Sydney-based portfolio manager Charles Story of WaveStone Capital, which oversees more than $5.5 billion in assets, has detailed the fund’s recent performance. The fund significantly benefited in July from a market rotation towards high-quality healthcare and technology companies, oversold prior to year-end. Further gains were realised during reporting season, with key positions in healthcare and resources reporting earnings exceeding market expectations. An underweight position in major Australian banks also proved advantageous, as market sentiment shifted to earnings risk amidst concerns over slowing loan growth, rising arrears, and limited capital flexibility.
Story noted that the current elevated volatility in the Australian equity market, while unsettling, has created opportune moments for active investors. WaveStone Capital has recently capitalised on such opportunities, acquiring well-known mega-cap companies including CSL, Cochlear, Woolworths, and BHP, all of which have seen meaningful share price rebounds from their lows. He highlighted that rapid shifts in market sentiment, influenced by macro factors and structural market changes, necessitate an active and diversified investment approach.
When asked about lesser-known holdings, Story pointed to SRG Global, an Australian industrial services company providing engineering, maintenance, asset care, mining services, and construction solutions. Its appeal lies in increasing exposure to long-term maintenance and asset management contracts, which generate recurring revenue and provide strong earnings visibility. Regarding undervalued assets, Charter Hall, an Australian property fund manager with a proven track record of growing funds under management, was identified as increasingly attractive. Despite recent share price weakness, Story believes the market focuses too much on cyclical macro headwinds, underappreciating the robust strength of Charter Hall’s franchise. He concluded that humility is a key asset for investors, fostering better decisions in position sizing and knowing when to exit an investment.
