Mirrabooka in hunt for bargains as ‘market nears bottom’

Listed investment fund Mirrabooka believes that the market is nearing the bottom and is on the prowl to scoop up cheap stocks.

Mirrabooka says the market is nearing the bottom of the cycle

Listed investment fund Mirrabooka believes that the market is nearing the bottom and is on the prowl to scoop up cheap stocks.

In a shareholder update on Thursday afternoon, the Melbourne-based fund noted the coronavirus-induced shutdown of the economy has triggered some of the worst returns its investment portfolio has seen since the beginning of the 2008 global financial crisis.

Between November 2007 and November 2008, Mirrabooka’s net tangible asset portfolio incurred a return of negative 40.7 per cent. But the company said it remained focused on providing positive long-term returns.

Meanwhile, Mirrabooka chairman Terrence Campbell said historical price to earnings ratios figures over the past 15 years indicate the sharemarket may now be nearing the bottom of the cycle.

Mr Campbell said PE ratios for small and mid-cap industrials are currently tracking around 12 per cent, which roughly equates in the current low interest rate environment, to the 7-8 per cent PE ratio experienced during the GFC.

However, smaller and medium-sized industrials could also suffer further falls may occur once the market realises the financial impact COVID-19 will have on their earnings,” he said.

“I think the market might get a bit of a shock on these smaller industrials when they come out with their results,” Mr Campbell said. “There will be a very sharp fall in earnings.”

While the pandemic has seen a climate of uncertainty grip global sharemarkets, Mirrabooka said it was scoping out investment opportunities and ready to take advantage of heavily discounted stocks that have followed the market down.

The fund said it may decide to move cash assets into the market in an attempt to firm up positions in well performing entities and to also further diversify its portfolio.

“Quality tends to outperform in difficult economic conditions,” the company said. “The strong tend to get stronger as opportunities arise following a downturn.”

In the current financial year to date, the group has purchased a 2.1 per cent stake in Oil Search and a 2 per cent holding in waste management group Cleanaway.

Mirrabooka’s largest shareholdings are in Mainfreight, James Hardie Industries and Seek, where it holds respective stakes of 4.8 per cent, 4.2 per cent and 3.2 per cent.