From Fairfax:
Deep value funds manager Simon Mawhinney from Allan Gray has been buying selectively in the battered resources segment, but he admits “we’re not seeing any light at the end of the tunnel”.
Mawhinney said he had been buying names in energy, aluminium and gold as the S&P/ASX 200 has lost about 15 per cent of its value since its April peaks, with the resources segment the hardest hit.
He said he continued to avoid iron ore and copper producers because of their reliance of demand from China.
Mawhinney said he had this morning bought up all of the available rights in the Origin Energy $2.5 billion equity capital raising the company announced the previous day.
“I think with energy the supply side of the equation will fix itself soon,” Mawhinney said of the world’s energy demands and the amount energy prices have already come down. “Energy prices have already cut deep into the cost curve.”
For those readers with a memory, here is what Mr Mawhinney was doing this time last year:
Contrarian fund manager Allan Gray has seized on the mass sell-off of Arrium stock, snapping up a 5 per cent stake in the steel maker while most investor were heading for the exits.
…Mr Mawhinney said the stock was trading at less than a third of the price it was under a year ago.
“It’s the same assets in the same markets. The only thing that’s really happened is the profitability of the iron ore business has fallen.
“Our attraction to the company is definitely not its iron ore business.
In the fullness of time we think the steel business will return to profitability and mining consumables should be a good business going forward.”
Does that sound like “he continued to avoid iron ore”? At the time, ARI was at 36 cents. It is now at 9 cents. Back then markets were still of view that the iron ore “supply side of the equation will fix itself soon” and that “prices have already cut deep into the cost curve”.
Just sayin’…
