MENU
 

PRE TAX NTA |$3.76

Value as at close of business on 17 January 2024

CIO Insights - 22 November

Hi everyone

I hope this finds you well and you’re all getting excited for some time off over the festive season and re-connecting with loved ones.
 
I saw a great quote this morning, which I thought was too good not to share:
 
“Expectation is the grandfather of disappointment. The world can never own a man who wants nothing.” 
 
Read that again.
 
Now back to business…
 
You all know by now that the conference is on ‘virtually’ on December 3, which is Friday of next week. A reminder to everyone who has bought tickets that you will be able to listen (and re-listen) to all of the pitches for 5 days, starting at 8:00am AEDT of December 3. As we’ve mentioned before, the Charlie Munger/Mark Nelson Q&A session will, however, only be available to watch/listen at 11:00am AEDT on Dec 3. As always, the stock pitches will be fascinating to watch, and I know the speakers are all excited about their investment ideas for 2022. If you haven’t already registered, you can purchase a ticket here. HM1 subscribers can access 20% off using the discount code: HM1-CONF at the checkout. A reminder that a large percentage of the ticket price is tax deductible and a DGR Status1 receipt will be provided upon purchase. We’ve had some excellent media coverage in the lead up to the event, here is an article in today’s Financial Review with one of our returning speakers, Nick Griffin.
 
Next Monday, 29th November, is the 2021 Annual General Meeting of Hearts and Minds Investments. Again, this will be conducted virtually from 3:00pm AEDT. Details of this can be found here.
 
With less than two weeks to go, most of the 2020 conference recommendations have now been sold, and as I mentioned last week, whilst we’ve had some super-normal gains (Bill. com, Hello Fresh, Yeahka) this suite of stocks has had more negative returners than in previous years (Ping An Good Doctor, Teladoc, Nintendo). Whilst these names may prove to be winners over a multi-year period, we have realised the losses in our portfolio, as our mandate dictates that all conference stocks have a maximum holding period of 12 months. This approach has delivered the portfolio good returns over the 3 years we have been in existence, which I think justifies the portfolio construction process we have in place.
 
In past notes I have written about how compounding returns over multi years is an integral part of investing. The G.O.A.T of investing (’Greatest Of All Time’) Warren Buffett said that an investor should only buy a stock they would be perfectly happy to hold if the market shut down for 10 years, and that his favourite holding period is forever. Warren’s mentor, Benjamin Graham is best known for his advice that “in the short run the market is a voting machine but in the long run it is a weighing machine.” 
 
65% of the HM1 portfolio is invested in multi-year investment recommendations, comprising the three highest conviction stocks from each of our six Core Managers, namely Caledonia, Cooper Investors, Magellan, Paradice Investments, Regal Funds Management, and TDM Growth Partners. These fund managers have all been successful in their own businesses, and many are closed for new investors. To have access to their intellectual property on an ongoing basis to me represents the core of HM1. The majority of our shareholder funds are invested in this portion of the portfolio (twice the capital that goes into the conference recommendations) and the holding period is for as long as our managers recommend.
 
To my point above about compounding, this is where it all takes place for us. Roughly half of the stocks (by number and value) have been in the portfolio since November 2018. Perhaps 15% of the core portfolio has been invested for under 12 months. Not every position has been profitable, but as I mentioned last week, even the best stock pickers in the industry get some of their ideas wrong. Overall, the winners tend to outweigh the losers. Pleasingly, we have seen that when an investment thesis appears unlikely to play out, our managers have generally been swift to advise closing out such a position. As one of the managers said to me recently, “Panic quickly when the game changes Rors, don’t let a small loss become a big loss by refusing to acknowledge that you were wrong”.
 
The flip side of multi-year investing is that often when a stock has a supernormal return over a shorter period, be it 6 or 12 months, the following period will often see underperformance, or some sort of normalising. Does this mean that the original thesis has changed? Quite possibly, yes. But also, quite possibly, no. Given the number of participants in global stock markets, all of whom have their own timeframe for holding an investment, large price moves often see some sort of shareholder register shift, as many take profits (or losses) while others see the opportunity coming to fruition and finally deciding to invest.
 
This weight of money (new buyers vs the sellers) is what dictates what a share price does immediately after such a move. Our portfolio has been experiencing exactly this situation this year, with a few stocks having had exceptional returns in 2020, and then run into some profit taking/new news in 2021, which has led to retractions in the share prices of some of our holdings. This is where the expertise of our managers comes in. We believe they are best equipped to judge whether the multi-year investment thesis they have built and presented remains intact. Where it doesn’t, we have, and will continue to close such positions. Where they believe that news/price movement is more ‘noise’, they/we continue to hold stocks, so that the compounding effect of multi-year investing can resume.
 
