or alternative investments, where managers genuinely invested capital, which was why the US alteratives were so attractive.
"You've got companies that are growing. They provide a very high upfront dividend yield because of a structure that allows them to pay up pre-tax earnings," he said.
US alternatives should pay high single digit dividends, plus growth, that should continue for the next three to five years.
The second area PM Capital was eyeing was Macau.
"Which might sound surprising but they had a huge cyclic downturn in gaming because of the crackdown on corruption. But what people probably were not aware of is the fact that, that market is evolving from advice and corruption to family entertainment over a long period of time," Moore said.
With the family entertainment and mass market gaming industries now underpinning earnings, and with stocks down 75-85 per cent from peak to trough, it was a "a pretty attractive entry point".
As their company valuations were heavily discounted and gaming revenue was increasing, it was a great source of future growth for the next three to five years he said.
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