Insync Funds Management, an Australian money manager, bought shares of Nestlé SA after the Swiss central bank’s unexpected removal of its currency peg roiled equities.
Nestlé slumped 13 per cent in the two days following the Swiss National Bank’s decision to remove its trading limit against the euro, dragging valuations on the world’s biggest food company to a 10-month low. Nestlé makes up 22 per cent of Switzerland’s benchmark stock index.
“We like to take advantage when we see sharp moves in stocks because of the perceived risks that the market might take as extremely bearish,” Nitesh Patel, Sydney-based portfolio manager for Insync Funds Management’s Global Titans Fund, said in a phone interview today. “We’re long-term investors and are in it for three to seven years or maybe more. Nestlé can still continue to increase their returns.”
Patel said he’s also considering buying stock of drugmaker Roche Holding AG after a 13 per cent two-day tumble. His un-hedged global share fund has returned 11.5 per cent a year over the past five years, beating its benchmark MSCI World ex-Australia Total Return Index.
It counts Walt Disney Co., Oracle Corp and drugmaker Sanofi among its largest holdings, with health-care and consumer discretionary shares comprising almost half of the fund.
The SNB sent shock waves through currency and equity markets on 15 January by announcing it was abandoning its three-year-old cap of 1.20 per euro on the franc. The Swiss Market Index of shares trading on Geneva, Zurich and Basle exchanges slumped 8.7 per cent that day, the most since 1989.
Nestlé, which Patel has held since his fund began on 7 October, 2009, gained 54 per cent over that period through yesterday, compared with a 50 per cent increase on the MSCI World Index. The company traded for 18.4 times estimated earnings on 16 January, the lowest since March, according to data compiled by Bloomberg.
“When stocks overshoot on the downside we like to take advantage,” said Patel. “We invest in companies that have a long runway to success and Nestlé certainly fits in that.”
Bloomberg News, edited by ESM
