Revealed: Top investors’ tips for 2021’s hottest shares
Star stock pickers who delivered stellar returns last year have revealed the shares they believe will be standouts in 2021.
First Sentier Investors' head of Australian equities growth Dushko Bajic, who manages the third-best performing fund over the past 12 months, told The Telegraph that he expects Afterpay to power on.
The buy-now pay-later behemoth's shares are up by about 260 per cent in the past year.
"Afterpay has achieved extraordinary growth driven by increasing active customers and higher customer spending as more merchants are added to the network," Mr Bajic said.
"We expect further growth to be driven by international expansion, rollout of new products and the shift to e-commerce."
The $1.1 billion "wholesale concentrated Australian shares" fund Mr Bajic controls at First Sentier - the new name for Colonial First State - delivered a 22.6 per cent return in 2020 after fees; over three years the average gain has been 16 per cent per annum.
That performance has been partly driven by First Sentier's holding in cloud networking software provider Megaport.
"We see a strongly positive outlook given ongoing enterprise migration to cloud and Megaport's global leadership in networking-as-a-service," said Mr Bajic, who has a history of backing new and complex businesses.
That said, he is also a fan of iron ore producer Fortescue Metals.
"Strong cashflow generation is likely to result in enhanced returns," Mr Bajic said.
Another top tipster, Chester Asset Management managing director Rob Tucker, is wary of a potential shift away from technology darlings that have enjoyed "wonderful momentum".
"I'm not sure that continues into 2021," Mr Tucker said, especially if interest rates and inflation rise.
He is positioning Chester - a $170m fund that was the eighth-best performer in 2020 - to take advantage of an Australian economic resurgence.
"We think the domestic economy, as we start 2021, is as well placed as any in the world," Mr Tucker said.
So he is increasing his bets on cyclical stocks that profit from a strong economic bounce-back.
"We think Qube Holdings is a beneficiary of that because it's a logistics provider," Mr Tucker told The Telegraph.
Qube is in stevedoring and rail transport. Big grain crops and rising demand for bulk commodities are good for Qube, Mr Tucker said.
He also likes Downer Group, which among other things, maintains roads and rail.
About 85 per cent of its revenue comes from governments, making it relatively low risk, Mr Tucker said.
"We don't think the market is rewarding Downer for the change in business model towards urban services," he said.
Ausbil Dexia's chief investment officer Paul Xiradis believes the big banks are due to deliver for shareholders, noting they are cheap compared to the prices investors have historically paid for a slice of the Four Pillars.
Nor have their bad debts haven't risen to the levels first expected, Mr Xiradis said.
His active sustainable equity fund was the fourth-ranked performer in 2020, according to Morningstar.
The fund tilts toward NAB and ANZ over CBA and Westpac.
The top-performer in 2020 was Hyperion's Australian growth fund.
It delivered a 33 per cent return by backing Afterpay, James Hardie and cloud-based accounting software company Xero Ltd.
Its lead portfolio manager Mark Arnold was not available for comment.
Originally published as Revealed: Top investors' tips for 2021's hottest shares