MENU
 

PRE TAX NTA |$3.53

Value as at close of business on 7 March 2025

CIO Insights: It’s a marathon, not a sprint II

Hi everyone

First of all, condolences to the family of the man who tragically lost his life on Wednesday in an horrific shark attack at Little Bay in Sydney.
 
A couple of weeks ago I wrote about the numerous corrections equity markets have seen over the years and how every time eventually the indices have recouped the declines and continued their march higher, which has translated into roughly 9-10% average annual return over the last 120 odd years. The ‘price’ investors pay for this higher return compared to putting your money in the bank, is the volatility of those returns.  Some great investors say that they wouldn’t care if markets were to close for 10 years, because the quality businesses they own, (as opposed to a ticker code), will keep generating profits regardless of whether the stock market reports their daily share price. They simply don’t need to see the share price because they view it as if they own a piece of the company.
 
During the US reporting season, I’m sure you all saw the headline when Facebook reported their quarterly earnings: “Facebook share price decline represents the biggest loss of shareholder value in history, at $270mm”. Previously, the biggest shareholder loss was in Apple shares, back in September 2020, at about $180mm ‘lost’. When you look at the chart below, you’ll see that this was merely a ‘speedbump’ in the longer-term share price. My point, other than demonstrating that good investors often ride out the bumps when investing in equities, is that quality companies, just like the broad indices, will always be prone to market corrections, and equally they tend to recover from the declines pretty quickly.

 

 

Of course, not all companies will behave like this. Indeed, many companies do eventually collapse, ending up worthless, with investors who are ‘running the marathon’ losing all or most of their capital.
 
I hear you saying that one minute I’m telling you to run the marathon, but the next minute I’m saying that you could lose everything by doing that. What gives??
 
Quality. That’s what gives. The cream rises to the top. Bad companies don’t keep making profits through economic cycles, and they get found out. Of course, in the short-term, both good and not-so-good companies can and do have big share price gains AND falls. That’s volatility. That’s the emotional rollercoaster that is the stock market.
 
Share prices rarely trade at the true, or fundamental value of the company itself. And that’s what makes a market. The skill lies in finding companies that are not trading at their fundamental value, and companies whose value is highly likely to increase over time, because they will dominate their sector, change the way consumers do things, or introduce something altogether new, that competitors cannot readily copy.
 
Companies, but especially technology companies, often pitch the so called ‘blue sky’ – a promise that 5-10 years down the track, todays spending, or capex (capital expenditure), or re-investment in the business, will eventually pay off. Quality companies deliver on these promises. Remember Amazon in the early 2000’s?  No reported profits? I’m sure you all know how the Amazon chart looks over the last 20 years but if you don’t check this out: AMZN 20-year share price low: $15; AMZN 20-year share price high: $3,700!!
 
Despite the recent share price declines, our managers firmly believe that they have recommended quality companies that are trading below their true value. Many of the company updates over the last 6 weeks or so have confirmed this. However, often we see investors ‘give up’ on companies when the short-term news doesn’t ‘meet analyst expectations’. A sign I love is when management stump up and buy more of their stock when this happens. Indeed, we saw it in one of our companies just last week. Whilst the media seem to love a bloodbath, our managers are always looking for genuine signs that their thesis is intact, or not. This often has very little to do with the daily share price.

 

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, 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
Reporting Season Insights: HM1 Core Portfolio Holdings
We spoke to our dedicated fund managers for an update on some of our major portfolio holdings following reporting season.
The investing megatrends you can’t ignore (and some you should rethink)
James Marlay of Livewire sat down with Vihari Ross of Antipodes (HM1 Conference Fund Manager) and James Tsinidis of Munro Partners (HM1 Core Fund Manager) to discuss the biggest megatrends shaping the future.
2025: Where to Find Market Opportunities
There are opportunities abound for investors with an active management mindset in 2025. Get more insights from one of HM1's Core Fund managers, Magellan.
Significant increase in profit and increased fully franked dividend
We're pleased to declare an increased half-year fully franked dividend of 8.0 cents per share payable in April 2025.
 

Reporting Season Insights: HM1 Core Portfolio Holdings

We spoke to our dedicated fund managers for an update on some of our major portfolio holdings following reporting season.

Read More
March 10th, 2025
 

The investing megatrends you can’t ignore (and some you should rethink)

James Marlay of Livewire sat down with Vihari Ross of Antipodes (HM1 Conference Fund Manager) and James Tsinidis of Munro Partners (HM1 Core Fund Manager) to discuss the biggest megatrends shaping the future.

Read More
March 3rd, 2025
 

2025: Where to Find Market Opportunities

There are opportunities abound for investors with an active management mindset in 2025. Get more insights from one of HM1's Core Fund managers, Magellan.

Read More
February 25th, 2025
 

Significant increase in profit and increased fully franked dividend

We're pleased to declare an increased half-year fully franked dividend of 8.0 cents per share payable in April 2025.

Read More
February 20th, 2025
 

Magellan's Elisa Di Marco - 3 Trends That Will Define The Next Decade

Elisa Di Marco of Magellan (HM1 Core Fund Manager) joined Equity Mates to unpack 3 big megatrends shaping our world today (and how we can invest in them).

Read More
February 7th, 2025
 

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
 

How Trump will impact equity markets

The United States has spoken. President Trump has returned to the White House. But how can we cut through the noise to reveal the investment, economic and geopolitical ramifications?

Read More
November 26th, 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