One ASX shares fund has revealed the 10 companies that it’s betting on to provide maximum returns as Australia recovers from the current COVID-19 resurgence.
The Firetrail Australian High Conviction Fund only contains about 25 stocks in its portfolio, so the 10 investments it publicised in its latest update are relatively large stakes.
The fund claims to have a high 80% active share, meaning the majority of its investments are different to what the rest of the market possesses.
Qantas’ narrative is obvious. Eventually, the world will return to something resembling pre-COVID life, and air travel volumes will multiply from the current nadir.
Similarly, gambling sites like pubs and casinos will start to see more patronage in the coming years, allowing Aristocrat to cash in.
Aristocrat shares are already up more than 40% this year. Qantas is down 10.6% after the Delta variant of COVID-19 killed off the recovery of its domestic operations in recent months.
Housing construction will also pick up, as the winding down of COVID restrictions will allow more productive building sites and consumer confidence to start new projects.
Firetrail’s update named BlueScope Steel Limited (ASX: BSL) and James Hardie Industries plc (ASX: JHX) as overweight shares in its portfolio, benefitting from “strong demand while taking market share in their categories”.
Yarra Capital Management head of Australian equities Dion Hershan this week also named Aristocrat and James Hardie as safe havens in the inflationary climate.
He told clients his team has currently a “preference to skew our portfolios towards high-quality companies, in attractive industry structures with strong pricing power”.
James Hardie shares have risen more than 37% for the year-to-date.
Finance and ‘defensive’ ASX shares
The Firetrail team made it clear it was staying well away from Australian banks.
Private health insurer Medibank has seen its shares rise more than 18% this year. Insurers QBE and IAG have both seen 10% and 6.6% rises respectively in the past month.
The Firetrail Australian High Conviction Fund is also going overweight on a trio of “undervalued defensive companies” — Telstra Corporation Ltd (ASX: TLS), Newcrest Mining Ltd (ASX: NCM) and Crown Resorts Ltd (ASX: CWN).
Meanwhile, similar to the big banks, Firetrail is avoiding iron ore-related stocks.