Fund manager James McDonald at the Pengana High Conviction Equities Fund provides insight into some of the current opportunities arising for the Fund.
In particular, James explains why stock example Howard Hughes is very well placed to benefit from the current environment and how it fits in the portfolio structure. With a targeted portfolio made up of less than 20 stock holdings, Howard Hughes is one of the stocks held by investors in the Pengana High Conviction Equities Fund.
Howard Hughes is a long-term fundholding and is a US property developer that owns both operating property assets such as officers, and also owns large tracts of land which it slowly sells off to housing companies to develop.
Howard Hughes, the billionaire aviator, bought the first block of land in Las Vegas in the 1950s. It’s a vast piece of real estate that will house 200,000 residents in one of the most desirable Las Vegas suburbs when it’s completed.
The second, block of land is Ward Village, attractively situated in Honolulu at the northern end of famous Waikiki Beach. The company has a plan to build about 13 high-rise buildings on this land over the next 10 years. The city is popular with both US and Japanese tourists, and there’s a shortage of local housing, creating attractive economics.
The next block of land is the Seaport District, an entertainment area in New York near Wall Street, which we finished at the end of this year
This gives a flavor to some of the land they own.
The company is trading at a significant discount to the net asset value with the company calculation of this being around $150 per share compared to the current price of $82 per share. Even taking a discount to the company valuation, it’s still a decent upside to the share price. If land prices were to rise more quickly then there might be further upside to this price.
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A concentrated portfolio of ethically screened global companies