The Motley Fool

How this leading fund manager is investing during the COVID-19 pandemic

The Ophir High Conviction Fund (ASX: OPH) share price is pushing higher this afternoon following the release of its latest investment update. At the time of writing the fund manager’s shares are up over 2% to $2.19.

Investors appear pleased to see that this high conviction fund is outperforming the market during the coronavirus pandemic.

Although the fund lost 13.7% of its value during March, this was significantly better than the benchmark ASX Mid-Small Accumulation Index which fell 22.5%.

How is the fund manager investing during the pandemic?

As well as providing an update on its performance, the fund manager advised how it is approaching these volatile markets.

According to the update, Ophir has been redeploying capital from companies with the greatest earnings risk and higher debt or refinancing risks, to companies less/neutrally/positively impacted by the virus, but oversold.

Ophir’s CEO, George Chirakis, notes that shares have been sold off indiscriminately during the pandemic. He feels this has created a buying opportunity for investors.

Chirakis said: “This (selling) has been providing opportunities in the recent market volatility to top up existing positions, and add new positions, in companies we believe have been unfairly sold during the downdraft, as investors seek liquidity.”

“We have been happy to provide them with this liquidity, particularly in our favourite type of opportunity: those that we already like for their structural growth characteristics but are also seeing a cyclical boost at present,” he added.

But what type of shares should you be buying?

Ophir’s focus is on cash generative businesses with structural or secular growth opportunities and strong balance sheets that trade on reasonable valuations.

One share the fund owns is NEXTDC Ltd (ASX: NXT). It likes the data centre operator due to its exposure to the increasing use of online digital technologies. These includes those that “support working from home, and video streaming and gaming, that are seeing increased use at present.”

Ophir also owns A2 Milk Company Ltd (ASX: A2M) and Freedom Foods Group Ltd (ASX: FNP), which have both experienced strong demand for their respective products during the coronavirus pandemic.

And while it has trimmed down its Afterpay Ltd (ASX: APT) position, it holds onto its shares for the time being. Though, it has a preference for companies where there is better visibility of the earnings trajectory over the next year or two. This is not exactly the case with Afterpay right now due to the uncertainty caused by the pandemic and the potential impact this might have on discretionary spending.

Finally, the fund manager advised investors to hang in there and reminded them that this pandemic will not be here forever.

Chirakis commented: “Whilst there are many uncertainties about how and when countries will be able to contain and suppress the virus which has precipitated this downturn, history gives us comfort that this too shall pass.”

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Motley Fool contributor James Mickleboro owns shares of NEXTDC Limited. The Motley Fool Australia owns shares of A2 Milk and AFTERPAY T FPO. The Motley Fool Australia has recommended Freedom Foods Group Limited. 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.