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Motley Fool: Here’s a top ASX share this leading portfolio manager rates highly


As well as releasing a stellar full year result this week, Pinnacle Investment Management Group Ltd (ASX: PNI) has also held its annual investment summit.

At the event, a number of portfolio managers provided investors with commentary on shares they are positive on.

On this occasion I’m going to look at what Spheria Asset Management is recommending.

Spheria Asset Management is a specialist small and microcap investment manager with more than $1.7 billion under management across its strategies. For the 12 months to 30 June 2021, the Spheria Australian Microcap Fund returned 81.2% net of fees, costs and taxes.

Which shares do portfolio managers rate highly?

Spheria Asset Management’s Portfolio Manager and Co-Founder, Marcus Burns, revealed that he is a fan of fashion retailer Universal Store Holdings Ltd (ASX: UNI).

Burns said: “So let’s give you an example of a stock we own in our portfolios and we think it’s a really sound idea based on long-term thinking. The stock is called Universal Store.”

“Over the last four or five years, it’s converted almost all the cashflow to earnings or its earnings to cashflow and vice versa. And so it ticks our boxes and it fundamentally, good business with a sound business model. We like it, it’s an on-trend, omnichannel apparel retailer for millennials and Gen Z consumers.”

Long growth runway

Spheria also sees a long growth runway for the retailer in the future and likes the way it leverages new technologies.

Mr Burns explained: “Another reason we like the stock is because it’s incredibly immature. It only has around 66 stores currently, and their target is well over a hundred in Australia, it has no stores currently New Zealand.”

“So that gives you four or five years, runway of double digit space growth. Not only that they make real time use of data to feedback their stock purchasing, many retailers buy in advance their stock for a full 9 months, 12 months in advance and get caught with out of fashion stock at the end of the year and have discount at big prices and really hit the margins.”

“Universal Stores has this technology where they basically reorder multiple times in season buying what’s popular and selling to consumers, what they’re demanding rather than what the buyers think they actually want to get. And they’re pushing a private label,” he added.

Outstanding value

But perhaps best of all, the portfolio manager notes that the Universal Store share price still trades at a very attractive level.

He commented: “And finally, the history of the business is showing incredible outstanding like-for-like sales growth, get all that for about 10 times EBIT, 10 or 11 times EBIT looking one year forward. Which we think represents outstanding value on top of the fact that it’s fundamentally a cracking business.”

This article was written by James Mickleboro and first published on Motley Fool