Value as at close of business on 17 January 2024
Value as at close of business on 17 January 2024
Some of Australia’s biggest resources funds are gearing up for a bumper start to the new year.
Read MoreQiao Ma, Portfolio Manager of the Munro Partners joins Owen Rask on The Australian Investors Podcast.
Read MoreWith valuations stretched and geopolitical tensions high, the new year offers plenty of potholes for investors.
Read MoreConference 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.
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 MoreNick Griffin, Founding Partner & Chief Investment Officer of Munro Partners joined the Equity Mates podcast in their Summer Series.
Read MoreHearts and Minds Investments Limited advises that Paul Rayson intends to retire from the position of Chief Executive Officer, effective 19 February 2025.
Read MoreNick 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 MoreEleven 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 MoreStock pickers have been punished for betting against the US. The choice between consensus and contrarianism on American exceptionalism is now harder than ever.
Read MoreNorthcape Capital’s Fleur Wright this gives a rare opportunity to buy a high quality company at an attractive price.
Read MoreChris 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 MorePaul 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 MoreAmong 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 MoreAustralia 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 MoreDon’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“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 MoreHearts & Minds Investments chair Chris Cuffe is hoping for HM1 to grow to more than $1.5bn in the next five years.
Read MoreBitcoin’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 MoreInfluential New York-hedge fund manager Ricky Sandler will turn to Europe for his next stock pick.
Read MoreThe portfolio manager says defensive stocks pose a bigger risk than the magnificent seven for investors that are overexposed to the American sharemarket.
Read MoreThe 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 MoreMr 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 MoreWhen 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
IFM Investors executive director Rikki Bannan believes this year could be a good one to invest in some select small cap stocks.
Read MoreFollowing a global search, the Conference Fund Manager Selection Committee is pleased to share eleven new managers for 2024.
Read MoreChris 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 MoreChris 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 MoreAlex Pollak’s funds management company Loftus Peak rode the Nvidia wave and he is now looking at more opportunities in disruptive industry stocks.
Read MoreHall of Fame alumni Chris Kourtis of Ellerston Capital joins Livewire to analyse high conviction stock picks.
Read MoreRegistered Office and Share Registry Office
Hearts and Minds Investments Limited
c/- Boardroom Pty Limited
Level 8, 210 George Street
Sydney NSW 2000
Telephone: 1300 737 760 or +61 2 9290 9600
Email: heartsandminds@boardroomlimited.com.au
Principal Place of Business:
Suite 12.04, Level 12, Chifley Tower
2 Chifley Square
Sydney, NSW 2000
Email: ir@hm1.com.au
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Amazon
Amazon reported strong growth in e-commerce and a stabilisation of growth at Amazon Web Services (AWS), which was one of the most important things to see in the reported result. Management’s revenue guide continues to show strong retail growth in the first quarter of 2024, and importantly both the quantitative guidance and qualitative earnings call commentary suggests that AWS growth should continue to re-accelerate starting Q1 2024. The most impressive part of the result was the operating margins that are now approaching double digits.
Over time, Core Fund Manager, Munro Partners believes there is significant margin expansion to come for Amazon, creating a long earnings runway. One of the drivers of the margin is Amazon’s advertising business, which is growing strongly but also, at a significantly higher margin (Munro estimate approximately 40% operating margin).
This has created a positive mix effect on the core e-commerce business profitability. Over time, Munro Partners believe Amazon has one of the strongest earnings growth opportunities in their portfolio holdings, given the sheer scale of margin expansion they think the company can deliver. Munro Partners believe this will turn into very strong free cashflow generation leading to further returns for shareholders over the medium term.
BHP
BHP reported an in-line operating result accompanied by solid free cash flow and strong cost control with average unit costs only increasing marginally despite the broader inflationary environment. The company indicated that Copper production at Escondida is expected to decline more than expected while in contrast, their South Australian Copper production expectations are improving.
Their iron ore operation continues to perform strongly retaining its position at the bottom of the cost curve. This more than offset challenges in their (much smaller) nickel and met coal operations. The company continues to represent good value with high single digit free cash flow yields, solid production growth, low gearing and a suite of attractive assets towards the bottom of the cost curve.
Brookfield
Brookfield reported growth in its net asset value of 18% for 2023. The performance was led by the recently listed asset management arm whose shares increased 40%. As a leader in high demand areas of credit, infrastructure, and renewables the outlook for 2024 is for double digit revenue growth at the asset manager.
Brookfield’s stake in its listed entities (asset management, infrastructure, renewables, private equity) roughly equates to the current market capitalisation. The property on their balance sheet of $22bn is not being valued by the market. Interest rates stabilising and a recovery in capital market activity will help bring confidence to these values and assets. All the while Brookfield’s continues to grow its operations and intrinsic value.
Eurofins
Despite the market’s slightly negative response to this set of numbers, Core Fund Manager, Cooper Investors think it was a promising result. There was a small cut to the dividend which seems to be the main cause of the reaction as the board set the pay-out ratio back to pre-covid levels. The offset to this is the company continues to buy back shares. Free cashflow was a tad light on some working cap moves. These results were the first reported positive revenue and EBITDA growth numbers since the COVID period. This is a major inflection point. Reported EBITDA increased 5% and margins expanded 120bps.
