Here’s why one high profile fund manager is underweight banks, including CBA shares

357

Writing in the Schroder Equity Opportunities Fund August 2018 monthly report, Martin Conlon has warned that trade tensions, increasingly sharp currency moves and limited scope for interest rates to buffer against future shocks create a volatile backdrop for global share markets.

Here in Australia, Mr Conlon says the inevitable slowdown in residential house construction and a far more measured outlook for credit growth creates obvious challenges.

Not surprisingly the fund is underweight bank shares.

That said, the fund does have a declared holding in Commonwealth Bank of Australia (ASX:CBA) shares, although its weighting is less than the benchmark.

Last month Mr Conlon said five years from now he suspects CBA will still have more retail deposits and Australian home loan customers than any other bank, and will make an underlying profit not a long way short of current levels.

In a dig at inflated property prices, Mr Conlon said the environment has changed such that borrowers actually need to be able to afford repayments from wages rather than relying solely on speculative house price gains.

The Schroder Equity Opportunities Fund has a strong value bias, saying it struggles to rationalise the share price movements of some of the popular and sexy growth stocks that drove ASX returns higher in the August reporting season.

For August, the fund returned -1.66 per cent compared to the 1.40 per cent gain in its benchmark ASX 300 Accumulation Index. Over the past 12 months, the fund has under-performed by 3.36 per cent, after fees.

Commonwealth Bank shares don’t look cheap, but these 3 shares do…

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.

Commonwealth Bank was not one of them, but the list does include one tiny gold mining stock, and the company one top fund manager calls the cheapest stock in the ASX 100.

Find out why these 3 Cheap and Good Stocks could be better buys than Commonwealth Bank. But you better hurry… these stocks may not stay cheap for long.

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”

Contributors to this article may own shares in some of the companies mentioned in this article. The Capital Club has a thorough disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
Bruce Jackson has 30 years of hands on investing experience. He is passionate about stock market investing, running his own portfolio and SMSF. His focus is on small cap growth stocks. You can contact Bruce at brucej@thecapitalclub.com.au