Headed by Steve Johnson, Forager Funds aims to invest in undervalued businesses, holding them within a concentrated portfolio, for the long term.
Since inception in October 2009, the Forager Australian Shares Fund (ASX: FOR) has handily out-performed its benchmark, gaining 9.25% per annum versus 7.79% for the All Ordinaries Total Accumulation Index (ASX: XAOA).
In its August 2022 monthly update, the fund says that although most of corporate Australia is on high alert – with expectations high inflation, higher interest rates and falling house prices must eventually curtail consumer spending – there is no sign of a consumer strike just yet.
"While there is a justifiably high level of concern, record low unemployment, increasing wages and high levels of savings from the past few years are allowing Australian consumers to keep spending."
"We are not expecting that to continue but the amount of pessimism baked into share prices back in June provided shareholders with a lot of room for profits to fall."
The fund goes on to call out two ASX shares that are susceptible to an economic slowdown, yet which still trade at very attractive prices.
Forager notes motorcycle and accessories retailer MotorCycle Holdings Ltd (ASX: MTO) is exposed to the most discretionary part of consumer spending, with its most profitable business being the sales of Ducati and Harley-Davidson motorbikes, typically optional purchases.
The fund says that although the MotorCycle Holdings share price is up more than 30% from its June lows, the roughly six times profit multiple it trades at today, and 8% fully-franked dividend yield, should prove attractive for long-term investors.
While share prices in the advertising sector were "absolutely walloped" in anticipation of a slowdown in economic activity, Forager notes the recent earnings season hasn't shown much evidence of a slowdown, with industry data suggesting August and September will be strong.
Forager says that although the Seven West Media Ltd (ASX: SWM) share price has risen over 50% from its June lows, the shares are trading at around four times last year's profits, "a level you would normally associate with a Russian telecommunications company".
