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Top fund manager is finding “an abundance of growth opportunities” outside the hot ASX tech stocks


Writing in its August 2018 update, the Prime Value Opportunities Fund said that although ASX tech stocks may be getting all the attention, it is finding an abundance of growth opportunities to be found in other sectors.

The fund gained 2.6 per cent in August, soundly beating the 1.4 per cent gain in its benchmark ASX 300 accumulation index. It has gained 19.4 per cent over the past 12 months.

The fund’s top 5 positions are CSL Limited (ASX:CSL), BHP Billiton (ASX:BHP), Westpac Banking Corp (ASX:WBC), Orora Ltd (ASX:ORA) and Macquarie Group (ASX:MQG).

The fund called out CSL Limited as a key contributor to fund performance in August. The CSL share price rocketed 16 per cent higher in August aided by a full-year profit result that beat its upgraded guidance from May.

Not all fund managers are fans of CSL shares however, with the Schroder Equity Opportunities Fund saying there is a massive gap between the plasma group’s stock market pricing and a sensible 12.5 times multiple of its current operating profits.

Software company Bravura Solution (ASX:BVS) was another strong performer in August. Prime Value Opportunities said Bravura is a software company benefiting from strong demand, with its mission-critical product increasingly used by global fund managers and institutions as regulatory requirements get increasingly complex.

The Bravura share price jumped 30 per cent higher in August after reporting FY profits increased by 27 per cent driven by its Sonata wealth management administration system. Bravura is expecting full-year 2019 earnings growth to be in the mid-teens.

The fund cited Cleanaway Waste Management (ASX:CWY) as an example where the portfolio manager believes a company is operating in a niche market with unique growth prospects. Cleanaway is a national provider of waste management services with significant assets across the eastern seaboard.

The Cleanaway Waste Management share price has gained almost 38 per cent in the past 12 months. The fund says it is a successful “turnaround” having transformed from a highly-geared and low profit business.

Detractors to the fund’s performance in August included Flight Centre (ASX:FLT) and Reliance Worldwide (ASX:RWC).

The Flight Centre share price fell 14 per cent in the month, the sell-off due to a slowdown in the Australian operations driven by a new booking system, sales force contraction and rebranding.

The Reliance Worldwide share price fell 11 per cent in August despite reporting double digit revenue and earnings growth for FY18. Conservative guidance, likely driven by political and macroeconomic uncertainty, weighted on Reliance Worldwide shares.

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Bruce Jackson is the founder of The Capital Club. Of the companies mentioned above, Bruce has a holding in BHP.  The Motley Fool Australia owns shares of and has recommended Flight Centre Travel Group Limited. The Motley Fool Australia owns shares of Bravura Solutions Ltd. 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.

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