Five years on, what are the best Sohn stock picks to date?

Some of the top fund managers in the country will on Friday pitch their best investment ideas to the Sohn Hearts & Minds conference.

But how have past favourites fared? Over five years, NextDC, JB Hi-Fi, TradeDesk, Nickel Mines and MinRes are among the best performers of the lot.

It was back in 2017 that Colonial First State’s Dawn Kanelleas pitched NextDC as her best idea for the year, predicting “significant share price upside” from its then share price of $5.45.

The attraction was NextDC’s “predictable and recurring operating cashflow” due to long-term customer contracts and growing data demands, Ms Kanelleas told the conference at the time.

With its current share price at $9.22, a 70 per cent jump on five years ago, this pick would have paid off for anyone who bought.

A year later, Auscap Asset Management’s Tim Carleton was pitching Australian household name JB Hi-Fi, labelling it a “screaming bargain” at $23.

The impact of a weaker housing market and the Amazon threat were overblown, he suggested, saying the retailer was well-run, highly cash generative and, most importantly, cheap. Today the stock is trading at $43.

At the same conference, Munro’s Nick Griffin put forward his own top pick: retail behemoth Amazon. While Munro had owned the cloud computing stock for a number of years, it was still his best idea, he said.

Four years, and a big share price jump, later, and Mr Griffin is still bullish on the company – though Munro halved its position in the stock back in January.

“We still like the company on a medium-term view, but just recognise that they probably overspent in the crisis because they thought things had changed permanently and in the end, they haven‘t,” he told The Australian. “From that point of view, they‘ve got to go on a bit of a cost-cutting mission to right size the company for the overspending that they did through Covid.”

Like so many others, Amazon has suffered in the tech rout this year, falling well below the record $US3000 ($4470) a share it hit in 2021 (before a 20-to-1 stock split). Even with the recent decline, anyone who bought in late 2018 is still well ahead on their investment.

Mr Griffin was back again in 2019 with his next pick, US tech company Trade Desk, which provides software designed to help advertisers and agencies buy ads using automated tools and reams of data. Trading at $US20 a share back then, the stock has more than doubled to $US53.

Mr Griffin still likes the company but took profits before the downturn, fully selling out of the position. “We still like it and we will be back,” Mr Griffin said. “It’s just if interest rates are going to be higher then these companies need to trade on lower multiples. And that’s a process that‘s been going on for about a year with Trade Desk.” Even with a more than doubling of the share price, Trade Desk wasn’t the best pick of 2019. That falls to mining services play Mineral Resources, which has seen a 460 per cent surge in its share price over three years. As Airlie Funds Management’s Emma Fisher said at the time, the stock was trading at a big discount at only five times earnings.

Tribeca’s Jun Bei Liu had the best pick of 2020 – based on today’s prices – with Treasury Wine Estates. The Aussie winemaker, at its current price above $13, has jumped 45 per cent since Ms Liu’s buy call two years ago.

At the time, Treasury Wines was caught in the middle of trade tensions with China and was a buying opportunity because it was so cheap, she said.

At that price ($9), investors weren’t paying for any brand loyalty or future demand for its premium labels, Ms Liu added.

The winemaker is still an attractive prospect today, she said.

“Putting aside China, I think the outlook for (Treasury) is just phenomenal. The company is going to grow over 20 per cent in the next couple of years, just through the reopening … so it has that tailwind to really drive growth,” Ms Liu said. Tensions with China, meanwhile, appear to be thawing, providing a further boost to the stock, she added.

In 2021, Mr Griffin was back, this time with the top pick, semiconductor supplier Onsemi, whose share price has jumped 20 per cent over 12 months.

While these are just a handful of the best picks of the past five years, even the top fund managers can’t always get it right.

Among the worst calls of the lot, based on current share prices, are Coinbase, Ping An, Teladoc Health, Spotify and Megaport, all of which have tumbled more than 70 per cent since they were pitched in 2020 and 2021.

If nothing else, this shows the challenge of picking the winners in the post-pandemic era as inflation and rates bite.



This article was originally posted by The Australian here.

Licensed by Copyright Agency. You must not copy this work without permission.

\Disclaimer: This material has been prepared by The Australian, published on 17 November 2022. HM1 is not responsible for the content of linked websites or content prepared by third party. The inclusion of these links and third-party content does not in any way imply any form of endorsement by HM1 of the products or services provided by persons or organisations who are responsible for the linked websites and third-party content. This information is for general information only and does not consider the objectives, financial situation or needs of any person. Before making an investment decision, you should read the relevant disclosure document (if appropriate) and seek professional advice to determine whether the investment and information is suitable for you.

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