There are a few different ASX shares that Ophir High Conviction Fund (ASX: OPH) likes the most right now.
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What is Ophir?
Ophir is a fund management business that is headed by Andrew Mitchell and Steven Ng.
The fund manager runs a few different portfolios, but the one I'm covering is the Ophir High Conviction Fund.
This fund looks to provide investors with a concentrated exposure to high quality companies outside of the S&P/ASX 50.
Ophir uses an extensive investment process that combines a rigorous company visitation schedule and fundamental bottom-up analysis to find opportunities. It looks to identify businesses operating within structural growth sectors with the ability to meaningfully grow and compound earnings over time.
Typically, the majority of businesses within the portfolio will already have well-established business models with large or growing end markets and a clearly identifiable pipeline of future growth opportunities.
As a concentrated portfolio, the fund seeks to identify the very best of these opportunities in order to ensure each portfolio position delivers a meaningful impact on overall portfolio returns.
This strategy appears to have worked. Over the past year the Ophir High Conviction Fund portfolio has delivered a gross return of 19.7% per annum. Since inception in August 2015, the gross portfolio return has been an average of 23.2% per annum.
What are the ASX shares that Ophir likes?
Ophir listed its largest five exposures at the end of October 2020 in its most recent update. In alphabetical order those businesses are:
A2 Milk Company Ltd (ASX: A2M), which is an infant formula business with significant exposure to Chinese customers.
Afterpay Ltd (ASX: APT), which is a buy now, pay later business which is growing rapidly in the US.
Domino's Pizza Enterprises Ltd. (ASX: DMP), which is a large franchisor of Domino's outlets in Australia, New Zealand, Belgium, France, The Netherlands, Japan, Germany, Luxembourg and Denmark.
Nextdc Ltd (ASX: NXT), which is a data centre business which provides digital infrastructure for the cloud.
Xero Limited (ASX: XRO), which is a cloud accounting software business which has a presence in many countries including New Zealand, Australia, the UK, the US, Canada and South Africa.
Ophir's recent overall thoughts on its portfolio
The fund manager doesn't try to meaningfully time its allocations to investment styles, sectors or ASX shares off the back of 'top down' macroeconomic or political factors. It's not that Ophir doesn't think these have an effect, just that the fund manager doesn't have an edge in timing allocations when lots of investors and analysts already look at these factors.
It also doesn't help that there isn't a model that is able to consistently and reliably assist with that process.
In recent times Ophir has been, at the margin, reducing how much underweight it is to 'reopening theme' companies as it became clearer that a COVID-19 vaccine was likely. This process was accelerated thanks to the Pfizer and Moderna vaccine news. That's why Ophir increased its allocation to good quality companies that are growing faster than the market and likely to benefit from a relaxation in social distancing measures.
However, that doesn't mean that Ophir has been involved in investing in 'value' or 'cyclical' type companies for the sake of it. The core of the funds remain in ASX shares that Ophir believes can grow and compound earnings largely regardless of the macroeconomic environment.
Its holdings of Afterpay, Xero and ResMed Inc (ASX: RMD) were strong performers in October. Ophir was particularly pleased that ResMed posted a strong quarterly result, although it was boosted by one-off ventilator sales.