Ex COVID the business continues to grow at around 6% organically, and as the first full year ex COVID the 2024 outlook is for 15% EPS growth. The business is now trading on ~17x this number which is well below historical averages. Eurofins 2027 targets call for $2.4bn of EBITDA which should deliver more than $1bn of free cashflow. On any reasonable multiple we see significant upside over this 3-year period.
Formula One
Formula One continues to fire on all cylinders, with revenue and adjusted EBITDA growing more than 20% in 2023. Importantly, momentum is widespread across the business, with double-digit growth in each business segment.
With compelling top of funnel metrics, including a global audience of 1.5bn people (+4% yoy), growing race attendance (+5% yoy in 2023), faster social media growth than any other major sport globally, and attractive growth in the important under-35 and female demographics; we believe Formula One is still in the early innings of monetising its enormous global fanbase. As such, financial metrics should accelerate in 2024 (more than 40% adjusted EBITDA growth) and compound for years to come. Important catalysts like a new US media rights contract and improved profitability for the self-promoted Las Vegas grand prix present positive tailwinds over the next 12 months.
With a very capital light operating model, this profitability inflection will translate to healthy cash flow conversion, creating meaningful shareholder return and/or accretive M&A optionality.
Intercontinental Exchange
ICE is a leading global operator of regulated exchanges and clearing houses for financial and commodity markets and the dominant technology provider to the US Mortgage market. The company reported strong derivative volumes in the final quarter of 2023 reflecting elevated volatility in underlying energy and interest rate markets. In addition, lower long-term US interest rates over the quarter were supportive of an improvement in the outlook for the US Mortgage market benefiting ICE’s Mortgage Technology segment.
Just Eat
The Global Food Delivery Industry continues to shift to profitability and Just Eat Takeaway was no exception. Group adjusted EBITDA for 2023 was €324m, up from €19m in 2022. This compares to the original company issued guidance of approximately €225m provided at the start of 2023. Most notably, delivery costs per order improved in the UK by 12% in 2023.
Importantly, the group was free cash flow positive (excluding changes in working capital) in 2H23 and will be free cash flow positive in 2024 and thereafter. The group expects profitability to continue to improve in 2024 and has guided to 2024 adjusted EBITDA of approximately €450m. On the capital management front, share buy backs are ongoing with 7.3% of issued shares bought back since April 2023.
Mastercard
Mastercard delivered another quarterly earnings beat at its full year result. Mastercard continues to demonstrate sustainable revenue growth given its diversified exposure to consumer spending and cash digitisation across regions. The strength in Mastercard's network was clear in the result, with value added services growing at multiples of the core consumer payments business.
In more recent news (20 February), Capital One (a card issuer) announced the desire to acquire Discover, which is the 4th largest credit network in the US. Whilst this deal is likely to face some regulatory scrutiny, Core Fund Manager, Magellan do not think this merger will diminish Mastercard's ability to continue to protect and grow its earnings. Mastercard and Visa are the only true global networks, with Discover only at scale in the US. Ubiquitous global payments are key to consumer usage, and achieving this globally will come at a significant cost with respect to both time and money.
Microsoft
Microsoft’s ability to capitalise on the artificial intelligence market opportunity and continue to deliver profit margin expansion were the highlights of its December quarter result. The Azure cloud business grew 28%, with increasing customer AI spend contributing to this growth.
Encouragingly, industry IT spending headwinds abated as customers resume project investments. The Office 365 business demonstrated continued strength and there is a positive opportunity ahead with the launch of Copilot. Microsoft closed its acquisition of Activision-Blizzard, which will provide further opportunities for its gaming franchises. Overall, Microsoft delivered a strong result that was consistent with Magellan’s investment thesis.
Nvidia
Nvidia reported earnings with revenues up 22% over the quarter, and 265% year-on-year. Operating leverage was even more impressive, with EPS up 487%. Gross margin came in at 74%. Despite the exceptional performance of the stock since it was acquired, the earnings multiple is a lot lower today. It is currently trading at 31x forward after-tax multiple.
Nvidia is now annualising revenues at $100bn run rate based on the next quarter’s forecast. The company is still capacity constrained and there is clearly a lot of confidence in the coming quarters. Further growth is expected as supply comes online. Nvidia is the hardware and software solution for the artificial intelligence boom that we are seeing. Encouragingly, 40% of datacentre revenue is already coming from something called inference which will help to steady concerns that Nvidia will lose out as compute shifts from training models to actually using them.
This AI boom is just getting started and Nvidia has a huge lead. We think that there will be a lift in sovereign demand in the near and mid-term. Every major government is going to need to train their own models on their own data which must be kept secure. This is a huge opportunity for Nvidia.
Taiwan Semiconductor (TSMC)
TSMC reiterated its guidance for revenue to grow over 20% in 2024. This was also reinforced by the general health of the industry best seen by ASML reporting 9bn EUR of orders received during the quarter. Investors were paying close attention to this number provided by the company as a gauge of industry growth in 2024.
The company reiterated previous guidance which sent a signal to the market that growth in the semiconductor industry is expected to be strong ahead. TSMC also increased the percentage of revenues coming from AI related workflows to high teens as a percentage of revenue. Munro Partners’ believe TSMC earnings can double over the next 5 years and believe the stock is still attractively valued at approximately 17x blended forward earnings.