Ask A Fund Manager
The Motley Fool chats with fund managers so that you can get an insight into how the professionals think. In this edition, Medallion Financial managing director Michael Wayne shows off the 3 ASX shares that have gone gangbusters for him over many years.
Investment style
The Motley Fool: How would you describe your service to a potential client?
Michael Wayne: We're a private wealth advisory firm. We help clients invest in the Australian equity market through direct shares. That's where we think we can add some good value to people. We also help clients gain exposure to the international markets through ETFs [exchange-traded funds] and ETMFs [exchange-traded managed funds] and various listed investment companies.
We are actually in the process of setting up a fund that will launch in January of 2022, fresh for the new year.
MF: Congratulations.
MW: It won't be a big part of our business to start with, but it will allow investors who want to come on board with Medallion and invest in the Medallion strategy. It will allow smaller investors with smaller increments to just put money into a fund, rather than setting up a trading account and rolling across an entire portfolio.
That fund will just follow the strategy of Medallion's model portfolio, effectively, look to replicate the approach and the companies that are held within that model portfolio.
The managed funds will be S&P/ASX 300 (ASX: XKO) direct shares with a skew, I suppose, to ASX ex-50, looking to identify some of those emerging leaders. So still businesses that are of size and established, but are still growing at a very quick rate.
In saying that, many of the businesses in the model portfolio and many of the businesses that we'll hold in the fund are still within the S&P/ASX 50 (ASX: XFL). So companies like Aristocrat Leisure Limited (ASX: ALL), CSL Limited (ASX: CSL), Fisher & Paykel Healthcare Corp Ltd (ASX: FPH), Resmed CDI (ASX: RMD), these types of businesses. Businesses we hold now for clients, and will likely be replicated in the fund going forward.
Popular ASX shares
MF: What are the most popular holdings currently among your clients?
MW: CSL is the biggest holding across our client book, and then close second and third is Fisher & Paykel and Resmed.
That's not necessarily done by design, but it's a symptom of the fact that they've been stellar performers over 3, 4 years, even longer, going back in time. They've grown to be fairly significant size weightings in portfolios and we're comfortable in holding these companies long term.
They've got very, very strong balance sheets. They're growing at double digit revenue growth and earnings growth. Margins are very, very strong. So they're core positions that we're comfortable in holding.
MF: Coincidentally all 3 are in health?
MW: Yeah. In terms of our strategy and the way that we approach the market, we do try to identify sectors of the economy that we think are booming and have a bright outlook. Healthcare, with the ageing population and emerging middle classes in places like Asia, we think that there's a natural long-term tailwind for that sector.
Then once we identify a sector that we like, we try to identify the companies within those sectors that have very strong fundamentals. So, companies with consistent revenue growth, margin expansion, high return on equity, low debt — these sorts of traits and characteristics. That's how we filter through the market and identify the companies that we want to hold.
