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Is your portfolio ready for 2021?

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This year’s Sohn Hearts & Minds Conference, an annual one-day event that brings the finance and investment community together, saw a select group of fund managers fund manager share their best stock idea for the year ahead.

This year’s recurring theme without doubt was COVID-19. But grief and tragedy aside, COVID-19 has forced us to go digital. It allowed us to go about our daily lives, conduct business and communicate whilst limiting the spread of the virus. Digital transformation that was slated to occur over the next decade, is happening now. Out of the 15 stock from the leading global fund managers that attended, we have selected five top tips for 2021:

CSL

  • Portfolio manager David Moberley from Paradice Investment Management is confident that Australia’s largest and most well-known company will come through with the goods, saying the market “is underrating CSL.” He went on to say “CSL [has] … a management team that I believe is one of the best capital allocators in the country. The stock has significant latent value in its asset base and R&D pipeline, but the market is focused on a transitory COVID-19 related impact despite signs of recovery already emerging, which has created a rare opportunity”. CSL Behring Australia is developing an anti-SARS-CoV-2 plasma product for the Australian market with the potential to treat people with serious complications of COVID-19, particularly those whose illness is progressing towards the need for ventilation. CSL has committed to supply 51 million doses of University of Queensland vaccine to the Australian government, should clinical trials be successful. CSL Behring is also part the CoVIg-19 Plasma Alliance, an unprecedented industry partnership to develop a potential plasma-derived therapy for treating COVID-19. Any success that is not captured in the company’s consensus earnings represents further upside.

    Hello Fresh

    Munro Partner’s Nick Griffin says people underestimate how big the German start-up could be. Most people will have received a HelloFresh box but decided against joining up for one reason or another. But in the same way online electronics delivered to your doorstep took off during the pandemic, online groceries are going to penetrate at some point. Hello Fresh founded in 2011 in Berlin, has gone through the roof in recent years. In 2019, their global net revenue reached approximately 1.8 billion Euros, that’s an increase of over 1.8 billion Euros since 2013. The model works via a subscription-based service which delivers customers fresh ingredients direct to their home. The ingredients are pre-portioned and need only to be cooked before served. The service was originally marketed towards shift workers and those with busy lifestyles, but Griffin believes these delivered food boxes will form part of everyone’s grocery shopping in the long run. COVID-19 was the medium that broke down barriers and introduced the general public to the product.

    Nintendo

    VGI Partners have chosen the well-known developer of videogames and manufacturer of gaming consoles as their star pick. The fund manager believes the market is undervaluing the stock despite an increase in its earnings profile. Since the COVID-19 crash in March, Nintendo’s shares have been on a tear almost doubling in value from its March low of $36 to $66 today. What attracts the fund manager is the company’s high-quality, under-monetised IP library which includes games such as Mario, Pokémon, Donkey Kong, Zelda, etc. There is significant opportunity to grow its digital penetration especially through the pandemic. The business is capital-light and has a strong balance sheet. “VGI Partners believes there is an opportunity for Nintendo to continue to grow margins with higher digital penetration, shift to subscriptions, growing downloadable content and expanding its mobile business.”

    Teladoc

    For those that don’t know, Teladoc is a virtual doctor. Downloadable as an app on your smartphone, Teladoc allows patient visits through the platform. That’s right, all online via a smartphone. And as you’ll expect business has been booming during the pandemic, as doctors, physicians and insurers have been promoting virtual visits to stop the spread of the virus. Teladoc’s recently completed Q3 2020, such visits were up 208% year over year, resulting in a 109% revenue gain. We think ARK Funds are onto something. A virtual doctor offering is digitisation at its best. The company is now pressing further via the acquisition of Livongo Health, an app-based diabetes management platform. It’s aim is to extend the digital offering to patients conditions such ashypertension.

    Temple and Webster

    Regal’s Todd Guyot is a big fan of online furniture retailer Temple & Webster. He believes in the company so much that he advised at the Sohn Hearts and Minds convention that the stock had further to run after gaining 284% this year. The company is another beneficiary of Covid-19. This was driven by quarantined consumers and their JobSeeker payments splashing cash on homewares. The company is a leading online retailer of premium furniture and homewares products which operates on a lower cost and faster delivery drop-shipping model. Products are delivered from supplier to customer direct. Debt free and $69 million in the bank having just raised capital, TPW’s balance sheet is looking fabulous. The company is profitable with EBITDA up 668% to $7.1 million for the 11 months ending May 31. TPW is cashed up and looking to grow after being considered one of the worst floats of 2016.




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