Fund manager reveals top 5 ASX holdings

Is 'value' investing history?

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Many 'mum and dad' or retail investors like to look to see what shares some of Australia's most prominent professional fund managers are buying in the hope of finding investment ideas or even turning a few bucks profit themselves over time.

That's fair enough as the professionals should be doing the most in-depth research and often have the advantage of being able to meet with company management teams to get an even better read on the likely direction of the business.

One prominent fundie in the media is Steve Johnson of Forager Funds Management that runs an ASX-focused equity fund.

Forager is a 'value investor' which traditionally describes an investment style popularised by U.S. academic and investment guru Ben Graham who even taught the 'world's most successful investor' in Warren Buffett.

Graham essentially taught that professional investors should value stocks and then look to buy them at a discount or with a "margin of safety" to their exchange traded price as that would offer the surest chance of positive returns.

Value investing also traditionally favours buying "cheap" stocks, rather than "growth" stocks, where it's harder, inter alia, to find a margin of safety.

Unfortunately though traditional "value investing" on the ASX has proven tough going for many professional fund managers on the ASX over the last few years with the likes of Forager and Perpetual Limited (ASX: PPT) failing to beat the market.

For example the Forager Australian Share Fund has returned 6.16%pa (net of fees) over the last 3 years (as at its January 2019 report) while the benchmark S&P All Ords. Accum. Index has returned 10.01%pa.

In fairness though "since inception" the Forager Australian Share Fund is around 3.7% ahead of the index.

So let's take a look at its top 5 ASX share holdings as at January 2019.

  • Macmahon Holdings Limited (ASX: MAH) is a mining and engineering services business forecasting "adjusted" full year EBIT between $70 million to $80 million, with net debt between $25 million to $30 million. The stock is flat over the past year.
  • iSelect Ltd (ASX: ISU) saw its H1 FY 18 revenue fall 8% to $74.3m and produced an interim statutory net loss of $6.9 million.
  • Enero Group Ltd (ASX: ENO) is a digital media and public relations aggregator that just reported a half year profit of $6m on revenue of $108m.
  • Thorn Group Ltd (ASX: TGG) is expecting a full year loss of $6m. The equipment leasing and lending group has seen shares fall steadily since 2015.
  • MMA Offshore Limited (ASX: MRM) just reported a half-year normalised loss of $14.6 million on revenue of $119.5 million. It provides offshore engineering services, the stock has gone from $2.18 in March 2014 to 16 cents today.

Foolish takeaway

The surest way to make money in the share market is to charge others to manage their money, failing that you can either manage your own money, or pay others to manage it.

I'd suggest learning to manage your own money and appreciating that in the share market today growth and value are indivisible, while share prices over the medium term will always follow cash flows higher or lower.

Therefore, I'd suggest investors look to companies likely to consistently grow earnings while selling for reasonable valuations.

Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned. You can find Tom on Twitter @tommyr345 The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

Person pointing finger on on an increasing graph which represents a rising share price.
Broker Notes

These ASX shares could rise 20% to 30%

Big returns could be on the cards for buyers of these shares according to analysts.

Read more »

Modern accountant woman in a light business suit in modern green office with documents and laptop.
Broker Notes

All about the momentum: Which ASX 200 stocks does Macquarie currently favour?

These stocks have strong positive momentum.

Read more »

A graphic showing a businessman running up a white upwards rising arrow symbolising the soaring Magellan share price today
Share Gainers

CBA shares hit another all-time high. Can they surpass $200 in 2025?

CBA shares have a tailwind pushing up their price that has nothing directly to do with the bank's business performance.

Read more »

a young woman raises her hands in joyful celebration as she sits at her computer in a home environment.
Share Gainers

Why Alliance Aviation, Cogstate, Collins Foods, and Findi shares are roaring higher today

These shares are having a good session on Tuesday. Let's find out why.

Read more »

Frustrated stock trader screaming while looking at mobile phone, symbolising a falling share price.
Share Fallers

Why APA, DroneShield, EOS, and Woodside shares are tumbling today

These shares are missing out on the good times on Tuesday.

Read more »

Woman checking out new iPads.
Broker Notes

'Lock in profits at these levels': Expert's verdict on 2 ASX 200 shares

Tony Locantro of Alto Capital says it might be time to take profits on these high-flying ASX 200 shares.

Read more »

asx share price growth represented by hand holding hourglass surrounded by dollar signs
Opinions

'Patience isn't passive': Expert reveals 2 ASX shares his team won and lost on

They say patience is a virtue. This asset manager says it can also determine your investment success.

Read more »

A pilot stands in an empty passenger cabin smiling with his arms crossed looking excited
Travel Shares

Virgin Australia shares take flight on ASX return after IPO

The airline's long-awaited return has started strongly.

Read more »