Allan Gray Australia Equity has been ranked as the third best performing Australian equity manager, producing 17.27 per cent, according to Money Management’s Investment Centre (MMIC).
It was also ranked as the 14th best managed fund in Australia this year and outperformed the index over three, five and 10 years, according to the MMIC.
Allan Gray portfolio manager, Dan Abeshouse, said the fund returned 7.5 per cent per annum over 10 years (net of fees) compared to the index (ASX 300 Accumulation index) return of 4.7 per cent.
Great success over the last 12 months stemmed from their long-term positions in wholesale grocer Metcash, Newcrest Mining, which mined gold and Pacific Brands which owned Sheridan and was also taken over by a US company, he said.
“A year ago those were companies that were particularly out of favour and depressed. Metcash was closer to $1.00 and now it’s around $1.80. Newcrest more than doubled to $24 and Pacific Brands was only around $0.40 per share now and it’s been taken over now and at $1.15,” he said.
“It goes to show you that with patience, being able to look beyond the six to 12 month horizon, you might actually end up doing well. And that’s what we continue to see in terms of the way we look at our portfolio.”
The fund manager was deemed long-term, fundamental and contrarian, and went against the grain of investor sentiment, he said.
He tipped that their largest holdings in energy, which made up about 15 per cent of the portfolio, and alumina and gold, which took up about 10 per cent each, would generate strong long-term returns.
Their liquid natural gas holdings in Woodside petroleum and Origin energy were in another depressed part of the market, despite their strong business fundamentals, he said.
“That tends to be our sweet spot. They have some very long-term reserves, management teams that are very focused on capital allocation and making sure their balancer sheets are robust,” Abseshouse said.
In addition, their Alumina producer holdings, in Alumina and Alco were trading at historical lows, despite attractive book values, low costs and long reserves, he added.
