Prime Value’s Richard Ivers explains how the fund has outperformed the Small Ords despite avoiding resources and buy now, pay later stocks.
How have you beat the Small Ords without investing in resources stocks?When resources stocks run, they tend to run hard, like we are currently seeingBut we have a clear mandate to prioritise capital preservation over the long term, which means resources and speculative stocks are not our focus, even if that means we leave some short-term returns on the table.
We’re not traders – we are high conviction investors and prefer companies with a high certainty of future earnings and cash flows. This makes future value more certain.A new position we established in January was Kelsian at $6.50. Kelsian is an anagram of its old name Sealink, which some may recognise. We like Kelsian as it’s a relatively defensive business with exposure to borders reopening.
There are additional contract opportunities this year and we think the upside potential is not being priced into the stock – so it’s fundamentally attractive with optionality. Further, management are large shareholders and highly motivated to drive the business forward in future years.We are bullish on all our holdings long-term. Our benchmark is 8 per cent per annum absolute, which is quite unusual as most other funds have an index.
News Corp is another, due to the underlying value of very high quality assets with clear catalysts for the realisation of that value. And NIB Health for its solid top line growth and attractive multiple using normalised earnings/margins.We look at international markets and stocks for insights on local stocks and global trends. Universal Music Group, the world’s largest music label, looks interesting.
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