And despite the risk of further volatility after the price gains of the preceding months are unwound, Mr Frazis argues the ongoing weakness presents an opportunity for investors with a sufficiently patient time horizon.
There’s so many fast-growing, innovative companies, that we don’t need to go to these red-hot ones, unless we get in early.
— Michael Frazis, Frazis Capital Partners
“These are really important times because these are where you want to be adding to positions,” he said. “Carefully reassessing everything, making sure that you’re keeping the book fresh and new.
“But most importantly, making sure you’re properly set for the next upswing. You’ve got to take these opportunities.”
Mr Frazis’ portfolio was up 54 per cent after fees for the calendar year-to-date as of the end of August.
Other fund managers hold a less optimistic view on the outlook, pointing to risks facing sharemarkets which could build on the selling pressure led by the high-value technology names.
“What we are seeing is a natural market response to an extended period of stretched valuations,” Pengana chief investment officer Jordan Cvetanovski said.
“As markets approach meaningful and potentially disruptive events such as the US election, the rise in COVID cases as winter settles in the northern hemisphere and with the tensions between the US and Chinese authorities, not to mention the ballooning debt levels around the world, it exposes the vulnerability of these high valuations in the sharemarket in the face of these risks.
“With that in mind, we anticipate that volatility will not only remain high, but potentially increase in the coming months.”
But while Mr Frazis agreed that the high-profile names that attracted a lot of investor interest remained expensive, there were no shortages of other options for growth companies that have not seen the same price appreciation.
Get in early
“There are parts of the market that are red hot,” he said.
“We’re spoilt for choice at the moment; there’s so many fast-growing, innovative companies, that we don’t need to go to these red-hot ones, unless we get in early.”
One example was Carvana, the US online used-car seller with a disruptive click-and-collect offering that hit headlines this week after it doubled its revenue and said it planned to grow sales volumes by a factor of 10.
Its shares jumped 31 per cent on Tuesday, leaving the stock close to 150 per cent higher since the start of the year.
“The natural consequence of something that doubles every year is that it’s in the headlines three or four years later,” Mr Frazis said. “But we want to get in early.”