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MDF Global Limited Q&A

Fundie: The market has not yet reflected this sector’s true value

A few years ago, Vasilios Piperoglou netted his fund a ‘five-bagger’ after identifying a key thematic in a “misunderstood and unloved” sector. Now, the fundie has identified a new thematic he believes is “very much on a similar plane”.
A few years ago, Vasilios Piperoglou netted his fund a ‘five-bagger’ after identifying a key thematic in a “misunderstood and unloved” sector. Now, the fundie has identified a new thematic he believes is “very much on a similar plane”. “We were very early investors into ASX-listed uranium stocks back in 2017,” the Collins St Asset Management co-founder and CIO told Reach Markets ahead of his appearance on Friday’s The Insider: Meet the Fund Manager session.
“In 2017, there was no new supply coming on. But fast-forward three years, when energy self-sufficiency and security took off, particularly in the US, and we made five times our money.”
With sights set on replicating this success, Mr Piperoglou has kept an eye out for similarly attractive thematics, and has identified what he believes is the standout sector. “In my view, the market has not yet reflected the true intrinsic value within the energy sector. “One of our largest positions at the moment is Beach Energy – and has been since September 2021. Now, we’re up 60-70% from when we bought, but the oil price has almost doubled. The earnings are probably going to go up 250% from the low, yet the share price is only up 70%. “From a historical perspective, there has been an underinvestment in this sector since late 2014. There was a big capex drop-off.
“So, throw that in with the ethical overlay that has seen a sell-off from institutional investors, and my view is that right now, if I had to pick one sector that was still significantly undervalued, the energy sector is the one to watch.”
Mr Piperoglou noted Collins St Asset Management operates under an asymmetric risk return profile, focused on protecting against the downside and thinking longer term. The CIO highlighted the aforementioned uranium investment, which took three years to mature, as a good example. “Not many fund managers would hold a position if it literally didn’t move for three years, but we felt confident that the spring coil was being pulled and pulled and pulled,” he said. Mr Piperoglou – whose wholesale Collins St Value Fund has not had a negative calendar year since its inception in 2016 – said patience (and the right investor base) is also critical to success. “Having a very strong investor base that is long-term minded, rather than short-term thinking institutional investors, is a solid advantage.”

First steps on a long and winding road

Mr Piperoglou’s love affair with stocks began in his early days as a child entrepreneur – starting his first business (vending machines) and owning his first share (CSR) at just 12 years old. “I’ve actually got that first dividend framed in my office. “From there, I started reading financial publications, sold my business at 22, ran and sold a few other businesses and then decided I wanted to work in the funds management arena, but only at a firm that had a strict value investing ethos.
“That was largely because I had read everything about Warren Buffett – and probably own every book ever written about him – and it just made sense to me valuing the business according to earnings and being opportunistic.”

What’s the market outlook for investors?

“I’m an optimist by heart. At the end of the day, I make money going long and buying stocks to appreciate in the medium to long term,” Mr Piperoglou said. But he still believes that any new investment must be able to pass on costs during an inflationary period, “because if that does occur, then great, you’re still doing well. If it doesn’t occur, you need to know that your business is resilient”. Acknowledging the volatility of markets and sustained inflation, he added: “If you can ensure the businesses you’re invested in have a moat, or can at least maintain their margins in an inflationary environment, then you should be well protected if you’re buying at the right price.
“If I’m wrong and inflation reverses, and we’re going back to the normal zero to 2%, then you’ll do well anyway, but I don’t think this is a short-term cycle. I believe it’s a medium to longer-term structural shift.”
Join Collins St Asset Management’s Vasilios Piperoglou this Friday, 12th August at 12pm (AEST), on our weekly The Insider: Meet the Fund Manager webcast to hear him talk about his favourite stocks, investment strategy, market insights and more. There will also be an opportunity to ask questions during the session. To book yourself in, click here.
 

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