Ask a Fund Manager
The Motley Fool chats with fund managers so that you can get an insight into how the professionals think. In part one of this edition, we're joined by Andrew Martin, principal of Alphinity Investment Management. The Alphinity Concentrated Australian Share Fund has delivered an annual return of 7.6% after fees over the past five years.
The Motley Fool: The macroeconomic situation has changed dramatically since we last spoke with you in October 2021. Has the higher inflation and interest rate environment changed your investment approach with Alphinity's Australian share funds?
Andrew Martin: Not at all. If anything, this has reinforced that focusing on earnings and focusing on the companies is the right thing to do.
Macro has been so volatile over the last year. But that's incredibly difficult to pick. So, ultimately, earnings are going to drive the market over time. Whether it becomes a growth market or a value market because of the change in macro, ultimately, growth stocks and value stocks are still driven by their earnings. They still have to come through.
Sticking to this process is even more important when you get all this volatility.
MF: What's been your best call over the past year?
AM: When you get this much volatility, avoiding stuff is as important as what you buy.
On that, we avoided getting sucked into those high-valuation, low-profitability type growth stocks. It's been very positive for us this year, not being in those stocks.
As for what we've owned, in this environment, our large caps have done particularly well, in a relative sense. Companies like BHP Group Ltd (ASX: BHP), like National Australia Bank Ltd (ASX: NAB), like Woodside Energy Group Ltd (ASX: WDS).
These large caps have benefited from the environment they've been in.
MF: What's your outlook on these three ASX 200 shares heading into 2023?
AM: We are still holding them.
BHP is obviously exposed to the global economy, and China in particular. On that front, things are a bit more questionable going forward than they were six months ago, particularly around China. They are taking longer to come out of their COVID-zero slump. That may take a bit of time to play through.
Woodside has had a very good run and it's a little bit more stretched now from a valuation perspective. But the outlook for gas remains strong.
And then National Australia Bank; the banks are one of the few sectors that are getting upgrades. Banks are beneficiaries of higher rates. That's still playing through.
MF: Why NAB shares rather than some of the other ASX 200 bank stocks?
AM: I think NAB is executing better. They have really reinvented themselves over the last five years.
They've reclaimed their title as the best business bank in the country. Business is actually going really well, despite everything else that's going on. They've managed to have a better margin outcome than their peers. And they've managed their costs better. So their growth trajectory looks better than some of the others.
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Tune in tomorrow for part two of our interview with Andrew Martin.
(You can find out more about Alphinity's Australian, Global, and Sustainable funds here.)
