Where is the value on the ASX? 3 fund managers name their best ideas

Patrick Ian Polk (0:14)

Thanks very much, and welcome, gentlemen. I've got to say, I feel a bit sorry for you guys. It's been a tough year. If you have a look around the globe, Australia hasn't done so well. North America, the S&P is up 15%, 20%.

Most of Europe's up.

Korea, even though it had that correction up 100%, Japan up 70%, and the good old Aussie market, it's I think down a couple of percent before you take into account dividends. So, tough year. For Arden, down the end, commiserations, I think the small odds is even worse. So, it's been pretty hard going. Interestingly though, as we said before, what looks like we're going sideways has created quite a diverse market. If you just break it down into industrials and resources over the last year, industrials down almost double digit, resources up over 20, 25 percent depending on which area you're in. So, if you go down to the small odds, which we talked about with Arden, it's like the industrials are down 18 percent. One stage, we were, and I say we because I'm a small cap investor as well, so I sympathize, we were down over 20 percent, but it sits here from the peak in January at 18 percent. So, a lot of noise, good stock pickers have done well, but it's been a tough market. So, with that enlightening backdrop, get you guys on the front foot, let's kick off. I'll start with you, Arden. Let's talk about the market at the moment and what you're thinking about the market. More importantly, a bit like our survey question or the question up there, how you're positioning at the moment, what do you like? What don't you like at the moment? Because I think the market's fairly diverse in the thoughts.

Dushko Bajic (1:54)

Yeah, obviously you're hoping comments there, Matthew, around small caps. It was a tough year with rising interest rates, sort of creating a bit of a headwind. I'm really surprised, but sort of encouraging to see the results of the survey there that everyone just submitted on small caps and resources, obviously being potentially an area of opportunity.

Where we're looking at, obviously, AI and electrification is clearly an opportunity in our space for opportunities. Whether that's through the contractors like Genus Plus, Southern Cross Electrical, even NRW, which has the Freedon part of the business, or Tasmania, which has Maxim, one of the largest data center fit out companies. You can play the picks and shovels for the AI factory boom, and obviously data center boom that we're currently experiencing.

Patrick Ian Polk (2:39)

That's an interesting thing you say there because most times Australians can't really invest in AI. There's not many opportunities, but you've just rattled off about six, seven names very quickly.

Dushko Bajic (2:49)

We definitely don't have the semiconductor market like the NVIDIAs, the SK Hynixs of the world are producing the chips, but you can get exposed to the picks and shovels of that particular sector. Another one would be defense. Obviously, with GDP, roughly 2% of GDP being allocated towards defense, there are opportunities there within the small ordinaries complex. Kodan, it's obviously in the penthouse now, but one we've held for a very long time, is exposed to communications equipment and defense, service stream. They've got the base services agreement with the Defense Force for Northern Territory in South Australia.

So there's certainly opportunities there within that. We've got a bit of a two-speed economy as well. So domestically here, we're probably focused on those companies that are WA linked or Queensland linked, WA with the mining capex that's going through. In Queensland, you've got the Olympics coming up, net migration, there are companies exposed to those areas, as a few examples. So there are plenty of ways to play some good structural themes and drivers and then go down to a bottom up.

Patrick Ian Polk (3:52)

Yeah, it does feel a bit like 2006, 2007, two-speed economy, which we always talked about in those days in the resources. But before I leave you on this, where don't you want to be at the moment?

Dushko Bajic (4:01)

I think the consumer is pretty tough at the moment. We have had three rate hikes. Looks like we had another one or two at least.

Inflation is pretty sticky, so obviously RBA is dual manned out there. Inflation and unemployment, they've got to service that. So we think that the consumer is currently under pressure. Doesn't mean you can't find opportunities there. All financials are exposed to the consumer. I think you've got to be pretty cautious there, but there will be a time to buy these. We're talking about that now, but who knows, maybe we could have rate cuts next year and you want to be buying them.