From Valuations to Volatility – Breaking Down the ASX Reporting Season and What Comes Next?
Featuring insights from SGH High Conviction Fund Portfolio Manager Hamish Tadgell.
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Breaking Down the ASX February Reporting Season
In this episode of the SGH Podcast, Hamish Tadgell—Head of Australian Equities and Portfolio Manager for the SGH High Conviction Fund—shares key takeaways from the ASX February reporting season. From stock-specific insights to broader sector themes, Hamish breaks down how the fund is positioned for opportunities in the 2025 Australian equities market.
How the SGH High Conviction Fund is Positioned in 2025
“At a very high level, I’d describe it as a resilient reporting season against a more challenging economy,” says Hamish Tadgell.
Despite minor earnings downgrades, small-cap stocks demonstrated strong growth potential, which is expected to benefit from interest rate cuts.
SGH High Conviction Fund, is designed to identify high-quality investments that align with our strategic approach. We run a concentrated portfolio of up to 30 high-conviction Australian equities and we focus on long-term earnings growth potential, while meticulously managing risk regardless of the economic and investment environment.
Sector Highlights: Investment Themes Driving the Fund
Consumer Discretionary: Selective Growth Plays
Consumer stocks remain an area with mixed performance across the sector. Electronics retailers like JB Hi-Fi delivered strong results, while general retail saw pressure due to inflationary challenges.
“We’ve positioned ourselves in companies with structural growth,” says Tadgell, referencing Aristocrat and new addition Light & Wonder as examples of holdings benefiting from favourable industry tailwinds.
Industrials and Building Materials: Cyclical Recovery
“The macro environment remains challenging,” Tadgell explains, particularly for building materials and industrials. However, well-managed companies such as James Hardie and Reliance Worldwide remain core holdings in the SGH High Conviction Fund, positioning the portfolio to benefit from the economic recovery as market conditions improve.
Financials: Adjusting Exposure to Banks
“Bank valuations have been stretched, and their ability to outperform is now constrained,” says Tadgell. As a result, the SGH High Conviction portfolio remains underweight in banks, reducing exposure to institutions facing compressed net interest margins. Instead, the fund focuses on identifying opportunities in sectors with stronger earnings growth potential.
Investing in AI, Data Centres, and REITs
AI and digital infrastructure continue to drive long-term investment opportunities. The SGH High Conviction Fund has strategically invested in NEXTDC, a leader in cloud computing and data centres, positioning itself for continued growth in AI demand. Additionally, the fund recently added Vicinity Centres, a premium retail REIT, to capitalise on improving consumer sentiment and strong rental growth.
Strategic Exposure to the Energy Transition
The SGH High Conviction Fund maintains strategic exposure to the energy sector, particularly in domestic gas production.
“The transition to sustainable energy is undeniable,” says Tadgell, highlighting holdings in Beach Energy and Amplitude Energy. These investments align with our view that traditional and renewable energy sources will play a vital role in Australia’s future.
SGH Fund Strategy: High-Conviction, Long-Term Focus
The SGH High Conviction Fund is designed for investors seeking exposure to high-quality Australian equities with strong potential. By focusing on fundamentals, active risk management, and valuation discipline, the fund aims to deliver superior long-term performance.
“Focusing on fundamentals and investing in quality businesses at sensible valuations is more important than ever,” says Rob Hogg.
Ready to explore high-conviction investment opportunities in Australian equities?
Learn more about the SGH High Conviction Fund or contact our team at bdm@sghiscock.com.au.
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Disclaimer: SG Hiscock & Company has prepared this article for general information purposes only. It does not contain investment recommendations nor provide investment advice. Neither SG Hiscock & Company nor its related entities, directors or officers guarantees the performance of, or the repayment of capital or income invested in the Funds. Past performance is not necessarily indicative of future performance. Professional investment advice can help you determine your tolerance to risk as well as your need to attain a particular return on your investment. We strongly encourage you to obtain detailed professional advice and to read the relevant Product Disclosure Statement and Target Market Determination, if appropriate, in full before making an investment decision.
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