2 ASX shares that tick all the right boxes for the long term: expert

Ask A Fund Manager: Alphinity Investment Management’s Elfreda Jonker reveals her 2 biggest active holdings, which are set up to rocket in years to come.
The post 2 ASX shares that tick all the right boxes for the long term: expert appeared first on The Motley Fool Australia. –

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, Alphinity Investment Management client portfolio manager Alfreda Jonker tells of the 2 ASX shares set to cash in on long-term themes.

Investment style

The Motley Fool: How would you describe your fund to a potential client?

Elfreda Jonker: Alphinity Investment Management is a boutique-sized active fund manager based in Sydney. We run 5 different equity strategies. We’ve got two Australian core funds, one global core fund, and then we also have an Australian sustainable fund and a global sustainable fund.

All these funds are managed using the same investment philosophy. We invest in quality companies, that are in an earning upgrade cycle, that we can buy at a reasonable valuation. So all our funds are pretty much concentrated, style-agnostic with a core focus on delivering consistent, strong, alpha through different market cycles.

MF: In the context of the ASX shares we’ll talk about today, they’re from one of the core Australian funds?

EJ: Yes. The Australian share fund, which is around 35 to 55 companies normally.

Biggest convictions

MF: What are your two biggest holdings?

EJ: If we exclude the really large caps like BHP Group Ltd (ASX: BHP) and the big banks, I think it’s probably more interesting to talk about our biggest active weights. And currently, two of those names would be 麦格里银行 (ASX: MQG) and Medibank Private Ltd (ASX: MPL)

Macquarie probably does not need a huge amount of an introduction, but effectively it’s a banking advisory investment and funds management business. It’s been one of our core holdings in our portfolio since 2012, which has just consistently been in an earnings upgrade cycle, and really is one of those companies that can stand a portfolio for a number of years. If you look at the current situation of Macquarie, it is definitely seeing very strong growth in assets under management, which is driving the fee growth. There’s lots of demand for infrastructure-style investments, which they clearly benefit from the high-interest rates.

Then, specifically at the moment, they’ve just continued positive asset realisation from a long-term period of equity investments coming across. They’ve got energy, transport, technology infrastructure — a lot of the investments that they’ve been making over the last number of years are all really coming to realisation now. 

They’re also really benefitting from the commodity business… benefitting from the energy crisis and volatility in commodities this year. Their banking business is deploying technology to take material market share in the retail banking space. 

Then of course the big thing is also their green energy assets. They’re, in our view, one of the leaders in that space and one of the world’s largest funders and developers. So they’re really perfectly positioned to benefit from this whole energy transition.

MF: Macquarie shares have done pretty well this year, haven’t they? Recently Macquarie became one of the big four banks.

EJ: Yeah, absolutely. It’s been a phenomenal rally. It’s up, I think, 168% since the COVID trough — and up around 43% in the last 12 months. So it has done very well. 

If you look at the valuation, it’s trading on a PE [ratio] of around 19 times, so that’s ahead of its long term average of around 16. But in our view, we do think that the way they are busy changing the business model and really just expanding the different business avenues that they’re in, we think this company can continue to generate really strong earning scores, particularly over the next number of years. 

We do see the potential to also expand that multiple even further potentially. So even after the last big run-up that we’ve had, we very much view it as a longer-term quality holding in our portfolio overall.

MF: How about Medibank?

EJ: Medibank, that’s effectively a health insurance business. They offer private health insurance coverage for hospital and ancillary services. They also offer a wide range of health insurance products like health, travel, [and] pet insurance. 

One of the big things that they are doing is that they are now really transforming the business, focusing on health support and wellbeing. So rather than just being an insurance company, they’re also trying to really drive to be a health company. And that’s really the exciting thing for us is that they are really transforming this business model as well. 

If you think about the 2 sides of the business on the insurance side, they are definitely benefitting from lower claims [volume] in the last 2 years through COVID and all the shutdowns.

Also, they’re returning some benefits to customers through lower pricing so that they’re cementing that recent brand improvement and the return to customer growth. We are seeing that insurance side of the business really benefitting from some of the larger trends that we’ve seen in the insurance space. 

But also, specifically to them, I think they’ve done a lot to really focus on their brand and also using a lot of the provisioning to smooth over the results in the next 2 years. Also, I think the focus on the health side, health support and wellbeing, is this really big growth spot of the market. Specifically, growth and in-home care businesses is where we think they’re specifically underestimated by the market. They’ve got very big plans to grow that part of the market.

At the moment, the market is probably more focused on just the insurance business and giving them a lot of benefit for that. But I think this whole health side that they’re focusing on… that’s just the trend of the future. 

So that’s really where we are seeing a lot of potential upsides. They’re really enjoying a lot of earnings upgrades, which, as I’ve mentioned, is one of the key things that we look at. But also from here onwards, we think there’s a very strong underlying gross margin, but also then just strong earnings growth from the whole Medibank health side.

MF: There’s a perception with the private health insurance sector that they’re at the whim of changes in regulations and how the government of the day feels at the time. Are you worried about that for Medibank?

EJ: No, I think Medibank specifically over the last number of years has really worked very hard at that… to improve the relationships and really to improve that perception in general. 

I think any sector always has some sort of risk from a regulation perspective. And that definitely goes for banks as well as general insurance and health insurance sectors. 

But I think at this point in time, we do think that that sort of risk is priced. And specifically, Medibank has really worked so hard in building the brand and building those relationships and to smooth over some of the historic issues that might have been. 

So we are not particularly concerned about any immediate or really rising risks in the shorter term, that can really negatively impact them. But I do think that it is something that investors always need to bear in mind when you do look at the valuation of the company, is that risk price at the current levels.

The post 2 ASX shares that tick all the right boxes for the long term: expert appeared first on The Motley Fool Australia.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of August 16th 2021

More reading

How did the Macquarie (ASX:MQG) share price stack up in November?

Did the Rio Tinto (ASX:RIO) share price start a recovery in November 2021?

Macquarie (ASX:MQG) share price gains as former RBA governor named chair

ASX shares to buy for the Omicron COVID outbreak

What’s JP Morgan saying about ASX 200 bank shares?

Motley Fool contributor Tony Yoo owns shares of Macquarie Group Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.


移动APP平台,拥有 12 个市场的 50,000 多种全球上市证券(全球市值超过 70%),直接在您的 Android 或 iOS 设备上即可操作。

与独有的交易理念和投资分析工具相结合,帮助您在我们 12 个全球市场中的几乎所有金融工具上找到可操作的见解,从而帮助您优化交易策略。





Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!