Perennial’s Stephen Bruce doesn’t believe in buying a stock just because it’s cheap.
“A good example of a turnaround would be Woolworths, which ticks every box, but a couple of management teams ago it came off the rails and expanded margins, but everything else about the business was good,” Bruce says.“But if you’re a struggling industrial with no pricing power and a bad balance sheet, turning that around can often be quite hard.”Bruce says the sweet spot for Perennial is somewhere between the structurally challenged stocks and the high-flying “hopes and dreams” stocks.
“Agriculture has been a really happy hunting ground for us in the little while, given everything that’s been going on in that sector.” “You do need to have some of your downside covered, and you need to have real companies with real earnings because it puts into question some of the economy recovery. “A lot of investing can be a bit above the vibe and the charisma of the CEO, but, really, you actually need to do the other stuff as well.”