Doug Goodwille from Kayne Anderson speaks to Drew Meredith from The Inside Network on market thinkers.
While a surging gold price is on hold as the world adjusts to a Trump presidency, all the factors that saw its price rise more than 50 per during his first term in office – trade disputes, fiscal deficits and geopolitical tensions – are almost certainly guaranteed the second time around.
Why this manager is doubling down on Marley Spoon
Blackmore Capital Equity Investors, known for its ability to pick high-quality investment opportunities for the long term, recently discussed reporting season and changes it has made to its portfolio to capture upside potential.
The Australian market has been hitting record highs supported by a better-than-expected recovery in company profits. Blackmore Capital says: “the S&P/ASX 200 is on track to deliver earnings growth of about 25% for the 2021 financial year. The profits recovery has been dominated by the banks and iron ore producers. At a portfolio perspective, we expect the market leaders of BHP and Commonwealth Bank to deliver a meaningful uplift in earnings and dividends and further underpin ongoing capital management.”
But there are concerns that the more virulent Delta strain and forced lockdowns are negatively affecting major cities. Economic growth and profit momentum are expected to slow in the September quarter.
The solution?
Get vaccinated. Australia’s success depends on at least 70% of the eligible population being vaccinated by the end of the December quarter.
Blackmore goes on to say it is important to own “industry leaders in the defensive sectors of consumer and industrial staples (Brambles, Wesfarmers, Woolworths) and healthcare sectors (CSL, Healius).
“We firmly believe that the attributes of earnings resilience and strong balance sheets remain valuable characteristics of the portfolio in delivering high-quality earnings and dividends to our investors.”
The portfolio should also hold “stocks that should benefit from a reopening in the economy, namely in the energy sector (Ampol, Santos) and industrials sector (Cleanaway, Qube).”
Blackmore has adjusted the Blended Australian Equity Fund via the purchase of Marley Spoon (ASX: MMM), which is a European-based meal kit service provider founded in 2014. The company sells and delivers meal kits. Blackmore considers MMM a market leader given its relatively large scale with the only other global competitor tying to execute the same business model being Germany-based HelloFresh (ETR: HFG), the first player in the meal kit sector, generating 15 times the revenue compared to MMM.
As a result, the fund manager has reduced its holding in Healius (ASX:HLS). The stock has benefited from a +200% uplift in COVID-19 testing volumes in Australia since the March quarter 2021. Blackmore says “HLS’ improving operational uplift has now been recognised in its strong share price performance over 2021. We have reduced our overweight position in HLS from about 6.2% to about 4.3%. We are using part of the proceeds from the sale of HLS to fund the new position in Marley Spoon.”
One highlight of the Australian market is its high yield. The 12-month forward dividend yield sits at about 3.9%, which is the third highest in the world.
