The ASX company result looming largest on Antares’ radar

Alongside the key things he's watching as first-half FY2023 results roll in, John Guadagnuolo explains how his team decides when to sell
Glenn Freeman

Livewire Markets

The half-yearly result from a company that holds the lion’s share of Australia’s online job search market is one of those most eagerly awaited by Antares Capital Partners this month.

“We know there’s been an increase in the labour force as migration has started to return, albeit slowly. So, there are more applicants per job ad,” says John Guadagnuolo, head of fundamentals and senior portfolio manager, Antares Capital Partners.

He and the team running the Antares ex-20 Australian Equities Fund are looking for a “vindication of our thesis” for yield improvement at the company and its ability to set prices that are appropriate for the current economic environment.

More broadly, pricing power is one of the themes they’re watching closely in the company announcements coming through this earnings season. This and other attributes tie into the Antares team’s approach to another critical part of investing that’s often underplayed: When to sell.

In the following video, in addition to revealing the name of the company alluded to earlier, Guadagnuolo discusses the team’s portfolio management process, including:

  • red flags they watch for
  • the “how and why” of rotating stocks out of – and into – the portfolio, and
  • Nuances of its views on stocks as either core or tactical portfolio inclusions.

Watch the video or read the edited transcript below to find out more

Edited transcript

How do you know when to sell stocks?

John Guadagnuolo - There's a couple of answers to that. One goes to our process. We are quite risk-focused, and so there are certain things that we just don't like. Unanticipated changes of governance, things like that, they are a sell signal to us, and we do sell on them. Another thing that we also focus on, we have our core and our tactical stocks. So tactical stocks are much more driven by valuation. When a tactical stock is clearly overvalued, we will sell it. That's because you are dealing with something that's short term in nature. Therefore, if you've got your return, unless you have very strong grounds, that's it.

With our core stocks, it's a much more nuanced thing. We will top and tail them a little bit. When they push up against our valuation, we might reduce them a bit because we know that things go in and out of favour, and you've got to be able to take opportunity like that. But they're really important things in our process.

The other thing that when we look to sell something is when we talk about risk. We like generally to switch like for like. 

If we take out a stock of a certain type, we like to replace it with a stock of a similar type. It might not be the same industry or the same sector, but it might have similar characteristics, be it core stock or a tactical. If there's a better opportunity in that space, that'll be the reason to switch them. 

So there's a number of reasons why we sell, but they're driven by the process, and they're quite clear.

Part of our sell discipline is that we, in our research, try to identify what is driving a stock price. Is it market share? Is it the price of an underlying commodity? Is it change of industry structure? Those types of things. We call it a factor, and we try to identify that factor. If we discover a change in that factor, if it starts to move away from the direction that we like, that's typically a trigger to sell as well.

What are the most important themes during this reporting season?

It'll be interesting to see the impact on companies' cost basis of inflation. I mean, that's the key issue. We know inflation's been running at a higher level than we've seen for many, many years. We've seen minimum pay granted a 5% pay rise, to low income earners and that type of thing. So it'll be interesting to see how that's starting to flow into company results - how companies deal with that inflation in their cost base because we haven't had it for quite a long period of time. It'll also show who has the ability to price, to deal with that, as well as to make themselves more economic.

I mean, one thing about taking price, to be honest, we're not that keen on it in our strategy because there are exceptions to that. But generally, we prefer companies to keep gross margins relatively low, if they can, and drive profit growth through the operating leverage. 

So simplistically, if you take a business that has a gross margin, you can grow earnings by expanding, by taking price, expanding margin, or by putting more throughput and getting velocity. So you get inventory velocity through the business, and that makes a bigger competitive advantage over time. We actually like that. They're not always easy to find. 

Nonetheless, we face a situation where inflation will be in the cost base, and we'll see also which companies' management teams can deal with it, which I think will be the most interesting thing.

