Which stock was Airlie’s ‘costliest mistake’?
Airlie fund managers, Matt Williams and Emma Fisher, have shared the one stock that was a mistake for them to buy last year and why they were forced to sell their stake.
The Airlie Australian Share fund had returned 8.7% during 2020 compared to returns by its ASX 200 benchmark of 1.4% thanks to outperformance in the first half of the year and a focus on balance sheet strength.
However, there was one financial stock which the pair described as their “costliest mistake” during the period. This was a position in financial Suncorp which later fell more than 30% before they exited it.
Shares in Suncorp fell 22% during 2020 compared to returns of 1.4% by the ASX 200.
While there was usually only one reason to exit a stock, the pair said Suncorp matched three of their exit criteria.
“Typically, we sell a stock for one of three reasons; our thesis changes, the risk/reward is no longer attractive or opportunity cost and we have a better idea. We exited Suncorp for all three reasons,” they said.
“Our original thesis saw the business as a turnaround story with excess capital to come back to shareholders post the sale of the Life business. Unfortunately, our thesis was wrong, as interest rate cuts and falling markets hit investment and bank earnings, and business interruption claims looking set to eat into any excess capital.”
They said the stock had risen by 15% since they sold it but they were comfortable with their decision and had redeployed the assets into Commonwealth Bank instead which was now their largest weighting.
Stocks which worked in the fund’s favour last year were Mineral Resources, James Hardie, Metcash and Nick Scali while Commonwealth Bank, Macquarie, BHP and Westpac benefited from the market rotation towards the end of the year.
“Mineral Resources was our strongest performer over the year with the share price rising 127% in 2020. This was driven largely by the uplift in iron ore prices over the year, as well as management articulating long-term plans to substantially increase iron ore production in WA,” they said.
AUTHOR
Laura Dew
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