Stagflation fears and the end of easy money have already resulted in the de-rating of many high-flying stocks but it is likely there is still further to go which should favour value investors, says Dougal Maple-Brown, Head of Australian Value Equities at Maple-Brown Abbott.
“Valuations had reached extreme highs by historical levels and even though they have fallen significantly, we believe there is still a fair bit more to go,” he says.
“We are currently structuring our portfolios to take advantage of the continuing narrowing in dispersions. We believe our value investing approach will position us to benefit from the emerging opportunities in the current market.”
Mr Maple-Brown said that, depending on which measure is used, the highest rated stocks were more than three standard deviations more expensive at the peak relative to their lowly rated peers, and many sectors are still above their historical levels.
“Furthermore, after spending such a long time so far above average, it would not be surprising if the situation flipped and the highly rated stocks traded below long-term averages for a period of time.
“The wide value dispersion in the Australian market suggest that our value style of investing will continue to deliver for our investors,” he said.
The Maple-Brown Abbott Australian Value Opportunities Fund, which was launched last year, has performed strongly in the past 12 months and has also received a Recommended rating in its first review by Zenith Investment Partners.
In its report, Zenith said:
“Zenith believes that the portfolio is managed in a consistent and effective manner, with Maple-Brown effectively leveraging the insights generated by MBA's experienced investment team.
“Despite the strategy's relatively short track record, Zenith has confidence in MBA's investment approach, which has consistently been applied across multiple investment cycles.”
The Fund is a benchmark unaware Australian share portfolio consisting of the Australian Value Equity team’s highest conviction opportunities. It targets an active share of more than 75% which tends to limit exposure to the top 20 stocks in the S&P/ASX 300 Index. The Fund will typically have 25-40 stocks across large, mid and small cap Australian companies.
“Performance for the Maple-Brown Abbott Australian Value Opportunity Fund has been strong in the 12 months to 30 June 2022, returning 5.8 per cent*, and we believe it is well positioned to benefit from the current environment,” Mr Maple-Brown said.
*The Maple-Brown Abbott Australian Value Opportunity Fund’s performance is based on the movement in net asset value per unit plus distributions and is before tax and after all fees and charges. Imputation credits are not included in the performance figures. Past performance is not a reliable indicator of future performance.
This material does not constitute investment advice or an investment recommendation of any kind and should not be relied upon as such. This information is general information only and it does not have regard to any investor’s investment objectives, financial situation or needs. Past performance is not a reliable indicator of future performance. The views and opinions contained herein are those of the author as at the date of publication and are subject to change due to market and other conditions.
The Zenith Investment Partners (ABN 27 103 132 672, AFS Licence 226872) (“Zenith”) rating (assigned June 2022) referred to in this piece is limited to “General Advice” (s766B Corporations Act 2001) for Wholesale clients only. This advice has been prepared without taking into account the objectives, financial situation or needs of any individual, including target markets of financial products, where applicable, and is subject to change at any time without prior notice. It is not a specific recommendation to purchase, sell or hold the relevant product(s). Investors should seek independent financial advice before making an investment decision and should consider the appropriateness of this advice in light of their own objectives, financial situation and needs. Investors should obtain a copy of, and consider the PDS or offer document before making any decision and refer to the full Zenith Product Assessment available on the Zenith website. Past performance is not an indication of future performance. Zenith usually charges the product issuer, fund manager or related party to conduct Product Assessments. Full details regarding Zenith’s methodology, ratings definitions and regulatory compliance are available on our Product Assessments and at Fund Research Regulatory Guidelines