"Our view is that most market penetration stories are expensive. In fact, we believe these names are broadly overpriced and even as EPS growth emerges, stock prices will stagnate or fall given high starting valuations. One exception is retirement village operator Aveo, which will increasingly benefit from the ageing population, but is priced near its net tangible assets. Overall, we see more opportunities in the cyclicals, which of late have been discarded by markets due to an apparent lack of growth. Our preferred play is insurance broker Austbrokers due to its attractive positioning in the cycle and attractive valuation. Its earnings are influenced by the insurance premium cycle as its revenue model is commission driven. Underwriters are significantly under-earning and the only way to improve this is to raise pricing. This move to an up cycle will be very positive for Austbrokers, suggesting the current P/E of 13 times is excessively cheap.” - John Campbell, Portfolio Manager, Avoca Investment Management (quote originally appeared in the AFR: (VIEW LINK) )


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