At the Sohn Hearts & Minds conference that took place in Melbourne today, leading fund managers from Australia and around the world shared their best investment ideas to raise millions of dollars for medical research.
In a surprise end to the event, Myer’s tormentor, Premier Investment’s Solomon Lew has made an unscheduled appearance.
Both thanking the room and commanding its attention, Lew stood up and said “I’m not trying to do a Kanye on you,” to MC Dr Renee Lim, explaining his bet to have Gary Weiss play a classic rock tune on the condition Lew raised half a million dollars.
In what became an all-out auction, Lew managed to canvas an extra $60,000 from the crowd, taking the total to $560,000, $200,000 of which was donated by his own family trust. Geoff Wilson tipped in a handy $20,000.
Weiss duly played Steppenwolf’s Born to be Wild.
See today’s Trading Day blog for more from the Sohn Heart & Minds conference
But it was stock tips that investors are here for and stock tips they got — with presenters tipping the likes of Nufarm, plumbing company Reece and US heavy-hitter Amazon.
Here are a selection of the top tips:
Quoting Confucious, Tribeca Investment Partners’ Jun Bei Liu has underlined the importance of education in China — why she’s backing NYSE-listed New Oriental Eduation and Technology.
Answering “why do tiger mums exist” she says there is a huge amount of pressure from six adults raising one child under as birthrates have been kept low in China under the one child policy.
New Oriental operates in the education sector in China, particularly in the afterschool market and plays to the tiger mums in China as the largest private education service provider in the country.
“Currently China’s afterschool market stands at just over $52 billion, but with penetration of just 37pc compared to levels of 70-80pc in Japan and Korea,” Ms Liu says.
In addition to a diatribe against the ALP’s planned changes to franking credit policy, leading investor Geoff Wilson from Wilson Asset Managementrecommended Bandai Namco, a Japanese video game development company.
Shares in Bandai Namco, he said, had the potential to increase by more than 50 per cent in the “next little while”.
Annual revenue growth in global gaming was 10 per cent, and even more at about 20 per cent in the mobile segment.
The total number of gamers in the world topped 2.3 billion.
Mr Wilson said Bandai Namco was the result of a merger between a toy company and a gaming business.
It had good management, strong cashflow and was cheap.
The company was also growing at a similar rate to the wider industry, but its multiple was about half of its peers.
Billionaire tech investor Alex Waislitz quite literally swapped his signature fedora for a hard hat on stage — tipping $122 million Austin Engineering (ANG) as his Sohn Hearts and Minds pick.
Quoting Mark Twain, he said, “In a gold rush, sell shovels — and these are the biggest shovels you can imagine”.
Detailing the company’s hit after the mining slump, the chair and founder of Thorney Investments — which holds a 21.2 per cent stake — says the company has rebuilt the company and revitalised its board.
Shares in the firm jumped as much as 6 per cent after the presentation.
“There is more to come in our view, Austin’s order book is strong and it is now well placed to benefit in the upswing of the mining cycle and the long awaited equipment replacement cycle,” he said.
“Predictions for capital expenditure for the top mining companies is set to increase for the first time in four years.”
“At Thorney we are patient but demanding, very demanding investors — if we believe in a company we work with it to unlock value and we have with Austin.”
Cooper Investment namesake Peter Cooper says satellite radio stock SiriusXM is one of the best media companies in the world and its only going to get better.
Cooper said the American broadcasting company has already turned itself around thanks to good management and will turn its attention to recent acquisition of free service Pandora online radio in the hope of doing the same.
Cars of the future could resemble something more like a lounge room, according to Paradice Global manager Paul Masson, and that’s good news for premier automotive seating business in North America, Lear.
The NYSE-listed stock is well placed to leverage both the increased demand for larger cars, and development of driverless and electric vehicles thanks to its dual-revenue focus with seating and e-systems, Masson says.
“Fully integrated electronic architecture for motor vehicles has significant barriers to entry for new companies and by 2023 we see the e-systems business delivering the majority of Lear’s profits,” he told a second session of the investment conference.
Cota Capital founder and managing partner of Cota Capital Babak Poushanchi says he has an opportunity to make two times your money in the next two years … all you have to do is sign on the dotted line, electronically.
