Why Ellerston Capital’s Chris Kourtis plans to back a ‘hated’ stock
When he addresses the Sohn Australia conference, Ellerston Capital’s contrarian investor Chris Kourtis plans to surprise everyone with some love for one of the ‘most hated’ stocks.
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Ellerston Capital portfolio manager Chris Kourtis plans to tip one of the “most hated” stocks in Australia when he presents at the Sohn Australia conference in Adelaide next month.
While there may be several candidates for that title, Kourtis, an avowed contrarian investor, has plans to provide his own spice to give the $3500-a-head audience some entertainment for their money when he presents for the second year in a row at the conference.
“It’s very controversial,” Kourtis says of his proposed stock tip for the conference, which raises money for medical research.
Stock tips have to be kept secret until their revelation at the conference. “It (the stock he will tip) has bombed out,” he says. “It’s probably the most hated stock in Australia. I’ll leave it at that.”
When Kourtis presented to the Sohn conference at the Sydney Opera House in November last year, he used pictures of Darth Vader, Hannibal Lecter and US professional wrestler Lord Humungus in the lead-up to his recommendation of sleep apnoea company ResMed.
Out of favour at the time because of fears that new obesity drugs such as Ozempic would undermine the market for sleep apnoea equipment, ResMed had been trading in the low $23 when he tipped it last year. The stock closed on Friday at $35.64 – a 50 per cent-plus increase.
Despite a career of more than 30 years in funds management in Australia, Kourtis recalls his nervousness when he was speaking on stage at the Sydney Opera House.
It was a combination of a strong belief that ResMed was undervalued and the primeval fear of any public stock tipper that they could get it spectacularly wrong before an audience of top fund managers.
“I was at Sohn thumping the table (for ResMed) with my pants around my ankles,” he recalls in an interview with The Australian.
While other Sohn presenters talk passionately about their appearance at the conference being driven by a desire to support medical research, Kourtis says he had to have his arm twisted by Sohn Australia founders – Barrenjoey executive chair Matthew Grounds and Sydney businessman Gary Weiss – to present for a second time this year.
While he likes the idea of supporting medical research, he says he does not need the stress again of tipping a stock that could blow up on him if it goes pear-shaped.
If he did tip a stock that went badly, as he told the Sohn conference last year, he would “be in more trouble than the early settlers”.
But Kourtis is confident that his appearance will add to the colour of the event, being held in Adelaide for the first time.
Kourtis runs the Australian share fund for Ellerston focusing on ASX 200 stocks.
“Of those 200-odd stocks there are only 70 which are investible,” he says.
His fund had a concentrated portfolio of about 23 stocks and he describes himself as a “bottom up stock picker”.
“I’m not a propeller head, I’m not a quant, I’m not a growth at any price investor,” he says.
“I would call myself a selective contrarian, a value-oriented and valuation-disciplined investor, rolling up my sleeves. Good old-fashioned stuff.”
He also likes to describe himself as a “fully invested bear”.
Other out-of-favour stocks he has bought over time have been Insignia, CSL, and Fortescue earlier this year when its price was hit by the slump in iron ore prices due to the slowdown in China.
But then there have been others that he would prefer not to be reminded of, including financial software company Iress, whose shares have not done so well.
“I have nightmares around that one,” he admits. “I was too early on it.”
Recent buys have included building and restoration company Johns Lyng.
“If a hurricane or a cyclone rips your roof off, you ring your insurance company and then ring Johns Lyng,” he says. “They come to the rescue and put a tarp over your roof. Given the incidences of hurricanes, cyclones and natural disasters, they’ll be busy for the next 500 years.”
Kourtis says the stock is a “former market darling” that has fallen out of favour.
“Everyone loved it at $7 and $8 not that long ago but back in February it was $4 a share. You couldn’t give it away,” he says.
The stock closed at $3.91 on Friday, but he is still a fan.
He also likes some retail stocks and is an admirer of Solomon Lew, recently buying into Premier Investments.
A funds manager Hall of Fame member, Kourtis has been a director and portfolio manager of Ellerston since 2005. He joined Ellerston from Melbourne-based Portfolio Partners, which he co founded in 1994.
Kourtis is an avowed long-only investor with no interest or desire to be a short – an investment practice that he regards as highly risky.
“Shorts are for the beach,” he says. “You can quote me on that.”
Despite the outperformance of the US market in recent years, Kourtis says he will continue to focus on his speciality of ASX 200 stocks.
He predicts there will be structural changes ahead for some big companies that will be forced to look overseas for expansion given the federal government’s plans to tighten merger laws.
“If you are the number one player in a market, you will have Buckley’s chance of buying the number two player in your industry,” he says. “You are seeing more companies sniffing around for acquisitions offshore.”
This year’s Sohn is expected to bring the total funds raised for medical research by the conferences in Australia to more than $70m since the first one in 2016.
Sohn Hearts & Minds will be on Friday, November 15 at Festival Theatre in Adelaide. Themes for the 2024 event will explore space, AI, geopolitics, biosciences and investing.
The conference includes stock picks from leading investment experts from around the globe, including Jordan Katz, managing director at Advent Global Opportunities in Boston; Beeneet Kothari, chief executive at New York-based Tekne Capital Management; Ricky Sandler, CEO of Eminence Capital; Samir Mehta, senior portfolio manager at JO Hambro Capital Management in Singapore; and Sydney-based Vihari Ross, portfolio manager at Antipodes Partners.
It is being held in partnership with the South Australian government, with half the proceeds from this year’s event going to the South Australian Health and Medical Research Institute.
sohnheartsandminds.com.au
Originally published as Why Ellerston Capital’s Chris Kourtis plans to back a ‘hated’ stock
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