Already a subscriber?The Australian Financial ReviewThe Pengana Capital Group portfolio manager is speaking of Brazilian Rare Earths – a South American-based developer that listed on the ASX late last year and helped fuel a more than 50 per cent return for McDonald’s fund in the past financial year.“Seriously,” McDonald continues. “The grade is just so much better. It’s a real risk for other rare earth players.
It seems other investors agree. The shares are already up 60 per cent since the company’s December listing. It is also one of a handful of stocks that has helped drive McDonald’s Pengana High Conviction Equities Fund to an impressive 55.8 per cent return in the 2024 financial year.McDonald and co-manager Jeremy Bendeich only hold a maximum of 20 stocks at any one time, which are typically in the small to mid-cap area of the market and listed either in Australia or offshore.
“I had my pilot’s licence before my car licence because where I grew up was so remote,” he says. “My mother is an investor in the fund now … and we still talk about stocks when I go home.”McDonald’s experience in the health sector has led him to his latest success – cancer treatment developer Clarity Pharmaceuticals.
“When interest rates went up substantially, it really hit the biotech sector hard. Rates haven’t really come down yet but there’s been a big rally in a lot of smaller stocks in the biotech index which was very helpful,” he said. The fund’s penchant for niche sectors is evident in another well-performing holding IperionX – an ASX small-cap darling that produces high-performance titanium alloysMcDonald first picked up the stock in early 2023 and the shares have nearly doubled in the past 12 months.
“It’s the wonder metal. Stronger than aluminium, lighter than steel and more corrosion resistant than stainless steel – if it was cheaper, we’d use a lot more of it,” he says.