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The view from K2: Stephen Scott shares three companies he favours

April 14, 2021

The view from K2: Stephen Scott shares three companies he favours

Side-effects caused by the AstraZeneca COVID-19 vaccine have created a detour on Australia’s road to recovery, but K2 Asset Management’s Stephen Scott says the country’s outlook remains positive.

Side-effects caused by the AstraZeneca COVID-19 vaccine have created a detour on Australia’s road to recovery, but K2 Asset Management’s Stephen Scott says the country’s outlook remains positive.

Speaking on Reach Markets’ fortnightly Meet the Fund Manager webcast on Friday, Mr Scott said Australia has “managed the virus very well”, setting the local economy up for growth.

And even though the AstraZeneca vaccine – which forms the backbone of Australia’s vaccine rollout – is no longer recommended for those under the age of 50 due to the risk of blood clotting, Mr Scott is confident the country will be able to solve the problem.

“Australia has managed the pandemic right, and will get the vaccine right, it will just take time,” he said.

“I’d rather be in Australia looking out, than anywhere else right now.”

While Mr Scott said the economy will likely continue to grow, he cautioned investors to be wary of individual companies whose growth potential can be disputed.

“We’re really looking for sectors where the growth rates aren’t contested,” he said.

“We prefer to select sectors where we think it’s reasonably established that there’s underlying growth.”

Under these circumstances, Mr Scott picked three companies he believes will perform well in the coming months.

SDI (ASX: SDI)

The pandemic-driven switch to remote work in 2020 created an unexpected demand for cosmetic surgeries, linked to the use of Zoom and other video conferencing technology, forcing consumers to look at their faces all day.

SDI is one company Mr Scott believes will benefit from this growing market. The company produces specialist dental products including cements and sealants for medical professionals.

Mr Scott even has first-hand experience watching the company produce some of these goods.

“We’ve been to the premises, we’ve seen fillings being made right before our very eyes,” he told webcast guests.

Importantly, the company also produces teeth whitening products – which Mr Scott highlighted as a key way into the growing industry for cosmetic treatments.

PayGroup (ASX: PYG)

Established financial technology companies are a basket Mr Scott feels very positively about under the current market circumstances.

PayGroup – which provides payroll and human capital management software-as-a-service – fits this bill nicely.

“We think they occupy commanding heights in terms of their role within business, they’ve got good reference customers, and interestingly enough their market cap to their annual recurring revenue is relatively low compared to other software businesses,” he said.

 SECOS Group (ASX: SES)

One of the few highlights of 2020’s year indoors were stories and videos of dolphins returning to Venice’s canal as reduced traffic on the famous waterways resulted in cleaner water for the purported porpoises to swim in.

These videos were sadly fakes (although the animals did make a surprise appearance in 2021), but prompted avid discussions about pollution and the environment.

Mr Scott tipped SECOS Group as one business which stands to benefit from this budding interest in sustainability.

SECOS manufacture sustainable and biodegradable plastic packaging and materials.

“We think that packaging is increasingly going to lean towards being biodegradable and sustainable,” he said.

“We believe that they’re [SECOS Group] well positioned to participate in this trend”, he further added

 

This article is a summary of the information Mr Scott shared with us during our fortnightly ‘The Insider: Meet the Fund Manager’ session. You can watch a recording of the session below, or you can click here to book into our next installment of the series.

 

Reach does not assume responsibility for the accuracy or completeness of any information provided, and the views expressed are not reflective of Reach Markets position.

Any advice contained within this presentation is general advice and does not consider your personal circumstance, you should consider whether it’s appropriate for you.

The information we are giving you is for educational purposes only. “Investing is about understanding your risk” and every time you invest in the share market there is a risk of loss.

 

Sources:

 


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