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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, Shaw and Partners portfolio manager James Gerrish tips a couple of quality businesses that have been oversold and will roar back.
Hottest ASX shares
The Motley Fool: What are the 2 best stock buys right now?
James Gerrish: Goodman Group (ASX: GMG) and Hub24 Ltd (ASX: HUB).
It's all about buying quality that's been sold off. So if you think the year that we're likely to have is going to be dictated by big change, change is entrenched from a sector point of view, but [dictated by] quality companies coming in and out of vogue.
Goodman's down 16% from its highs. That's a really high quality company that's growing really strongly. They've got caught up in the sell-off of high valuation stocks.
And Hub24 is similar. It's fallen 30%. They just came out with their best quarterly trading update in a long time. The growth there is accelerating.
But I think the important thing is they're real businesses. There's a lot of high-value type stocks that are promising a lot, but are yet to deliver. These are stocks that have delivered, and the trend of delivery is there and ingrained. I think this year you want to be in things that have got some defensive qualities, but also, you want to be high quality.
This is why this year could be such a good year. You will get opportunities in those high quality companies.
The market has ultimately become too bearish bonds — bullish bond yields — and if we're correct here, these high quality growth-oriented stocks will recover strongly in the near term. Importantly, however, that is not a long term view. It's a more short to medium term stance in response to the question of what to buy right here.
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.
JG: There are always lots of regrets in the market, I should have done this, I should have done that. It's important to frame these as learnings — and over the years you tend to have fewer of these pop up if you learn from each one.
The most recent 'learning' has been around how quickly and aggressively hot money can come out of technology. While we were correct on the macro side in 2021 and into the start of 2022 around interest rates, we should have been more aggressive in culling our exposure as a consequence of that view. In our International Equities Portfolio, our position in Trade Desk Inc (NASDAQ: TTD) springs to mind here.
We called the macro pretty reasonably well, around interest rates and to remain underweight technology in that environment. I regret not being more aggressive in reducing some of our holdings in that space… Where we've still got painful holdings there, we could have done better in terms of exiting them based on our macro view.
