The fund manager Ben Griffiths believes that the ASX share bull market we're currently seeing could go on longer than some investors are expecting.
Mr Griffiths published an article on Livewire Markets discussing his latest thoughts and some of the recent moves by the fund.
Why could the bull market go on longer for ASX shares?
The fund manager pointed out that cheap money and lots of liquidity are key reasons why the ASX share market is generating so much growth. But he commented that there are quite a few late cycle markers beginning to emerge. He pointed to the GameStop situation and the growth of special purpose acquisition companies (SPAC) as markers.
Those SPACs, which are outlawed in Australia, raised US$100 billion in the three months to March 2021 in the US, which was roughly equivalent to what was raised in the whole of 2020.
Discussing which phase of the market the ASX share market is in right now, Mr Griffiths said:
Stocks have shifted to Sir John Templeton's 4th quadrant market stage-Euphoria (Pessimism-Scepticism-Optimism-Euphoria). Problematic? Eventually but I contend that markets can remain this way for some time. It should be noted that credit markets (including CDS pricing) remain benign and the VIX futures curve remains in clear contango.
He went on to comment on the smaller end of the ASX share market:
Investors need to appreciate that the Small resources subset of stocks is at the early stages of an unfolding rally whilst their industrial brethren appear unstoppable and about 7% shy of their all-time highs.
Which ASX shares have the Eley Griffiths funds been buying and selling?
Pro Medicus Ltd (ASX: PME)
The healthcare technology business has been a recent addition to the portfolio.
Mr Griffiths acknowledged that it's an expensive stock but with a 20% compound annual growth rate of revenue over the next five years and earnings before interest and tax (EBIT) margins of around 60%, it was worth it to buy the business according to the fund manager.
Pentanet Ltd (ASX: 5GG)
Pentanet is a newly-listed Perth telecommunications business where Eley Griffiths participated in the IPO. The former iiNet CEO is the current chair.
Eley Griffiths pointed out that it's winning market share with high bandwidth fixed wireless technology called Terragraph. Capital is only employed when customers sign up. It also has a gaming opportunity with a partnership with NVIDIA, which will allow for multiple use of bandwidth within a single household and delivering high processing power to any laptop or standard PC.
Betmakers Technology Group Ltd (ASX: BET)
The fund manager sees a similar opportunity in Betmakers as Pointsbet Holdings Ltd (ASX: PBH).
Eley Griffiths believes that Betmakers has secured the perfect entry to sell the bookmaker and racing operator technology to US operators.
SportsTech is a business it acquired late last year, which has increased its presence to 36 states in the US and Mr Griffiths said that it's the pre-eminent operational partner for US racing bodies.
Netwealth Group Ltd (ASX: NWL)
The fintech ASX share is a business that the fund has sold out of. It still thinks the thesis is compelling with growing market share and dissatisfied customers at legacy rivals who have been underinvesting in their products.
However, the fintech is looking to reprice its back book and it's also looking to renegotiate its next deposit arrangement.
The fund manager wants to sit on the sidelines until there's clarity on the above issues. Eley Griffiths is hoping for a better entry point in the future.