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5 shares ideas from a top fund manager

One of the potential problems with following the buy decisions of a fund manager you admire is that you generally have very little colour around the decision.

For example, a fund manager may mention in a monthly report that they acquired shares in a particular company however that same fund manager may never mention when their view changes and sell the shares.

Likewise, a fund manager highlighting a buy decision rarely includes other vital information such as the entry price or the level of conviction they have in the stock.

These “unknowns” make the knowledge of a share purchase arguably of limited value.

For this reason, in my opinion, its best to utilise this knowledge as simply an idea generating mechanism.

With the above in mind, here are five new investments which highly regarded listed investment company (LIC) Argo Investments Limited (ASX: ARG) made during financial year (FY) 2016 that could be worthy of further research.

CBL CORP FPO NZX (ASX: CBL) is a New Zealand-based niche insurer of credit and financial risk. The company has been listed on the ASX for approximately one year and in that time the stock has rallied around 109%.

With the group reporting a large increase in profits for the six months ending June 30, the stock’s momentum appears positive.

Estia Health Ltd (ASX: EHE) is a residential aged care provider. The stock has taken shareholders on a wild ride recently with concerns mounting over the regulatory funding environment.

While market concerns would appear justified, with the stock down around 54% since the beginning of 2016, the bad news could potentially be more than fully reflected in the current share price.

Genworth Mortgage Insurance Australia (ASX: GMA) provides lenders mortgage insurance.

While Argo is presumably comfortable with the group’s exposure to the rallying housing market, some investors would be concerned that it’s the wrong point in the cycle to own Genworth.

The dangers of investing near the top of a cycle would appear to be on show at the recently listed real estate agency Mcgrath Ltd (ASXL MEA).

Since undertaking an initial public offering (IPO) in December 2015, the stock has fallen around 37%. If the property market has a soft landing (or doesn’t fall at all) then it’s possible the market has become overly pessimistic on Mcgrath. Under that scenario, the current share price of $1.15 could make the stock worth further investigation.

Reliance Worldwide Corporation Aus P Ltd (ASX: RWC) was a popular float and to date, it has proven a profitable investment for IPO investors.

Reliance is a leading provider of plumbing products and has exciting growth prospects in the USA. This US growth potential is used by some to justify the pricing of the stock which is trading on a consensus forecast FY 2018 price-to-earnings ratio of 22.5 times. (source: Reuters)

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Motley Fool contributor Tim McArthur has no position in any stocks mentioned. 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 Bruce Jackson.

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