Pacific Horizon – Convergence opportunity

Pacific Horizon (PHI) appears to have, in 2022, found itself at a convergence of both negative sentiment towards Asia and growth stocks more generally (seemingly a function of lockdowns in China, a slowing global economy and rising interest rates). While there has been a dent in its performance in the short term and it has been pushed it down its peer group rankings, the manager remains confident in the portfolio, commenting that, in its view, many of its companies are cheap (Asia Pacific ex Japan equities are trading at close to their five-year lows on a P/E basis, and look cheap versus global equities more generally), are cash generative and retain their strong growth prospects. Perhaps reflecting the current poor sentiment, PHI’s discount is approaching its five-year high (excluding a brief spell during COVID), which might offer investors an additional layer of comfort as there is the possibility that it could tighten if sentiment improves.