Franklin Templeton’s specialist fixed investment manager is off and expanding its suite of said products with a fresh Aussie-shaped fund named thusly: Brandywine Global Opportunistic Equity Fund for Australian investors.
Stockhead asked Felicity Walsh, MD of Franklin Templeton Australia and Brandywine Global PM Sorin Roibu the where, why and who around some of the unlikely global businesses Brandywine is reaching in to.
Sorin says there’s already high demand for strong global value equity strategies in the Australian market.
“The new fund invests in 60 to 100 global companies, limiting stock position size to 5 per cent at purchase, and aims to outperform the MSCI ACWI Index.
Felicity says the new fund is for investors seeking “differentiated active opportunities.”
Stocks in the portfolio certainly span a crazy mix of sectors and industries.
“We are generally invested in larger-cap stocks and our risk metrics are aligned with our view that opportunities are not plentiful in the current environment,” says Roibu.
“As always, we are vigilant and awaiting new opportunities,” adds Walsh.
“Market shifts can happen very quickly, and we are prepared to act opportunistically should investor fear arise in the US or elsewhere in the world.
“Brandywine’s distinct investment process is premised on the philosophy that valuation alone is not a catalyst.
“The fund’s approach helps us to avoid value traps and style drift while enhancing the strategy’s ability to capture diversified sources of return – through what we call ‘multiple ways to win,” adds Roibu.
“We use our macroeconomic insights to provide direction and bottom-up fundamental equity research to identify undervalued companies. On a micro level, we look for companies with solid balance sheets and strong free cash flow, favouring sectors believed to be well positioned to capitalise on key macro catalysts.”
Here’s a sample of the companies Felicity and Sorin are into.
AerCap: A Global Leader in Commercial Aircraft Leasing
AerCap (NYSE:AER), the world’s largest owner of commercial aircraft, is well-positioned to capitalise on the current shortage of planes due to Boeing’s production issues.
AerCap (NYSE:AER) year to date
Sorin says the company’s scale and market leadership enable it to command favorable pricing in the current environment.
“Despite the inherent value of its aircraft assets, AerCap’s stock trades at roughly book value, presenting an attractive investment opportunity.
“Management’s strategic decision to sell planes and use the proceeds to repurchase undervalued shares demonstrates their commitment to allocating capital effectively and maximising shareholder value. As the aviation industry recovers, AerCap is poised to benefit from the increasing demand for leased aircraft.”
Banco Santander: Undervalued European Banking Giant
Next we head to Spain.
Banco Santander, a leading European bank with a diversified global presence, offers compelling value for investors, says Sorin.
Banco Santander SA (BME: SAN)
“With 40% of its earnings generated in continental Europe and the remaining 60% from North America (20%) and Latin America (40%), Santander has a well-balanced geographic mix.
“The bank’s current valuation, trading around tangible book value per share and at a mere 6x PE ratio, significantly understates its underlying profitability and future potential.
“Santander’s return on capital comfortably exceeds its cost of capital, indicating a strong competitive position. The investment thesis hinges on the bank’s ability to grow earnings and improve its return on equity, driven by the tailwind of higher interest rates and the potential for a valuation re-rating as the market recognises its true worth.”
FMC Corp: Undervalued Agricultural Chemicals Leader
“FMC Corp, a prominent global agricultural chemicals company, has seen its stock underperform significantly this year due to temporary headwinds,” says Sorin.
“The overstocked distribution chain has adversely impacted sales, production, and earnings in the near term. However, we believe that once these issues subside and sales and earnings normalize, the company’s true value will be realised.”
FMC Corporation (NYSE:FMC)
“The business is expected to experience an inflection point in the coming quarters, and our analysis suggests that FMC Corp is currently trading at a substantial discount to its intrinsic value. As the agricultural sector continues to grow and the company’s operational performance improves, FMC Corp is well-positioned to deliver significant upside potential for investors.”
The views, information, or opinions expressed in the interview in this article are solely those of the broker and do not represent the views of Stockhead.
Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.
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