Aristocrat (ALL) shares have traded in a tight range between $20 and $22 over the last five months. The stock has been consolidating after a strong run but I am firmly of the view that this short-term share price consolidation phase is an opportunity to increase holdings in ALL ahead of a further re-rating to new highs in the months and years ahead.
The AIM Global High Conviction Fund has used this period of share price consolidation to increase our exposure to ALL, now making it one of our very biggest portfolio holdings. As a global fund we will buy an Australian stock if we believe it is the best in its sector in the world and looks cheap versus global peer multiples. ALL fits both those descriptions.
We are of the view that ALL’s FY17 results on November 30 will be better than their own guidance and better than current analyst consensus. This will lead to upgrades to FY18 consensus estimates and should concurrently drive a re-rating of the stock.