Global investor David Paradice still finds gold on the ASX

Aside from his HK and China plays, David Paradice has a slice of one of the ASX’s hottest stocks.

David Paradice has a slice of one of the hottest stocks on the ASX. Picture: Tomasz Machnik

David Paradice’s newest fund has more than a quarter of its holding in China and Hong Kong-exposed stocks, most of which are consumer discretionary-based companies that have outperformed the markets so far this year.

But the veteran stockpicker is still finding good quality stocks in Australia, with his Paradice Investment Management recently emerging as a substantial shareholder in one of the hottest stocks on the ASX.

Paradice’s firm spent the second half of May building an almost 6 per cent stake in Westgold, which has four gold mining projects across Western Australia and the Northern Territory.

• Name: David Paradice
• Age: 60
• Lives: Sydney
• Estimated wealth: $599 million
• Source: Boutique fund manager Paradice Investment Management
• Secrets of success: Buying gold stocks this year, starting global emerging markets fund

While Westgold shares are up almost 120 per cent since January 1, Paradice is still in the money, even after buying in during May. Given current share trading levels, his firm has made between 12 to 40 per cent on its investments in about three months.

Picking stocks is all in the timing, and it seems Paradice has once again chosen a good time to get into mining stocks as commodity prices, particularly the safe haven of gold, rise.

Paradice earlier this year also topped up its stake another gold producer in Silver Lake Resources, as well as buying more shares in nickel producer Western Areas in the past month.

Silver Lake has more than doubled since January 1 and has increased by at least 30 per cent since Paradice was buying shares in April, while Western Areas is up 32 per cent since the beginning of the year.

Another good performing mining stock for Paradice has been Queensland company Stanmore Coal, which is up 42 per cent during 2019. Paradice topped ups his Stanmore stake during February.

Otherwise, Paradice also has shares in gold miner Northern Star Resources, which is up more than 40 per cent since May. In June his firm emerged with a 7.7 per cent stake in uranium explorer Deep Yellow, though its shares have fallen about 10 per cent since then.

Paradice is also still up about 70 per cent on the shares in Mount Gibson Iron his firm bought last October, though the iron ore miner’s share price has fallen about 40 per cent since May.

Paradice is celebrating 20 years at his stock-picking firm, which accounts for the bulk of his estimated $599m wealth on The List — Australia’s Richest 250, published by The Australian.

It now has more than $16.5bn funds under management, spread across five main funds. It made a $78 million operating profit in 2018 with Paradice owning the majority of the company, having moved back to its Sydney headquarters after a stint working and living in Denver.

The latest fund in his portfolio is the fledgling Paradice Global Emerging Markets Fund started in July. It has more than doubled the performance of its benchmark, investing in a mixture of technology, consumer and education companies with a focus on China, Brazil and Hong Kong.

It joins the firm’s Global Small Cap Fund as the second Paradice fund to be managed from the US, with Kevin Beck overseeing the global small to mid cap-fund from Denver. The emerging markets fund is managed by Paradice recruits Edward Su and Michael Roberge in San Francisco.

In the few months since the duo’s fund has been in operation, the best performers among its top 10 holdings have been a Chinese education provider, followed by a company part-owned by the state and partly listed on the Shanghai Stock Exchange.

Shares in New Oriental Education & Technology Group, a private education provider in China, have surged 90 per cent since January 1, while Kweichow Moutai, the manufacturer of the famous Chinese drink of the same name, is up 79 per cent in the same time.

Other holdings include Brazilian higher education company YDUQS, up 32 per cent this year, the Indian HDFC Bank, which has risen about 5 per cent, and Russian technology firm Yandex, which is up 35 per cent.

The fund’s biggest holding is the giant e-commerce and technology group Alibaba, which has risen 27 per cent in value since January 1.

Two Hong Kong-listed companies - insurer AIA Group and conglomerate Tencent Holdings - make up the remainder of the fund’s top three stocks. AIA and Tencent are up 19 per cent and 5 per cent respectively this year.

The fund started on May 15 and it achieved a gross return of 8.67 per cent since inception, compared to a 4.25 per cent increase for its benchmark MSCI Emerging Markets Net Total Return Index.