I hope this all makes sense to you, and helps you better understand how the portfolio is constructed into two distinct portfolios, with very different investment timeframes, where hopefully we can capture both the compounding effect described by Benjamin Graham, as well as the X-factor effect of new industries, disruptive technologies etc becoming more mainstream in the near term.
 
We believe the combination works over the longer term.
 
Stay safe

Rory Lucas
Chief Investment Officer
Hearts and Minds Investments Limited

Reminder: these are simply my general views and should not be taken as investment advice

 

If you would like to receive these weekly updates direct to your inbox each Monday, sign up here.

 

DISCLAIMER: This communication has been prepared by Hearts and Minds Investments Limited (ABN 61 628 753 220). In preparing this document the investment objectives, financial situation or particular needs of an individual have not been considered. You should not rely on the opinions, advice, recommendations and other information contained in this publication alone. This publication has been prepared to provide you with general information only. It is not intended to take the place of professional advice and you should not take action on specific issues in reliance on this information. Past performance is not a reliable indicator of future performance. This document may not be reproduced or copies circulated without prior authority from Hearts and Minds Investments Limited.

 

Recent Posts

Read the latest insights
A curated list of HM1 investor updates, portfolio news and other interesting articles.
Read More
Nine top stock picks to prepare your portfolio for 2025
Health care, ride-sharing, and the emerging world of YouTube entertainers are among the industries leading investors have picked for growth in 2025.
Resources fundies reveal top picks ahead of ‘stellar’ 2025
Some of Australia’s biggest resources funds are gearing up for a bumper start to the new year.
Qiao Ma: finding killer companies, surviving the GFC & why founders win
Qiao Ma, Portfolio Manager of the Munro Partners joins Owen Rask on The Australian Investors Podcast.
10 top fund managers reveal their long-term stock picks
With valuations stretched and geopolitical tensions high, the new year offers plenty of potholes for investors. 
 

Nine top stock picks to prepare your portfolio for 2025

Health care, ride-sharing, and the emerging world of YouTube entertainers are among the industries leading investors have picked for growth in 2025.

Read More
January 21st, 2025
 

Resources fundies reveal top picks ahead of ‘stellar’ 2025

Some of Australia’s biggest resources funds are gearing up for a bumper start to the new year.

Read More
January 6th, 2025
 

Qiao Ma: finding killer companies, surviving the GFC & why founders win

Qiao Ma, Portfolio Manager of the Munro Partners joins Owen Rask on The Australian Investors Podcast.

Read More
January 6th, 2025
 

10 top fund managers reveal their long-term stock picks

With valuations stretched and geopolitical tensions high, the new year offers plenty of potholes for investors. 

Read More
December 28th, 2024
 

Rikki Bannan – Don’t get caught up in momentum

Conference Fund Manager Rikki Bannan, Executive Director at IFM Investors, joins Equity Mates to discuss her standout 2023 stock pick, Telix, and explore what opportunities lie ahead.

Read More
December 19th, 2024
 

Professor Jane Butler: Sparking Hope for Spinal Cord Injuries

In this episode of the Hearts & Minds Podcast, we sit down with Professor Jane Butler to discuss her groundbreaking research into spinal cord injuries.

Read More
December 10th, 2024
 

Nick Griffin – The Nvidia story is not over

Nick Griffin, Founding Partner & Chief Investment Officer of Munro Partners joined the Equity Mates podcast in their Summer Series.

Read More
December 9th, 2024
 

HM1 CEO Succession

Hearts and Minds Investments Limited advises that Paul Rayson intends to retire from the position of Chief Executive Officer, effective 19 February 2025.

Read More
December 5th, 2024
 

Trump unifies top investors in decade-long bullish outlook for US

Nick Moakes, CIO of the $72 billion Wellcome Trust, told the conference that too many investors were banking on a return to the ultra-low interest rates that prevailed over the past decade.

Read More
November 20th, 2024
 

These rock-star stock picks could get markets talking next year

Eleven rock stars of international and local funds management took to stage – each tasked with picking and pitching one company whose shares will take off over the next year.

Read More
November 18th, 2024
 

Is anyone brave or stupid enough to bet against America?

Stock pickers have been punished for betting against the US. The choice between consensus and contrarianism on American exceptionalism is now harder than ever.

Read More
November 17th, 2024
 

Sohn: NYSE-listed Estee Lauder’s Northcape Capital pick

Northcape Capital’s Fleur Wright this gives a rare opportunity to buy a high quality company at an attractive price.

