Reece Birtles, head of Australian equities at ClearBridge Investments, is drawing on his decades of experience to navigate current market uncertainties. ClearBridge Investments is a global investment management firm offering a range of equity and fixed income strategies. The firm focuses on identifying undervalued opportunities, even amidst concerns about the impact of artificial intelligence on various sectors. Birtles notes a heightened sense of market tension, comparable to that felt during the GFC and COVID-19 pandemic, triggered by concerns around AI replicating software services.
According to Birtles, the recent market sell-off has created significant undervaluation in several stocks within his fund. He highlights biotech giant CSL and rail freight operator Aurizon as examples of historically safe companies now trading at substantial discounts. This situation contrasts with typical market dynamics, resembling more the tech bubble era where avoiding high-risk names was key to finding value. Birtles’ main value strategy, the ClearBridge Select Opportunities Fund, has outperformed the S&P/ASX 200 Accumulation Index over the past year.
Birtles emphasises a preference for investing in companies that are currently out of favour with the market. One such example is CSL, where ClearBridge initiated a position following a significant drop in share price. Despite ongoing challenges for CSL, Birtles remains optimistic about its American plasma business, citing a lack of major competitors and long lead times for new facilities. He prioritises companies with real, physical operations that are less susceptible to disruption from AI, distinguishing them from software companies with uncertain futures.
Ultimately, Birtles believes that established, less glamorous businesses stand to benefit most from the efficiency gains brought about by AI. He suggests that the Australian market’s slow growth, resilience, and heavy asset base, often seen as negative attributes, could become strengths in the future. Birtles’ approach involves a continuous review of past investment decisions, focusing on factors such as accounting risk and capital deployment, to refine his investment strategy.
