Portfolio manager profile: Paul Cuddy, Bennelong Australian Equity Partners
Bennelong Australian Equity Partners: Launched in July 2008 by co-founders Paul Cuddy and Mark East, as a joint venture with Bennelong Funds Management.
Experience: I joined the industry in 1989 working as a junior analyst for a large institutional investment management group. Over the past two decades I have worked in various roles including head of equities, portfolio manager and investment analyst.
Investment philosophy: Stock prices are driven by earnings. The greatest returns come from companies that can deliver positive earnings surprises relative to market expectations. Investing in high quality companies helps achieve that objective while minimising the risk of negative earnings surprises.
One of your best calls: Over the past year we have benefited from an overweight position in the mining services sector. Campbell Brothers provides testing services to the mining, environmental and industrial sectors. It is leveraged to increased mining exploration and production, as well as some recent acquisitions that are creating further shareholder value. The stock has performed very well as the company has delivered strong results relative to peers and the broader market.
Outlook for the year ahead: Equity markets are struggling with the ‘two-speed economy’ that is dominating headlines. Many domestic industrial companies are facing tight monetary policy, increasingly cautious consumers, and a strong Australian dollar, and rising costs aren’t being offset by revenue gains. Conversely, the outlook for resources-related companies is more positive, with many companies well positioned to deliver positive earnings upgrades over the next couple of years.
Fund positioning: The portfolio is overweight high quality stocks that we believe will deliver positive earnings surprises over the foreseeable future. We like selected mining services companies, together with some high quality industrial companies that we believe will buck the downward trend of the ex-resources sector over the remainder of this year and into early 2012.
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