3 stock pickers on Morningstar’s watch list
Morningstar has uncovered three new equity funds as part of its list of promising investment strategies that are worthy of investor attention.
Mentioned: Chester High Conviction (41747), Ausbil Australian SmallCap (43751), GMO Climate Change Trust (44276), The Lottery Corp Ltd (TLC), AUB Group Ltd (AUB), Lovisa Holdings Ltd (LOV), QBE Insurance Group Ltd (QBE), Steadfast Group Ltd (SDF), Telstra Group Ltd (TLS)
Morningstar’s manager research analysts are always on the alert for strategies from fund managers that could further help investors. The team’s Prospects List of fund managers helps our analysts keep an eye on whether these fund managers could come under Morningstar’s research coverage.
To make the list, these fund managers must have a unique strategy or process, or a new strategy run by a manager with a long track record elsewhere, for example someone who has just started their own boutique firm. Another criterion our analysts look for in a manager is an under-the-radar strategy that has an established record but is not well known.
Every six months the list is updated. Most recently, Morningstar added three fund managers to the list including:
Let’s take a closer look at the strategies from these stock pickers.
The small cap strategy run by Ausbil’s portfolio managers Arden Jennings and Andrew Peros only began in April 2020 but according to Morningstar analyst Callan Maclennan, it has “strong beginnings over its relatively short history”. Indeed, since inception, the fund has delivered a 20.99 per cent return compared with the benchmark of 5.13 per cent. The team also have the backing of Ausbil’s highly experienced senior investors. The portfolio includes around 40 stocks with a bias to small caps among a modest exposure to micro-caps. The stock pickers are also style agnostic, open to investing in value and growth stocks. Top 10 holdings include AUB Group (ASX:AUB), jewellery designer Lovisa Holdings (ASX:LOV) and the Steadfast Group (ASX:SDF).
The team behind the Chester High Conviction fund are Melbourne-based and include lead portfolio manager Rob Tucker and former SG Hiscock colleagues Anthony Kavanagh and Luke Howard. They seek out high quality, cash generating businesses that are unloved and underappreciated by the market. This means they can invest in businesses at a good price. Top holdings include QBE Insurance (ASX:QBE), Telstra (ASX:TLS) and the The Lottery Corp (ASX:TLC) . The portfolio also includes both value and growth stocks. “While the aim is to maximise capital growth, drawdown protection is also sought through the portfolio’s defensive sleeve that comprises gold stocks and residual cash,” Maclennan says.
The investment team behind the GMO Climate Change Trust focus on investing in businesses across the globe that are well-positioned to benefit—either directly or indirectly—from the efforts to mitigate the long-term impacts of global climate change. Companies in its portfolio include solar energy generator Sunrun, Clean Energy Fuels and agri-food business Darling Ingredients. These businesses are all based in the US. “GMO's investment culture is strong, and stability on the business and personnel fronts boosts confidence in its staying power,” Maclennan says. “As an investment firm, the willingness to stand out and its transparency with investors are core to its long-term appeal.”
Morningstar fund analysts cover more than 450 flagship managed funds, including unlisted managed funds, listed investment companies and exchange-traded funds. Funds are evaluated on a five-pillar framework: Process, People, Parent, Performance, and Price.