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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 unveils 2 best ASX shares to buy now and why she regrets selling Xero.
Hottest ASX shares
MF: What are the 2 best stock buys right now?
JBL: oOh!Media Ltd (ASX: OML) is one. This is a little bit smaller and speculative.
I think it's attractive because, yes, their share price had a bit of a rally post-result but, again, this is another reopening play that you would put into your portfolio. Outdoor advertising has been hit very, very hard. Especially for OML, they have big exposure to the airports. The billboards in the airports. And that has been very challenging for them, but now the company has very strong balance sheets and what we have seen is that the advertising has picked up significantly across TV, across radio, across pretty much every medium aside from outdoor.
Our view is that outdoor being a premium asset in the media, traditional media category, it will return in a sharp way. We actually have seen that, when domestic travel picked up before the latest lockdown. We saw those numbers pick up significantly. Yeah, to us, this company will rip as soon as all the travelling, even domestic travel, starts opening up. Its earnings are well placed to grow very strongly.
Another great thing is that the outdoor market has gone through quite a significant consolidation. OML now is the largest player in that space and it's trading at the cheapest, compared to its global peers. Just on that basis, we really think that it's not going to remain that cheap for long.
MF: And the second pick?
JBL: Let's go Ramsay Health Care Limited (ASX: RHC).
Ramsay is one that, again, I'm picking companies that have a reopening trait to them. Simply because their earnings will grow better than other companies that didn't get impacted. Ramsay, obviously private hospitals, and elective surgery at the moment is being suspended — it's having an earnings impact. However, remember, this is infrastructure-like, private hospital assets.
It used to trade at such a big premium to the market, at a premium to the other healthcare businesses. Now it trades just over 20 times [forward P/E ratio]. The rest of the healthcare sector trades at over 40.
And this is a business, structurally, things are looking better, not looking at the pandemic. Simply because if you look at the private health insurance membership, it started growing for the first time in decades. People are becoming more health-conscious because of the pandemic, so that should generally flow through to a very healthy chain of private hospital growth every year.
At the same time, private hospitals have gone through an efficiency program, trying to take out costs. So when revenue does return, we will see nice top-line growth and nice margin expansion in the next 12 to 18 months.
MF: I didn't realise private health take-up has increased this year. That's a reversal of the long-term trend.
JBL: Yeah. It's reversed. And they've been sustainably higher — every month we've seen very positive growth coming through. That's very positive for the industry.
Remember the old days when they were positive. They used to put on 5% to 7% [premium increases] per year, and then the private hospitals put up their prices 7% a year. It's very healthy for that whole ecosystem.
The ASX share for a comfortable night's sleep
MF: If the market closed tomorrow for 5 years, which stock would you want to hold?
JBL: Easy. Ramsay would be sitting in there. I think even CSL Limited (ASX: CSL) would be sitting in that case, as well, but CSL's expensive. Ramsay would be, absolutely.
Hospitals have still got to run no matter what happens. The pandemic is the only [event] that actually hurt the private hospitals. Otherwise, hospitals would be running year in, year out.
Looking back
MF: Is there a move that you regret from the past? For example, a missed opportunity or buying a stock at the wrong timing or price.
JBL: It happens all the time. I think I have a selective memory. I just normally blank them out.
When Xero Limited (ASX: XRO) was sold off in March, we bought. We stepped up and we bought a lot of Xero in March. I think it went to like $90-something dollars, and then it rallied back to like $130.
At $130, $140, I was like, "Nah, we're done. I need to take profit and put into other things".
And, of course, the share price keeps moving. I do regret, for a high quality company, I do regret not holding onto it.
But you know what? I probably put into something that will equally outperform meaningfully.
This is always the hardest thing for investors, knowing when to sell — because your behavioural biases come in.
