Fisher Funds stands by healthcare reweighting decision

Wednesday 5th August 2009

Fisher Funds is standing by its reweighting into healthcare stocks despite yesterday's warning from Wakefield Health of a 30% to 40% lower profit for the first half than during the same period last year.

Fisher has reoriented its portfolio to more defensive positioning to ride out the recession, and favours healthcare stocks Ryman, Wakefield and Abano, while reducing exposure to retail players, most notably Pumpkin Patch and Michael Hill, despite jewellery sales holding up in Australia.

The Kingfish review was published just as Wakefield slashed its forecast for the first half, saying the recession had finally reached the private healthcare sector. Fisher Funds also reported disappointing earnings from Metlifecare.

However, Fisher Funds managing director Carmel Fisher told BusinessWire the strategy still stood, and that Wakefield would recover along with consumer sentiment.

"The Wakefield announcement is not flash, but their business is more resilient than the cyclical sectors such as retailers," she said. Metlifecare's problems were corporate rather than sectoral issue and Ryman kept "going from strength to strength". She noted also that Metlifecare is trading at less than half its asset backing.

"Our strategy during the past three months has been to continue to balance our focus on growth with other criteria that become important at turning points in the economic cycle," said Fisher.

"We insist on profitability but have been prepared to tolerate lower growth, iin an effort to make the portfolio defensive, while making sure we don't overpay for profit growth.

"If the global recesiion last longer than most expect, the Kingfish portfolio will be reasonably resilient; but equally, if economic activity lifts earlier than expected, the portfolio will benefit disproportionately."

The forthcoming earnings season would be "less about earnings (they will clearly still be bad, and expectations have been lowered significantly) and more about valuation".

"Any company that shows a better earnings performance than expected, or that highlights improving conditions...will likely be greeted with a share price rerating.

"We have signs of this already with Delegat's Pumpkin Patch and Sky City, whose share prices have performed well after the companies positively surprised the market."

Fisher praised Pumpkin Patch's "clever use" of American bankruptcy rules to close 20 of its 35 its US stores at a cost of around $3 million in 2010 and breakeven at store level, as against potential costs of around $13 million.

NZX's allied investment portfolio was also highlighted as having "considerable upside" and Kingfish had increased its holding in the New Zealand stock market operator during the June quarter, and it now represented 9.2% of the fund's assets.

"Mainfreight and Freightways have to date been very resilient, despite the weak economy," Fisher said.

The Kingfish fund had also upped its holding in Tower in April, at prices 20% below current levels, in the expectaqtion of growth evenin in recession, while reducing Ryman and Freightways holdings slightly.

Businesswire.co.nz

Comments from our readers

No comments yet