Steve Johnson
Retail investors have been increasingly rewarded with solid investment returns over the last year because of retailers benefiting from a ‘COVID spending economy’, a trend that Forager Fund Management believes will continue through 2021.
Retailers including Australian brands Shaver Shop and Motorcycle Holdings, and international brands Boohoo.com and Whole Earth Brands, have been a significant contributor to the strong performance from the Forager International Shares Fund (FISF) and the Forager Australian Shares Fund (FASF).
Both funds have outperformed their respective benchmark indices[1] since inception with FISF returning 54.45% over the past 12 months and FASF delivering a one-year return of 34.52%.
“We are seeing really healthy profits, dividend resumption and growth from Australian companies, and retail investors are really responding to that,” said Forager CIO, Steve Johnson.
“Even outside of the COVID spending economy, tech and marketing and media companies, such as RPMGlobal and Enero Group, are also pulling in strong sales figures despite the projected losses. It is a sign of a healthy state of the underlying businesses and continuing an attractive value on offer for investors.”
Investors looking to international growth opportunities
Forager is seeing strong growth from its International Shares Fund (FISF), which is up 48% since end of June 2020, and according to Mr Johnson, one of the primary reasons is because of their ability to move quickly when needed.
“We have had some huge growth opportunities with certain stocks in the fund, but because of how aggressively they have grown, the risks of substantial falls have become too high – some have seen share prices rise threefold in the last year,” said Mr Johnson.
“We look at an investment horizon of three-to-five years but markets and individual stock prices have been moving at a speed we have not experienced many times in our investing lives Companies like energy drink Celsius, Uber and Ulta Beauty have all fallen into this aggressive growth category and as a result we have sold.
“Some of our replacement companies – the new seeds in our portfolio – are those that are sensibly priced we are confident we can grow rapidly. Names like Boohoo and Twitter, that resonate well with retail investors. Airline Skywest is another business that was unloved but is now holding its own with its share price rising 45%.
“A balance between undervalued stocks growing rapidly, and attractively priced and defensive assets growing at more moderate levels is the sweet spot for investors,” added Mr Johnson.
The outlook for 2021
Mr Johnson believes that there is good value to be found in global markets, and investors will be able to take advantage of a post-COVID 19 world.
“We continue to look at exciting new companies that will help generate above-market returns while offering investors a new and unique opportunity to invest in something that resonates with them.
“A growing business can be a wonderful thing, but the starting price always matters. Sometimes it pays to cut the flowers and plant a few seeds,” added Mr Johnson.
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