His tip is DocuSign, a San Francisco based tech making contracts digital and helped by a new acquisition allowing for the creation of the documents themselves.
“DouSign now has the ability to get you all the way to get to the signing process and then search through your records to cover the entire workflow of the agreement,” he said.
But the key is the company’s customer base — large growing customers the likes of SalesForce make up 86pc of revenue while their top 100 customers have expanded their use by five fold.
Fertiliser maker Nufarm (NUF) has had its stumbles, but investors should ignore noise on potential bans of its products, according to Firetrail Investments deputy Blake Henricks.
Mr Henricks said concerns about glyphosate were overdone and that Nufarm’s development pipeline was essential to meet world food demand.
His tip was one of the first of many to be aired in this meeting of Australia’s best investment minds, all vying for the title of top investor with the best returns.
Apple might have beat it to the $1 trillion mark, but Amazon will beat it to $2 trillion, according to founding partner and chief investment officer of Munro Partners, Nick Griffin.
The general consensus is that Amazon can’t be a good investment because its too expensive … but that’s not true he says.
“Amazon has roughly held 20x EBITDA and the share price is tracking the growth in EBIDTA … it is simply capitalising on the growth of eCommerce and cloud computing.”
“We see Amazon as our best idea, even though it has been in our portfolio in the past five years. In theory, the growth can continue as they leverage the structural trends.”
JB Hi-Fi (JBH) is one of the most shorted companies in the Australian market but Auscap Asset Management’s Tim Carleton is backing it as a long.
Acknowledging the completion of Amazon, he says JB simply has a better offer — using its store network to its advantage for deliveries, offering in-store expertise, and offering more competitive pricing.
Adding to that, he says headlines of softening housing market are overlooking high levels of household wealth, economic and population growth and lower unemployment.
“We are in the middle of a technology super cycle, this is who will sell it to us for the next twenty years,” he says, closing out with a rhyme:
“Short interest might be high but we think it a buy.”
Founder and CIO of APS Asset Management Kok Hoi Wong says he was inspired by Edward Snowden in 2013 for his pick of Venustech, China’s dominant cyber security firm.
He says the company’s value is compelling with a broad customer base, with 80pc of governments, 80pc of banks, 60pc of the top Chinese companies.
“High entry barriers are maintained by a 20pc spend in research and development across a broad product space,” he says.
“The recent share price correction has made Venustech a strong buy again … Today China is building a new wall in cyberspace that we can’t see or touch but can profit from.”
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With a rock star introduction as the ‘Man who helped to break the Bank of England’, Key Square Capital Management CEO and chief investment officer Scott Bessent took the stage at Sohn Hearts & Minds to share his take on the three forces driving macro investing — divorce, disruption and divergence.
“The hardest part of macro investing is distinguishing what you want to happen and what is likely to happen.” he says, telling the crowd how he tipped Trump’s presidential victory.
Adding to his speech to Sohn Hearts & Minds, Scott Bessent sat down with Mark Nelson for a more informal Q&A.
Detailing his strategy on assessing currencies, he says he starts with academic metrics then goes through the “plumbing” — what’s happening in the financial sector and within the economy.
“For what we do, the first thing is what is the big idea and then identifying the best instrument to get the most out of it,” he said.
“Over the past few years our best year has been the reflation of the yen — it started as a short of the yen, then moves through bonds, exporters and back to the yen.”
He says behavioural influence is 80-90pc of investing and that assessing incentives is key.
Airlie Australian Share Fund portfolio manager Emma Goodsell has detailed the transformation of the family plumbing business Reece (REH), tipping it as her stock to watch.
“Through many housing cycles Reece has maintained excellent returns and continued investment in their stores and in their technology,” she said.
Detailing Reece’s acquisition of US business MORSCO, she says its not a fixer-upper like Bunnings UK.
There were also a few presenters that recommended some shorting opportunities, these included:
Regal Funds Management’s Craig Collie has tipped a 80pc drop for biosimilar stock Celltrion, describing the management of the company as a “doozy”.
While Montaka’s Chris Demasi has put forward iconic brand Campbell’s Soup as his short pick.
“We used to go the middle aisles of the shopping centre to buy food but today we’re shopping differently — fresher, healthier and with brands that engage with us.”
“Everything that was once a tailwind for Campbells is now a headwind.”