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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, Catapult Wealth portfolio manager Tim Haselum tells investors to not be anxious about timing.
Investment style
The Motley Fool: How would you describe your services to a potential client?
Tim Haselum: My name's Tim Haselum. I'm the portfolio manager here at Catapult Wealth. Essentially what I do is I run the model portfolios and the investment recommendations across five portfolios.
My day-to-day really is just being the filter between research providers and market noise, and sticking to our fundamental investment philosophy and rolling it out to the client.
Situations like now, people are panicking but the plan should have been agreed to and aligned before this. The whole "Should I buy high, sell low?" — that conversation had to have happened before and now it's just sticking to the guns and making sure we're true to the values in terms of what we provide to the client.
MF: With the model portfolio, what sort of investment philosophy do you take?
TH: Our philosophy, essentially the short version, is to be nimble.
You think about what we've seen in the last 10 years, well, value has underperformed growth and I'd say part of the reason, besides low interest rates and [the] tech boom, would be a lot of these companies have been propped up by governments, haven't been allowed to exit out the index. The value index is very artificial.
We've now seen an interest rate rise, and growth has been actually annihilated, right? The ASX is absolutely destroyed.
So I think the lesson we've learned is you need to have flexibility. Not quite style-neutral, but flexibility. But in our core, in saying that, our main mantras are quality, value buyers, and momentum, and so to us when we talk about quality, we're talking about filtering out really high leveraged companies, low profitability, very volatile, unpredictable earnings, and then having a slight bias for value. That includes the growth space.
We try [to] look at tech companies that have earnings, and look like they have the momentum to grow the earnings. After we take those two filters, it's a pure momentum play in terms of the timing of in and out. We want timing for buys and sells. We don't want to buy on a downtrend, so you do miss, you might miss the bottom, but we want to see the positive moods before we jump in, so we avoid some of these value traps.
Missing the very bottom is okay, as long as you don't just get stuck in an AMP Ltd (ASX: AMP) or something like that where it looks like it's not likely to jump back anytime soon.
We don't want quality companies that are expensive, and we don't want poor quality companies that are cheap. For us overall, it's strategic asset allocation first and foremost, and then style after that.
MF: Are you seeing anxiety among your clients at the moment?
TH: Our client base is quite experienced. But I would say a lot of clients are more itching [to buy]. They're like, "Oh look, we've got some cash. Should we jump in now? Should we jump in now?"
I think given that we've been through COVID and it was such a V-shaped recovery, I guess clients are like, "Well, maybe it's a V-shape recovery again". They just want to jump on the bandwagon.
We've had the likes of crypto and certain stocks just shoot up through the stratosphere and so it's just tempering that and being cautious… is more what we're doing now.
MF: You personally feel like the stock market recovery will take a little bit longer than back in 2020?
TH: I think it's too early to tell, because we've just had one rate rise so far in Australia. The US is going, but we are very, very early on in this rising cycle.
Historically [we've] seen that, even though we'll see jitters after the first rate rise, markets just stabilise and then [it] shoots back up again.
But once the weight of these rate rises start to accumulate and then you might see corporates downgrade their needs. That's when you see this continuation of the bear market from what could just be a short-term correction.
It's just that if what the [US Federal Reserve] is saying, soft landing, if some of this issue is transitory, if supply chains can come back online, if China changes their tune on zero-COVID, well perhaps [shares will recover].
But what we're seeing, it's very early to tell. Don't burn all your dry powder all in one go.
