Lazard Asset Management’s Select Australian Equity Fund, managing $1.4 billion in Australian equities, achieved strong performance over the past 12 months. Portfolio Manager Philipp Hofflin cited contributions from Reliance Worldwide, Domino’s Pizza, Woodside, AMP, Rio Tinto, and Viva Energy, with CSL a September quarter standout. As value investors, the fund benefited from underperforming high-multiple stocks and a market shift acknowledging AI’s disruptive threat to software-as-a-service companies.
The fund’s strategy involves comparing stock prices to assessed fair values, often leading to acquisitions of de-rated stocks. Over the past year, this included buying “fallen angels” – former “quality growth” stocks that experienced significant price drops. Recent additions were CSL, Domino’s Pizza, James Hardie, Reliance Worldwide, Woolworths, IDP Education, and Cochlear, acquired in April after a 45 per cent decline. Woolworths was sold following its share price recovery, along with Santos and South32, after rallies in energy and resource stock prices.
Among its holdings, the fund highlights wholesale pharmaceutical distributor EBOS Group and gaming technology provider Light & Wonder. EBOS Group operates as a wholesale pharmaceutical distribution company. It distributes a range of products to pharmacies and hospitals across Australia and New Zealand. Acquired after losing a major contract, it trades near a 12-year low at 12.5 times forward earnings-per-share, offering an almost 5 per cent fully franked dividend, supported by declining capital expenditure and a strong market position. Light & Wonder is the world’s second-largest supplier of electronic gaming machines. Its portfolio includes traditional casino games, mobile-focused SciPlay, and the iGaming segment in the US. Despite an impressive turnaround since 2020, it trades at a significant valuation discount to Aristocrat Leisure due to its leveraged balance sheet; however, Lazard remains confident given its strong cash generation and focus on debt reduction.
