One top fund manager just added to these 3 beaten-down ASX 200 stocks

878

The Ellerston Australian Share Fund had a tough May, the fund falling 2.9 per cent compared to a gain of 1.1 per cent in its benchmark S&P/ASX 200 Accumulation Index.

The fund remains ahead of its benchmark for the financial year to date, up 10.3 per cent.

Although it had some good winners for the month — including overweight positions in BlueScope Steel Limited (ASX:BSL) and Nufarm Limited (ASX:NUF) — the fund was dragged down by some hefty losses in companies including JB Hi-Fi Limited (ASX:JBH) and Healthscope Ltd (ASX:HSO).

Ellerston was not alone in liking JB Hi-Fi shares, with the new Airlie Australian Share Fund recently naming the retailer as one of its stocks in focus.

Shaken but not stirred, Ellerston added to its already chunky positions in these three beaten-down ASX 200 companies.

1. Treasury Wine Estates Ltd (ASX:TWE)

The Treasury Wine Estates share price fell almost 10 per cent after a report in the AFR said the wine producer is “facing a supply glut of its own making in China.”

Ellerston said their long-term conviction on Treasury Wine Estates share remains underpinned by the improvement of the wine cycle, the TWE portfolio of premium brands, excellent volumes of luxury inventory, unique access to the world’s largest wine markets, and the company’s superior earnings growth profile.

Ellerston said they expect earnings to grow by 25 per cent compounded for the next 3 years. The fund used the aggressive TWE share price sell-off during the month as an opportunity to increase its position in Treasury Wine Estate shares.

2. Link Administration Holdings Ltd (ASX:LNK)

The Link Administration share price fell 17 per cent in May after it said the Federal Budget’s proposed changes to the treatment of inactive superannuation accounts could cost the company as much as $55 million in lost revenue.

The policy proposed a transfer to the ATO of accounts that had balances less than $6,000 and with no contributions for 13 months or more.

Ellerston remains attracted to Link because it remains the lowest cost funds administration provider.

The fund believes that the long-term growth story in Funds Administration remains intact, and that rising regulatory uncertainty should lead to increased demand for low-cost outsourcing over time.

Whilst there are risks, including increased competition and regulatory uncertainty, Ellerston feels they are now reflected in the lower Link Administration share price.

Ellerston said the earnings growth profile on current consensus (FY19: +16.3% and FY18-FY20 EPS CAGR of over 11%) is compelling and valuation upside is attractive.

3. Graincorp Ltd (ASX:GNC)

The Graincorp share price fell 10 per cent in May after reporting a severe contraction in earnings caused by the adverse weather conditions that plagued Australian crops.

Ellerston said that while the impact of the weather is clearly disappointing and impacts a key leg of the earnings tripod, their investment thesis on GrainCorp shares remains unchanged, saying the fund will remain patient until this plays out.

Ellerston believes the share market is discounting the significant growth potential in the Malt business, saying they can justify the company’s current market cap of around $1.75 billion on its malt business alone. The Storage and Logistics, Marketing, and Oils businesses are virtually thrown in for free, the fund said. 

Here’s how you can strike it rich in the share market

The best way to strike it rich in the share market is to buy shares that are not only cheap, but growing quickly.

Combining countless hours of research with over 30 years of hands-on stock market investing experience, The Capital Club’s founder Bruce Jackson has just published his definitive list of 3 Cheap and Good ASX Stocks for 2018.

Best of all, the report is absolutely free, exclusively for readers of The Capital Club.

In this comprehensive free report, you’ll find the name of one ASX gold stock that’s not only profitable, but trading at less than 4 times forecast profits.

You’ll also discover the name of a company one fund manager has called the cheapest stock in the ASX 100, and you’ll read about the three catalysts that could push the share price higher in the next six months.

Finally, the report names one of the cheapest retailers trading on the ASX, a company that just picked up the assets of a distressed competitor on the cheap, paying just 2 times earnings. No wonder one top fund manager thinks its share price could at least double.

With the share prices of each of these 3 companies having the potential to double or more, you’ll want to act now. Simply click here or the button below, enter your email address, and this free report will be instantly sent to you.

See the 3 stocks

Read Next

Here are 6 of the best dividend stocks on the ASX for 2018 and beyond

Here are 10 ASX 200 shares to beat the traditional blue chips over the next 3 years

5 ASX blue chip shares for 2018 and beyond

Top fund manager names this iconic company as “the cheapest stock in the ASX 100”