Vihari Ross is a portfolio manager overseeing global equities at Antipodes Partners. The Sydney-based firm oversees $20.6 billion in assets under management.
The global portfolios have posted strong returns in the past 12 months – do you think any of your past winners have further to run?
In the context of market broadening over the past year, followed by the recent extreme crowding into hardware, the returns have come from broad and unique sources, with precious metals, auto, senior housing, healthcare, energy, electric grid, and technology and hardware supply-chain companies among the top contributors.
Many of these positions have since been actively recycled, and capital has been deployed into new ideas the team has generated.
Each stock must earn its place and has a job to do, so in that sense, we continue to see strong return opportunities across our global portfolios.
Our portfolios have been positioned for market breadth to widen and extreme valuation dispersion to close, and that hasn’t changed.
We’re targeting opportunities across software-as-a-service disruption from artificial intelligence, energy services, materials, infrastructure, healthcare innovation, and [artificial intelligence] enablers and adopters.
Thoughts on the SpaceX initial public offering slated for Friday? Is Antipodes planning to buy in?
The IPO has been marketed aggressively, especially to retail investors, with index inclusion negotiations under way too.
There will be significant oversubscription, which introduces the classic popularity-contest dynamic that can drive short-term price performance.
Elon Musk is a visionary founder with majority control, and while making life interplanetary and providing Wi-Fi to Martian cities sounds very cool, the majority of the company’s proposed full market potential remains more conceptual than tangible. It’s a no from us.
What’s a position you’ve exited recently and why?
We exited Hyundai Motor earlier in the year. The company still has growth opportunities across its internal combustion engine, hybrid and electric vehicle ranges, has a strong balance sheet, and can be a beneficiary of the South Korean government’s corporate governance clean-up.
However, it rallied over 100 per cent within a few months and reached our valuation target, driven by investor enthusiasm for its AI and robotics strategy.
With the relative risk-reward shifting, it was time to recycle that capital into other opportunities.
What’s a stock you own that (most) investors haven’t heard of?
One we’ve held since mid-last year is Japanese chemicals company Shin-Etsu Chemical. It’s a global leader operating in consolidated markets with high barriers to entry.
It’s the leading player in producing the polysilicon wafer, which is standard in the manufacture of the advanced nodes used in microchips. Demand spans autos, gaming, smartphones, PCs and data centres, with AI now a structural driver.
There is a cyclical opportunity in materials like PVC and silicons, and the company is at the bottom of the global cost curve.
It will benefit from a recovery in US housing and via use across construction, autos, electronics, and healthcare.
Which stock in your fund is the most undervalued by the market?
In the current market, there is compelling value across many cyclical, real-asset industries.
SLB is one example. It’s an oil services opportunity linked to the cyclical recovery in capital expenditure on exploration.
As the leading technology, software, and equipment provider to oil majors specialising in large, technically complex offshore and subsea projects, SLB is well placed to benefit from an industry at a favourable inflection point in capex following a decade of decline, with the shift away from shale towards offshore and liquefied natural gas playing to its strengths.
Its digital division provides proprietary AI tools and has faster growth and nearly double the margins of the company’s core segments, and new energy exposure across carbon capture, hydrogen, and geothermal adds optionality.
It trades at a discount to history on trough earnings, having traded at a market premium pre-COVID.
Meanwhile, about 10 per cent of market capitalisation is returned annually through buybacks and dividends, offering investors a well-compensated wait for the upgrade cycle to play out.
What one piece of advice has influenced your approach to investing?
The one certainty in markets and industries is that things will change. So pay attention to the impact of change and the resilience of a company to that change.
Markets often act irrationally when it comes to extrapolating change, treating a cycle low or speculative high as permanent.
This leads to value opportunities across both cyclical recovery stories and structural growers, and will help avoid those “cheap for a reason” value traps as well as the over-extended growth traps.
Are there any books, podcasts or TV shows that you’d recommend?
I quite like the Acquired podcast. Each one is a bit of a time commitment, but it’s really well-researched, enthusiastically presented and gets into the history lesson of the strategy and the luck behind how the world’s most successful companies came to be.
What is your favourite local bar/restaurant?
The front bar at Fred’s in Paddington does a great martini!
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