Perpetual's Sean Roger says value is emerging: These are the stocks he likes

Fund profile

• Name of the fund and ASX ticker: Perpetual Equity Investment Company (Quoted Managed Fund) (ASX: PIC)
• Asset Class: Australian and global equities
• Investment objective: To provide investors with an income stream and long-term capital growth in excess of its Benchmark over minimum 5 year investment periods.
  
• Fund Page: Perpetual Equity Investment Company Limited

After 11 years in the Perpetual Investments team across various roles honing his stock-picking skills, Sean Roger has just been appointed co-portfolio manager of the Perpetual Equity Investment Company, alongside funds management veteran and head of equities Vince Pezzullo. 

The fund is listed on the ASX and mainly invested in blue-chip Australian equities, with room to invest up to 35% of its portfolio in overseas stocks, especially in strong US markets. 

"I think it's the case both in Australia and in the US where you've got pockets of the market that are really expensive and other pockets where there's actually some attractive value," says Roger.  

"The property sector also looks quite interesting."

As at December 31, 2024 the fund offered a big grossed-up dividend yield, including the benefits of franking credits, of 9.6% - or 6.8% on a net basis.  

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Among the fund's top holdings are giant miner BHP Group (ASX: BHP), Chemist Warehouse-owner Sigma Healthcare (ASX: SIG), and high-flying baby formula group the a2 Milk Company (ASX: A2M). It also owns property investment company GPT Group (ASX: GPT) and building supplies operator GWA (ASX: GWA). 

Australian investment opportunities

Over the past five years, the fund has returned a compound 12% per year to investors net of fees, versus 8.8% for its benchmark the S&P/ASX 300 Accumulation Index. 

Roger says one of the fund's core value holdings is steel maker Bluescope Steel (ASX: BSL).  

"One thing we really like is the [Bluescope] management team. They're very experienced and they've operated through downturns in the past."

"We also think some of the new policies that have been put in the US with the new administration will help their US assets' earnings improve in the short term, and overall, we think that as conditions improve and return to a more mid-cycle steel spread number...that the business is very well placed to go well in that environment," says Roger. 

The fund also owns NewsCorp (ASX: NWS) and Roger likes the fact the dual-listed stock looks cheap at the same time as the media giant retains a 61% ownership interest in star real estate platform REA Group (ASX: REA).

"We've seen the Wall Street Journal improve significantly over the past 10 years where it used to be very heavily reliant on print and advertising revenue, whereas now it's very much digital subscription revenue based and we think that's a much higher quality earning stream," Roger says. 

"The other change with NewsCorp is they've recently announced the sale of Foxtel, which we think will reduce the complexity of the overall NewsCorp investment thesis. So yeah, despite the recent volatility, I still like the position."

Overseas picks

Roger says being able to invest money overseas also gives the fund flexibility if the Australian market looks expensive. It also offers diversification in the event the Australian market underperforms global peers for example. 

One overseas business it owns is New York Stock Exchange-listed sports betting group Flutter (NYSE: FLUT), which also has ownership of market leader SportsBet in Australia. 

They've got the FanDuel business," says Roger. "It has got a very dominant position in the US market and we think that as that market then continues to scale and they hold onto that advantage that the cashflow and profits that come out of that are going to be really positive for the stock and it's trading on an attractive multiple for that sort of business."

To find out more about the Perpetual Equity Investment Company (ASX: PIC) and the opportunities Roger sees, watch the Listed Series interview above.

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Perpetual Equity Investment Company Limited (PIC)

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