The ASX 200 index has gained a respectable 9.2 per cent over the past 12 months.
But that return doesn’t have a patch on the 41.1 per cent gain in the top performing Selector High Conviction Equity Fund in the year to 31st August 2018.
Writing in its most recent update, the fund mirrored the views of The Capital Club that many of the largest ASX 20 companies are struggling to grow.
The fund said bank shares, Telstra (ASX:TLS), Wesfarmers (ASX:WES) and Woolworths (ASX:WOW) have begun cost cutting, downsizing, divesting non-core operations and refocusing. No wonder their growth prospects look limited.
By contrast, businesses which have expanded offshore and reinvested in their core competencies have fared far better.
Reporting season illustrated the success of this strategy, with companies held within the fund’s portfolio — including SEEK (ASX:SEK), Carsales.com (ASX:CAR), CSL Limited (ASX:CSL) and Cochlear (ASX:COH) — delivering positive results.
The fund’s 7.9 per cent gain for August was driven by returns in companies including Infomedia (ASX:IFM), CSL Limited and IRESS (ASX:IRE).
The Selector High Conviction Equity Fund held 30 stocks as at the end of August. Here are its three largest holdings…
Aristocrat Leisure Limited (ASX:ALL)
Having hit a high of over $33 in late July, the Aristocrat Leisure share price has come off the boil in recent months, now trading at $28.64.
In May, the gaming giant reported strong first half growth, with revenue increasing by 33 per cent, driven by the completion of two significant digital acquisitions.
Aristocrat Leisure is somewhat of a favourite amongst high conviction funds, with it being a top 5 holding in the Platypus Australian Equities Fund.
Like many growth stocks, Aristocrat Leisure shares are not cheap, trading on a forecast forward multiple of around 31 times profits.
Aristocrat Leisure is a hefty 7.2 per cent weighting in the Selector High Conviction Equity Fund portfolio.
Altium Limited (ASX:ALU)
The Altium share price jumped 37 per cent higher in August after the printed circuit board designer reported revenues up 26 per cent and profits 33 per cent higher.
A host of fund managers have warned about the vastly inflated valuation of tech stocks like Altium, with the Celeste Australian Small Companies Fund saying Altium shares are trading at over 3.5 times the company’s total addressable market.
Altium shares are not cheap, trading at close to 70 times trailing earnings. Altium is a 5.9 per cent weighting in the Selector High Conviction Equity Fund portfolio.
Jumbo Interactive (ASX:JIN)
The Jumbo Interactive share price has been on an absolute tear since the end of July, soaring 85 per cent higher since then to now trade at $7.50.
In August, the online lottery retailer reported profits jumped 55 per cent higher.
Just a few days after reporting those results, Jumbo Interactive said it had experienced a strong start to the new financial year, saying it expects revenue growth of between 20 to 25 percent in FY19. The company also trades on a juicy fully franked dividend yield.
Jumbo Interactive shares trade at close to 35 times trailing earnings. Jumbo Interactive was a 5.4 per cent weighting in the Selector High Conviction Equity Fund portfolio at the end of August.