Alphinity Investment Management’s Australian share fund has delivered a 19.7 per cent return over the past year, outperforming the S&P/ASX 300 Index, which increased 16.3 per cent. Stuart Welch, a portfolio manager at the Sydney-based boutique firm, which oversees $27 billion in assets, attributes the outperformance to strong stock selection, rather than large sector or macroeconomic bets.
According to Welch, avoiding companies that experienced significant downturns also contributed to the fund’s success. Alphinity focuses on investing in companies delivering earnings ahead of expectations and demonstrating future earnings upgrades. Recently, the fund rotated its portfolio more into resources due to strengthening commodity prices, driven by better-than-expected demand and supply constraints.
To fund this resource allocation, Alphinity trimmed or exited positions in companies that were underperforming, particularly in the healthcare sector, including Sonic Healthcare and CSL. They also reduced holdings in Amcor, Qantas, and Xero. Currently, the fund sees significant potential in Superloop, which competes against Telstra, offering NBN, fixed wireless broadband, and mobile services to both consumers and businesses. Alphinity believes Superloop has potential for future earnings upgrades as it gains market share through its low-cost positioning and infrastructure ownership.
Regarding the ongoing conflict in the Middle East, Alphinity is avoiding making large bets based on geopolitical events and is instead focusing on stock selection. Given the uncertainty, they are incrementally shifting the portfolio more defensively. Welch emphasises the importance of time in the market rather than trying to time the market, advocating for a long-term investment approach.
