A top portfolio manager has revealed 7 ASX shares that he would go for this year as the world starts the post-COVID era.
Shaw and Partners portfolio manager James Gerrish is concerned the massive gains seen in 2020 have made investors complacent.
"The market's up 40%. [Individual] stocks are up 50%, 100% in some cases. So that's a concern that I have — that people think it's all too easy," he said in a Livewire video.
"It's hard in the market to consistently deliver results. So delivering consistently is a really important key for investors out there. That probably will be the area I think you should be careful of going into 2021."
Gerrish will be targeting companies that have scored from a structural change during the pandemic, as they will be more resistant to market volatility.
"The macro backdrop is starting to feed into higher inflationary expectations. From a portfolio positioning point of view, you need to be conscious of that," he said.
"There's areas in the market that really benefit as longer-term interest rates rise, inflationary expectations rise, and the like."
Resistant to 'market noise'
ASX stocks that meet that criteria, and that Gerrish tips for the coming year, are:
- Costa Group Holdings Ltd (ASX: CGC)
- South32 Ltd (ASX: S32)
- BHP Group Ltd (ASX: BHP)
- Monadelphous Group Limited (ASX: MND)
- NRW Holdings Limited (ASX: NWH)
- Lendlease Group (ASX: LLC)
- Downer EDI Limited (ASX: DOW)
Gerrish said he ideally would like a company to not be impacted by "external factors happening in the market" or "market noise".
"I want management to be running their companies the best they can, given the conditions they're operating in. 2020 has seen a lot of uncertainty around that, and those companies that have really dug in and… have come through COVID in pretty good shape I think."
Fruit and vegetable producer Costa Group is an example of a business that's managed the pandemic period competently.
"The business has now got some really strong tailwinds," said Gerrish.
"For a lot of years, it had some really strong headwinds."
He likes the miners South 32 and BHP, but mining services is an industry that intrigues him for 2021.
"I think these are more volatile areas in the market. If you look back — have they handled COVID? Have they been defensive, etc? Probably not," said Gerrish.
"But if I think about the companies that I want to be in going forward, and that's what as investors we've got to do, we've got to make decisions today on our outlook for tomorrow."
Monadelphous and NRW Holdings are his 2 favourite mining services stocks for this year.
"The infrastructure space, that's going to be a growth area going into next year as well. So we've got LendLease in the portfolio, and we're looking at Downer EDI to add to the portfolio."
