Three things that got the team talking this week - Firetrail Investments

Weekly insights from the Trail

Three things that got the team talking this week

November 11, 2022November 26th, 2023

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1. Hot property…

This week, Origin Energy (ASX: ORG) announced a huge $18.4 billion takeover bid from a partnership including Brookfield Asset Management and MidOcean Energy. If it goes through, Origin’s energy markets business will be spun into the $15bn AUM Brookfield Global Transition Fund, while MidOcean will take its LNG assets.

The $9 per share bid represents a 55% premium to the pre-announcement share price of $5.81. It affirms Firetrail’s view that Origin’s energy assets are highly attractive and undervalued by public equity markets. Over the coming year, Origin is set to benefit from high electricity and gas prices, a credible plan to decarbonise and 4.2 million retail customers.

Origin is a significant overweight position in the Firetrail High Conviction Fund and Firetrail Absolute Return Fund.

Illustrative only and not a recommendation to buy or sell any particular security

2. Work to live…

The US is facing an affordable housing crisis. ~7 million families pay more than half of their income in rent. And the pressure is building on those families.

Source: Zillow. Analysis based on average hourly earnings and Zillow’s Rent Index

3. Why we see glitter in gold…

There’s been a meaningful disconnect between the AUD gold price and Aussie gold miners this year, as shown in the chart below. Part of the reason is mining cost inflation due to labour costs, general inflation and in some cases lower copper prices. Some of these headwinds are likely to subside over time and we feel there is a strong case for including gold miners as a defensive part of a portfolio.

Slowing interest rate hikes, a softening USD and a recession usually support a higher gold price. Our pick of the gold miners is Newcrest Mining (ASX: NCM). We expect that NCM will move from 3 to 6 tier one gold mines over the next few years. The share price is very attractive at current levels considering its growth prospects.

Source: FactSet, Firetrail

Illustrative only and not a recommendation to buy or sell any particular security

Disclaimer

This article is prepared by Firetrail Investments Pty Limited (‘Firetrail’) (ABN 98 622 377 913, AFSL 516821) as the investment manager of the Firetrail Australian High Conviction Fund (ARSN 624 136 045), the Firetrail Absolute Return Fund (ARSN 624 135 879), the Firetrail Australian Small Companies Fund (ARSN 638 792 113) and the Firetrail S3 Global Opportunities Fund (ARSN 653 717 625) (‘the Funds’). Pinnacle Fund Services Limited ('PFSL') (ABN 29 082 494 362, AFSL 238371) is the product issuer of the Fund. PFSL is not licensed to provide financial product advice. PFSL is a wholly-owned subsidiary of the Pinnacle Investment Management Group Limited (‘Pinnacle’) (ABN 22 100 325 184). The Product Disclosure Statement (‘PDS’) and Target Market Determination (‘TMD’) of the relevant Fund are available via the links below. Any potential investor should consider the PDS and TMD before deciding whether to acquire, or continue to hold units in, the Fund.

Links to the Product Disclosure Statement: WHT3810AU, WHT5134AU, WHT3093AU, WHT7794AU

Links to the Target Market Determination: WHT3810AU, WHT5134AU, WHT3093AU, WHT7794AU

For historic TMD’s please contact Pinnacle client service Phone 1300 010 311 or Email service@pinnacleinvestment.com

This communication is for general information only. It is not intended as a securities recommendation or statement of opinion intended to influence a person or persons in making a decision in relation to investment. It has been prepared without taking account of any person’s objectives, financial situation or needs. Any persons relying on this information should obtain professional advice before doing so. Past performance is for illustrative purposes only and is not indicative of future performance.

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