Antipodes founder and chief investment officer Jacob Mitchell says the iconic, giant technology companies that dominate the US sharemarket are in healthy shape, but will likely lag different breeds of blue-chip growth businesses in the decade ahead.
He says the long short hedge fund will typically contain 60 long positions in heavily researched clusters of eight to 12 industry sectors, with short positions making up around 15 per cent of the fund’s exposure and tail risk hedging 5 to 10 per cent. Shares in $US200 billion database giant Oracle are up 49 per cent over the past five years. SAP, Europe’s largest software company, boasts a market capitalisation of $US112 billion.Aside from Oracle and SAP, the long short fund has pharmaceutical and healthcare giants Merck and Sanofi among its top long positions, alongside Japanese auto giant Toyota and computer-chip star Taiwan Semiconductors.
“We think that provides another layer of risk management that is often missing in portfolio construction,” he says. “We’re really looking for non-correlated [investments] as much as we possibly can. “Let’s call it a panel of risks or tail risks that we think are in play in the market,” he says. “And if we think the insurance on that tail risk is cheap, we’ll buy it. You need to think about that before the tail risk is on the front page of the paper because at that point the insurance isn’t going to be cheap - in fact you’ll probably be closing it out.”
“We wouldn’t be against the idea of a super-cycle {in copper and decarbonisation] over the next 20 years,” he says. “But you’ve got to be very mindful of your entry point. I think you’re getting a more reasonable entry point now, because of the sell-off you’ve had.”