State Street's Top Stock Picker Buys Beaten-Up Mining Companies

  • Engel buys some major Australian mining shares, avoids energy
  • Volatility in resources remains deterrent to larger positions

Olivia Engel, whose Australian equities fund beat 96 percent of her peers, is buying some of the country’s most beaten-up stocks.

State Street Corp.’s investing in some resources companies after shares slumped this year as commodity prices collapsed, Engel, head of active quantitative equities for Asia Pacific at the asset manager, said at the Bloomberg Summit in Sydney. She’s bought Australian mining stocks, with the industry remaining a small part of her fund, while avoiding energy explorers, she said.

“The reason I only dipped the toes in is that the volatility is too high," Engel said, citing uncertainty about China’s economic outlook and policy response, and the prospect of higher U.S. interest rates. “That volatility is unattractive to me. Eventually, the brave ones that are piling into resources right now will be correct. But it’s still too early” to accumulate bigger positions.

Engel’s fund placed 19th of 534 Australian equity funds tracked by Morningstar Inc. over the past five years through Oct. 31. Her outperformance was partly because she had shunned materials stocks.

Share Slump

The S&P/ASX 200 Materials Index, of which BHP Billiton Ltd. and Rio Tinto Group make up about half, is down 16 percent in 2015, the worst-performing industry after energy. That gauge had an average 30-day volatility of 23.7 this year compared with 16.9 for the Australian benchmark gauge.

“If housing in China is stimulated, then that will mean there is an underlying floor to support Australia resource companies,” Engel said. “And with that in mind, we have got a small position in some of the major miners in our portfolio -- mind you, it’s only 3 percent. It’s pretty small.”

Volatility for raw-materials shares remains high
Volatility for raw-materials shares remains high
Source: Bloomberg

China’s home-price recovery slowed in October as a supply glut in less prosperous cities challenges efforts to revive the residential market with interest-rate cuts and easing of mortgage restrictions. New-home prices increased in 27 cities, 12 fewer than in September, the National Bureau of Statistics said Wednesday.

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