Asymmetric Opportunities Fund Update - August 2023
Dear Investment Partner,
For the month ended 31 August 2023 the Asymmetric Opportunities Fund (AOF) decreased 2.3% (net of fees and expenses and assuming the reinvestment of distributions).
By comparison, the fund’s benchmark the S&P/ASX Small Industrials Accumulation Index declined 1.5%.
At month end, the portfolio consisted of 22 companies with a median market capitalisation of $377m. The closing net asset value (NAV) unit price was $1.1642
Portfolio Update
While ASX investors spent August poring over company results and outlook statements, the market was being buffeted by global economic data which helped send both iron ore prices and the Australian dollar lower.
The lower Aussie dollar is adding to the inflationary woes and cost of living pressures with everything from petrol to imported consumer goods costing more. We continue to believe there are challenging times ahead for the Australian consumer.
The macro backdrop, including uncertainty over short-term interest rates, perhaps explains the heightened volatility observed across reporting season. One in every eight ASX stocks reportedly experienced a move of 10%+ on the day its results were announced. This volatility was more than double the long-term average. As a case in point, Codan which is a core holding in the fund was up 4.7% for the month but fell 7.8% on the day of its results only to bounce back 8.1% the following day. A confounding share price reaction for a company which slightly beat consensus expectations.
Other notable holdings to finish the month higher included insurance broker AUB (up 7.5%), automotive accessories and spare parts distributor GUD Holdings (up 21.8%) and one of the fund’s July laggard’s investment platform Praemium (up 28.6%).
Countering these gainers were several holdings which performed poorly. Radio network operator ARN Media (down 18.3%) did a poor job of reducing costs in the face of a weaker advertising market. Enero’s advertising agency business also suffered and more than we expected. We remain enthusiastic about Enero’s 51% shareholding in advertising platform OBMedia and note the announcement that a strategic review of OBMedia is underway.
Contract labour firm PeopleIN (down 16.3%) achieved solid growth but missed consensus slightly. With no firm guidance provided, the market is now factoring in weaker growth for FY24. With the stock trading on a FY24 PER of 7.9x (and dividend yield of over 7%), good long-term growth prospects and a history of generating strong returns on capital, we believe the stock has the asymmetry we look for in an investment.
Kind regards,
Tim McArthur & Pierre Prentice
Co-Portfolio Managers
Disclaimer: The information contained in this document is general information only and does not constitute investment or other advice. The contents of this document do not constitute an offer or solicitation to subscribe for units in the Asymmetric Opportunities Fund. Asymmetric Asset Management (AFSL No: 536830) accepts no liability for any inaccurate, incomplete or omitted information of any kind or any losses caused by using this information.