How to use negative news to your advantage

"There have been seven instances when the market has fallen in the last 35 years and posted a negative return, but there have been double that (14 times) when earnings have fallen," Fisher explains. 

"The reason that earnings are more volatile than the market is because you're also getting dividends. The market is pretty smart. When earnings fall out of bed, it usually re-rates those earnings and puts them on a higher multiple. That can offset some of the damage." 

Sure, some news can change the long-term value of a company, but it's far rarer than one would think. 

Take 2019, "the last boring year that we all lived through", as an example. 

"I can't think of one historical event that happened in 2019 and yet, the [difference between the] 52-week high and low for the top 20 most boring stocks in Australia was 45%. And then if you look at the ASX 100 hundred, that number was something like 60%," Fisher says. 

"Their values are changing so quickly, but their value in the real world is changing over years and decades. So I'm always interested in exploiting that tension between the short-term fanaticism of the share market and how things actually really change for businesses in the long term." 

"If it's in the papers, it's probably in the price."

"Part of me definitely wants to go out and buy [Qantas] because I'd say it's got everything going against it right now," Fisher says. 

"But the thing that holds me back is the fact that they have an incredibly large CapEx program ahead of them. They need to fund something like $15 billion worth of fleet renewal over the next few years. And if I come on board as a new shareholder, I'm funding that." 

If you bought Qantas shares today, you are really only buying into a brand - and one that has been tarnished at that, she adds. 

"So, do I want to come on board and fund that fleet renewal so that at the end of that period I suddenly own a business that has hard assets and a brand? I'm not sure. I don't think it's obvious," she says. 

"What could make it obvious would be another big leg down in the share price. That would be an instance where suddenly the valuation accounts for all of the risks." 

In comparison, Fisher believes that ResMed is "the most interesting or outstanding buy idea on the ASX right now". 

"It is probably one of the top three highest quality businesses of the last 20 years listed on the ASX. It's been a 17-bagger since 2004, so it's a very high-quality company and right now it's trading on a PE of 19 times," she says. 

For context, industrial businesses (the ASX sans banks and miners) are trading on an average PE of 20.6 times. 

"This is a business that has one of the best track records on the ASX and it's cheaper than the bog average industrial business," Fisher says. 

"It's cheaper right now than Telstra (ASX: TLS). Not to pick on Telstra, but I know which business has a better track record of creating value." 

So, why the panicked sell-off? Well, there's recently been a slew of media (and a Kardashian endorsement) covering the rise in popularity of GLP-1 medication, better known by the brand name Ozempic (although there are other brands too) - which was originally approved in 2017 for use in adults with type 2 diabetes. 

Ozempic is a weekly injection that helps the pancreas make more insulin and lowers blood sugar. And while there are definitely diabetics that are using the drug, it's become far more infamous as a quick solution for weight loss. And ResMed, as the creator of medical devices for sleep apnea, is front and centre on the firing line. 

"About 70% of people with sleep apnea are obese. So [ResMed has] gone from being this company with basically 6-8% top-line growth at infinitum because nothing is holding back obesity growth rates... And then suddenly, we've got something that looks like it could be a solution," Fisher explains. 

However, Fisher is happy to take the other side of that bet. 

"The share price is pricing in very extreme degradation of its end market," she says. 

And yet, a third of ResMed's customers are not obese, and a third are so obese that even if they use Ozempic they will still need ResMed's sleep apnea devices. The remaining third would have to battle the well-documented side effects of Ozempic (not limited to serious digestive problems and suicidal thoughts) for the rest of their lives for there to be a real impact. 

"For all those reasons, I think it's overblown," Fisher says. 

"The share price has fallen about 35% in the last couple of months and now is trading at a very attractive valuation for a great business." 

Other areas of maximum pain in the market today 

Three months ago, the obvious answer would have been retailers, Fisher says. However, since then, many of these names have experienced a "pretty big bounce". 

Interestingly, Airlie recently found that 90% of the time when consumer confidence bottoms, the ASX 200 Discretionary Retail Index will lift over the following six to 12 months. 

"It's actually like a reverse signal. When consumer confidence is low, it's almost like it can only get better and it's a good time to buy the stocks," Fisher says. (see below)

Take Premier Investments (ASX: PMV) as an example - the parent company of brands such as Dotti, Jacqui E, Jay Jays, Peter Alexander, Portmans, Smiggle and Just Jeans. 

"It's got $400 million in net cash, it owns 25% of Myer (ASX: MYR) and 25% of Breville (ASX: BRG), so listed equities, which puts it at over a $1 billion fortress-like balance sheet," Fisher explains. 

"No matter what happens in the cycle, it's not going anywhere." 

And, since bottoming in June, Premier's share price has soared around 20%. 

"Again, it brings it back to the fact that if it's in the headlines, it's probably in the price," Fisher says. 

While the retailers may have rebounded, REITs continue to be in investors' bad books (the S&P/ASX 200 A-REIT Index is still 26% off the high it hit in December 2021). 

"We own a couple of REITs, no major swings, but the largest position we have is in Charter Hall (ASX: CHC)," Fisher says. 

As a fund manager, Charter Hall has "great economics", doesn't need capital to grow its business, and also has very sticky funds under management, she explains. 

"You've got seven-year redemption windows in a lot of their funds. Some of their funds are a partnership with large institutional clients, and those partnerships are evergreen - they can never get out, and if they want to get out, they find another partner to basically buy-in. So it's very, very sticky money," Fisher says. 

"Do I know what the 10-year is going to do? Absolutely not. I don't spend my time trying to figure that out. What we're reacting to is what valuations are implying, and I think that's one where the valuations are implying a pretty bearish outcome."