The performance of ASX shares last month defied the market adage of selling in May. But there’s one fund manager whose smile is bigger than most.
This is listed investment manager Monash Absolute Investment Company Ltd (ASX: MA1) as it reported a 12.8% gain in the value of its portfolio in May, which is nearly double the gain on the S&P/ASX 200 Index (Index:^AXJO).
There are a few factors that pumped up the fund’s alpha (performance above the wider market), but its managers credit three ASX tech stocks for doing more of the heavy lifting.
Firing the afterburner
One was the Afterpay Ltd (ASX: APT) share price, which surged 52% last month on the back of two announcements.
The buy now, pay later darling attracted a large investment from China tech titan Tencent Holdings Ltd, which quelled doubts about Afterpay’s outlook and valuation.
Afterpay then surprised the market by announcing it hit five million active customers in the US – a 30% to 40% increase over its weekly run rate from January to February.
However, in a sign that the Afterpay share price may be close to fair value, the fund sold some of its holdings although it said Afterpay remains one of its largest holdings.
The second stock that made a big contribution to Monash’s big month was the Kogan.com Ltd (ASX: KGN) share price.
The online retailer’s stock jumped 41% in May as it was one of the few that benefited from the COVID-19 lockdown that drove people to shop on the web.
“We had sold out of Kogan in late February on COVID-19 concerns about its supply chain. The stock subsequently fell and rebounded,” said the fund manager.
“Once it was clear to us there [sic] supply chain issues were limited we bought back into the stock.
“A week after we rebuilt our position it had a positive business update and the stock price continued run. It ran all the way through May too and we started to take profits.”
The fund manager completely sold out of the stock after making around 50% profit.
Another stock that Monash did well out of was EML Payments Ltd (ASX: EML) share price, which jumped 30% that month.
The fund sold some of its holdings before the payment solutions group withdrew earnings guidance due to the coronavirus turmoil even though it said business trends remained favourable.
“With EML however, we managed to rebuild our position close to that low point, in mid-March,” said the fund manager.
“A strong rally started soon after when EML announced a renegotiated outcome for its PFS acquisition, resulting in a strong capital position. A further business update later in May was well received by the market.”
Monash sold a modest amount of shares in EML to control its portfolio weighting.
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Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Emerchants Limited. The Motley Fool Australia owns shares of and has recommended Kogan.com ltd. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Emerchants 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.
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