Ask A Fund Manager
The Motley Fool chats with fund managers so that you can get an insight into how the professionals think. In this edition, Tribeca Investment Partners Alpha Plus portfolio manager Jun Bei Liu reveals the conviction behind her 2 biggest ASX holdings.
Investment style
The Motley Fool: How would you describe your fund to a potential client?
Jun Bei Liu: I manage an Aussie equity long-short fund. We essentially invest all in Australia and our benchmark is S&P/ASX 200 Index (ASX: XJO), which means we try to outperform our benchmark year in, year out, regardless of whether it's an up market or down market.
What does a 'long-short fund' mean? We can take advantage of a company that we think the share price will go up, and also we can short stocks where we take advantage where we think the share price will go down. We take both sides, which does make us much more defensive on the way down when the market goes down.
When the market goes higher, it makes us just more active and finding more opportunities to buy. And our fund's currently sitting just over $1 billion dollars. I think that has grown probably 3-fold since last time we spoke.
MF: Last year I remember you were a big advocate of Afterpay Ltd (ASX: APT). Now that the Square Inc (NYSE: SQ) deal has been revealed, how do you feel about it? Have you sold off or are you holding onto the shares?
JBL: We took some profit but we still remain a shareholder of Afterpay.
The reason we took some profit is that though we believe it's a really great thing for Afterpay to move to the next level, it does reduce that buy now, pay later exposure. Because it's now part of a bigger group and Square does make quite a lot of money from Bitcoin and a lot of other things. That is quite different from what we used to invest in.
My view is that Afterpay needs to take this step to quickly move onto the next level. I think M&A will continue in the sector. I'm still not ruling out that there might be somebody else that will come in to bid for Afterpay — just simply because Afterpay is a first mover and is the market leader in this space. It's the innovator and also is the one with the most active user within its ecosystem.
Afterpay also is just at the cusp of monetising its substantial ecosystem now that they start charging for some of the display advertising and some of those redirection trades. There's a lot of opportunity within its business and this would really take it to the next level.
ASX shares that are perfect post-COVID reopening plays
MF: What are your two biggest holdings?
JBL: One of them is Sydney Airport Holdings Pty Ltd (ASX: SYD), believe it or not.
Our view of that is we were quite fortunate. We knew this is a premium asset, it's something that's difficult to come by. It's very unique in this sense that there are not many listed airports around the world. And then we knew just before the pandemic hit, Tasmania [Hobart] Airport was sold at a substantial premium to the listed price at the time.
We saw this as a very strong reopening trade, a high quality asset. It is very defensive and it's very, very quality skew. We would have this as one of the largest positions and then a bid came through, it was a really good price. We were just waiting to see what the next step is. And we continue to think that the bid will probably come back probably closer to $9 at the end.
If you look at the consortium itself, it's a very high quality consortium. They know the importance and the quality of this asset. It's so rare. I just think it's better to be patient at this point. But I do like to see the management engage once the bid comes back with a more realistic number.
[Ed's note: Sydney Airport received a new $8.75 per share bid on Monday, after this interview.]
IDP Education Ltd (ASX: IEL) is in my top 5 positions at the moment.
The universities together previously held over 40% of the company. They sold down some parts of their stake and then we took advantage of it. We have always liked this company. It's a very high quality company exposed to global student placements.
Obviously, it was hit very hard when the students couldn't travel, couldn't come in. Also, the amazing thing about this company is that it's not just students coming to Australia. It's going global. It has huge exposure across the UK, Canada, and many other countries. Essentially just leveraged to that global movement from students wanting to be educated in some of the top universities.
Short term earnings have been impacted because of the COVID and, ultimately, will move past this. Once we have all the vaccinations or vaccination passports, these students will return.
MF: IDP shares have already gone up 57% this year. But you feel like there's more growth left?
JBL: Yeah, absolutely. It has gone up a lot but, in terms of its earnings, it has yet to return. In the next 12 months, we do expect meaningful return coming for this company, as its earnings grow higher and its multiple continues to expand.