The other thing I would probably expect to see is very benign outlook statements given interest rates. Our view on Australia and the Chinese reopening is a medium term view of growth. But over the next three to six months, that's got to come through. So I suspect that we'll also see management of companies being quite conservative in their outlook statements.

Which company are you most excited to hear from this reporting season?

All of our portfolio.. We know that we've had an increase in the labour force as migration has started to return, albeit slowly. So we are able to track that there are more applicants per ad, and that's how SEEK (ASX: SEKsee their value. So we're looking to see vindication of our thesis that the classic ad scenario within SEEK will start to see yield improvement because they're able to offer the employers more value through more candidates because that's how they measure their value.

If you can only provide one or two candidates for an ad, well that's not much value to the advertiser. But if you could provide eight to 10, and a couple of those are very good, then the advertiser's got the value they want. We look forward to SEEK being at a price for that.

A portfolio of tomorrow's leaders

The Antares Ex-20 Australian Equities Fund is an actively managed, concentrated portfolio of Australian equities that have the potential to offer significant long-term capital growth. For more information, please visit the fund profile below. 

Managed Fund
Antares Ex-20 Australian Equities Fund
Australian Shares
In this interview, John Guadagnuolo represents Antares Capital Partners Ltd ABN 85 066 081 114, AFSL 234483 (‘Antares’). Antares issues the Antares Ex-20 Australian Equities Fund (‘Fund’) as responsible entity and manages the Fund as investment manager. Antares is part of the Insignia Financial group of companies (comprising Insignia Financial Holdings Ltd ABN 49 100 103 722 and its related bodies corporate) (‘Insignia Group’). The capital value, payment of income and performance of the Fund or any financial product offered by Antares or other member of the Insignia Group are not guaranteed. This communication has been provided for general information purpose. Even though some information in the communication may constitute general advice, it has not been provided for the purpose of advice or recommendation. It provides an overview only and should not be considered a comprehensive statement on any matter or relied upon as such. It has been prepared without taking into account any investor's objectives financial situation or needs. Investors should consider its appropriateness having regard to these factors before acting on the information. Any reference in this communication to a specific company is for illustrative purposes only and should not be taken as a recommendation to buy, sell or hold securities or any other investment in that company. Securities mentioned in this communication may no longer be in the Fund. The Fund, invests in a concentrated portfolio of Australian listed equities, is designed for investors seeking the potential for higher returns while willing to accept high risk of capital loss and fluctuations in income. Investors should obtain a Product Disclosure Statement (PDS) relating to the Fund and consider it before making any decision about whether to acquire or continue to hold any interest in the Fund. A copy of the PDS is available upon request by phoning Client Services 1800 671 849 or at Any opinions expressed by Antares constitute Antares’ judgement at the time of writing and may change without notice. Antares or any member of the Insignia Financial Group, or their employees or directors do not give any warranty of accuracy, nor accept any responsibility for errors or omissions in this communication. Past performance is not a reliable indicator of future performance. Returns are not guaranteed and actual returns may vary from any target returns described in this communication. Any projection or other forward looking statement in this communication is predicative in character and not guaranteed. The actual results achieved may differ materially from these projections. This communication is directed to and prepared for Australian residents only. Livewire gives readers access to information and educational content provided by financial services professionals and companies ("Livewire Contributors"). Livewire does not operate under an Australian financial services licence and relies on the exemption available under section 911A(2)(eb) of the Corporations Act 2001 (Cth) in respect of any advice given. Any advice on this site is general in nature and does not take into consideration your objectives, financial situation or needs. Before making a decision please consider these and any relevant Product Disclosure Statement. Livewire has commercial relationships with some Livewire Contributors.

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Glenn Freeman
Content Editor
Livewire Markets

Glenn Freeman is a content editor at Livewire Markets. He has almost 20 years’ experience in financial services writing and editing. Glenn’s journalistic experience also spans energy and automotive, in both Australia and abroad – including the...

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