Read More
November 15th, 2024
 

Sohn ASX stock pick: Ellerston Capital’s Chris Kourtis backs Perpetual

Chris Kourtis has put his biggest bet on embattled Perpetual – picking one of the most hated stocks on the ASX – that he believes will soon be the ‘cheapest listed asset manager of scale in the universe’.

Read More
November 15th, 2024
 

AI start-ups a threat to incumbent big companies

Paul Bassat predicts emerging artificial intelligence companies will disrupt sectors and overtake established incumbent companies just as rapidly as the seismic shifts that took place when the internet emerged in the mid-1990s.

Read More
November 15th, 2024
 

Howard Marks and Sohn’s big stars reveal seven rules for investing

Among the stock picks and stunts at the Sohh Hearts & Minds event, Howard Marks and Nick Moakes provided investors with long-term rules for playing markets.

Read More
November 15th, 2024
 

Sohn investors position for bullish but bumpy Trump ride

Australia and the rest of the world must adjust to a new Trump presidency that will deliver an expected bull market but also disruption, with the leader in waiting prepared to “create pain” to get his way.

Read More
November 15th, 2024
 

Sohn stock picker experts name best shares to invest in for year ahead

‍Don’t overlook down and out silver miners, legacy skincare brands ready for a revival and a big financial company suffering from a severe case of shareholder wealth destruction.

Read More
November 15th, 2024
 

Eleven stock tips from Sohn to get you through 2025

“There’s no finer place for the finance festival than in the festival city,” said Matthew Grounds. He, along with fellow Barrenjoey co-executive chairman Guy Fowler and investor Gary Weiss, is one of Sohn’s driving forces.

Read More
November 15th, 2024
 

Sohn Hearts & Minds Investments fund targets $1.5bn valuation

‍Hearts & Minds Investments chair Chris Cuffe is hoping for HM1 to grow to more than $1.5bn in the next five years.

Read More
November 14th, 2024
 

Galaxy Digital CEO Mike Novogratz believes bitcoin will hit $US100k

Bitcoin’s bounce to record highs in recent days is only the beginning of a fresh surge higher for cryptocurrency, says US billionaire Mike Novogratz.

Read More
November 9th, 2024
 

Why this New York hedge fund manager sees opportunity in European stocks

Influential New York-hedge fund manager Ricky Sandler will turn to Europe for his next stock pick.

Read More
November 6th, 2024
 

Antipodes’ Ross says short-term wealth hinges on US election

The portfolio manager says defensive stocks pose a bigger risk than the magnificent seven for investors that are overexposed to the American sharemarket.

Read More
November 5th, 2024
 

Concentration risk key for investors: Antipodes Partners’ Vihari Ross

The concentration risk in global stock indexes that has built up during the strong rise over the past year must now be a key consideration for global investors, according to Vihari Ross.

Read More
November 5th, 2024
 

The fundie betting big on China – with help from AI

Mr Mehta is sticking to his well-worn strategy: he’s hunting for companies across Asia that aren’t battling intense competition and have management teams focused on costs, cash generation and high payouts to shareholders.

Read More
November 5th, 2024
 

Why this fundie wants you to ‘wince’ at his stock picks

When fund managers come to pitch their favourite stock at the annual Sohn Hearts & Minds conference, there are two ways they can go: they can play it safe, or they can take a risk and shock the room.

 

Read More
October 29th, 2024
 

IFM Investors’ Rikki Bannan backs small cap investments to rebound after mixed performance

IFM Investors executive director Rikki Bannan believes this year could be a good one to invest in some select small cap stocks.

Read More
October 27th, 2024
 

Meet the 2024 Conference Managers

Following a global search, the Conference Fund Manager Selection Committee is pleased to share eleven new managers for 2024. 

Read More
October 22nd, 2024
 

Chris Kourtis is on a winning streak. Here’s his next ASX pick

Chris Kourtis of Ellerston Capital thinks he’s found another winner and thinks it’s the last chance to have a bite at the cherry before the strategy plays out.

Read More
October 21st, 2024
 

Why Ellerston Capital’s Chris Kourtis plans to back a ‘hated’ stock

Chris Kourtis of Ellerston Capital plans to tip one of the “most hated” stocks in Australia when he presents at the 2024 Sohn Hearts & Minds Conference.

Read More
October 21st, 2024
 

Alex Pollak champions rewards of disruptive investment

Alex Pollak’s funds management company Loftus Peak rode the Nvidia wave and he is now looking at more opportunities in disruptive industry stocks.

Read More
October 14th, 2024