Eleanor Swanson was having difficulty convincing the investment team to buy into Afterpay.
It was 2019, and Swanson, then 28, had just left Macquarie’s successful high conviction fund to set up a new shop – Firetrail Investments – with eight others.
And Afterpay, which had listed on the ASX just a year earlier, was far from the buy-now, pay later giant which would eventually be sold to American payments firm Square in a $39bn deal.
“It was the classic millennial thing … My friends were using it, we are more accustomed to shopping online,” Swanson says. “I said it was a fantastic company. I had experienced it first hand and was using it for shopping.
“But some of the older guys in the view took the view that it was a short-term bubble. They didn’t see it as having longevity.”
One colleague described the share price – $8 – as “crazy”.
After considerable discussion, Firetrail decided it was worth a closer look. In her internal pitch, Swanson argued Afterpay shares were worth at least $50.
“We looked at how the customer transacted on the platform,” she says. “The customer might use it twice in the first year, but by the time they have been on the platform for three years they are using it 20 times a year.
“The average value of the order was also increasing.
“When you put those two metrics together – the frequency of spend, and the average order, and assumed a growing penetration of the millennial market – we were getting an enormous upside.”
The pitch was convincing. Afterpay – and the investment along with it – become a major success.
Firetrail, with a small cap fund now worth some $300m, sold out when Afterpay’s share price rose above $90. Its hedge fund held on until it rose above $100.
Now Swanson will make her debut at Sohn Hearts & Minds in December – one of 16 stock pickers predicting the best equity plays for the year ahead.
An analyst at the small cap fund, Swanson’s remit stretches from healthcare to biotechs and industrial stocks. (Swanson, who has also worked as an analyst at JP Morgan, is the daughter of ClearView Wealth managing director Simon Swanson.)
For her Sohn conference pick – to be revealed on the day – she has chosen a small cap Australian company in the tech sector.
“It is playing into the global growth thematic,” she says.
“It is an Australian company which has built a product here and is now taking it offshore and building a global business.”
Firetrail’s small caps fund can take in companies with market capitalisations of more than $200m up to ASX 50 companies.
Swanson says the fund has a flexible approach to stock picking, looking for a combination of growth and value stocks.
“Our investment philosophy is that every company has a price,” she says. “We do have more of a bias to companies with earnings as we believe share prices follow earnings. But we are very happy to play in the growth part of the market … we see a company’s valuation as very important.
“We would never buy a company just because we liked the thematic or like the space.
“We always build a proper model and figure it out. We want to see if there is upside based on where we think the earnings will land relative to market expectations. One of our best stock picks has been where we have found an angle on a company the markets have not cottoned on to yet.”
Swanson cites Beacon Lighting as one of the fund’s successful small cap investments.
“Eighteen months ago, we cottoned on to the fact they were rolling out a trade strategy instead of just focusing on the retail market.
“It has been a great performer for the fund. Finding that angle gave us a great point of differentiation to model out the earnings.”
Swanson says a background in science has given her an insight into healthcare and biotech stocks. Her picks have included New Zealand wound care product company Aroa Biosurgery.
“It listed on the ASX about June last year and it was one of our top picks. We actually invested just before the IPO when it was hard for companies to get their hands on capital.
“We stepped up pre-IPO and then helped them underwrite the IPO a few months later. It has been a great performer for us.”
The fund’s favourite industrial stock at the moment is outdoor advertising company oOh!Media.
“We think the market is underestimating how strong the advertising market is going to be next year,” Swanson says.
“Australians have saved over $150bn during lockdowns, not being able to travel or go out to dinner and having benefited from stimulus payments.
“We think there is enormous pent-up demand and there are companies which will want to make sure they get their share of the pie.” She says oOh! Media has a big presence in airports, which she believes will benefit as Australians resume domestic travel.
“We think they are going to be flat to up on their revenue prior to Covid whereas the market is thinking they wont be able to get back to where they were in 2019.”
She also likes Ardent Leisure, the leisure and outdoor theme park company whose fortunes were hit by the tragedy at Dreamworld on the Gold Coast in 2016. Her analysis sees the company potentially generating earnings before interest and tax at $120m compared to its current $80m.
She believes its US leisure centres, which operate under the brand Main Event, are turning around and generating more revenue, becoming its main asset.
Swanson, whose short career in funds management has never seen a down market, says she has benefited from the rush of IPOs on the ASX in the past 18 months.
“It has been an incredibly hot market for IPOs,” she says.
“I have learned a huge amount in terms of how to do due diligence. You have to make sure you not only speak to the chief executive and the chief financial officer, but also talk to their customers and ex-employees to get a holistic view of a company.”
She says the fund takes a three-year view when it looks at whether to invest in an IPO.
“We are not going to jump into an IPO because we think it is going to go up 20 or 30 per cent on one day,” she says. “Our favourite company is one which is genuinely coming to the market because it has a huge growth opportunity and needs capital.
“It’s always a red flag if a company is coming to the market opportunistically for no reason, or driven by private equity or the founders wanting to get out.”
Swanson says she is more than happy concentrating on the small cap sector in Australia.
“There are so many fantastic companies acrossall parts of the market – outstanding resource companies, mining services, financial services.
“Our big cap team is excited if they find a company that has 30 per cent upside. But (at the small cap fund) we are excited to find a company which has 200 to 300 per cent upside. The opportunities are so much more elevated with small companies. We always have at least 20 stock ideas.”
The annual Sohn conference started in New York in 1995 to commemorate the life of Ira Sohn, a Wall Street fund manager who died at the age of 29 from cancer.
This year’s conference in Australia, online as a result of the Covid-19 pandemic, will feature a video appearance by Warren Buffett’s colleague, Charlie Munger. It will also hear from Caledonia Investments chairman Mark Nelson and Regal Funds chief investment officer Phil King.
The local conferences, which began in 2016 have raised more than $30m for medical research.
The Sohn Hearts & Minds Conference will be held on December 3.
This article was originally posted by The Australian here.
Licensed by Copyright Agency. You must not copy this work without permission.
It’s an “age of instant gratification”, according to Tekne Capital Management’s Beeneet Kothari, and he is picking restaurant delivery group Delivery Hero to ride the innovation in last-mile logistics in the $US1 trillion takeaway food sector.
Firetrail’s Eleanor Swanson believes Megaport is currently one of the best stories on the sharemarket, and has the potential to join the ranks of Australian-founded technology companies such as Atlassian and Afterpay.
Jay Kahn of Flight Deck Capital has pitched Nikkei-listed Bengo4 as his stock pick for this year’s Sohn Hearts & Minds conference, following the recent acceptance of the electronic signature in Japan due to the Covid-19 pandemic.
Jay Kahn’s Flight Deck fund seeks out stocks in “roads least travelled”, and Kahn reckons it has unearthed a “multi-bagger”: Bengo4, which he describes as Japan’s DocuSign.
Builders Unions', Markus Bihler pitched Wise at the sixth annual Sohn Hearts & Minds Conference. Over the next five years, the fund manager expects the target share price to hit 30 pounds by 2027, a 27 per cent five year annualised return.
Builders Union’s Markus Bihler has picked the freshly listed London-based fintech Wise as his top pick at the 2021 Sohn Hearts & Minds Conference.
Cooper Investors’ Qiao Ma says that despite cordless power tools provider Techtronic Industries being an industrials company, it’s really a technology company at heart.
Regal Funds Management co founder, Phil King is recommending that investors sell shares in travel company Flight Centre, arguing that the stock has rebounded too strongly since its lows of last year with the company still facing headwinds with the shift to online travel bookings.
Yen Liow, managing partner of Aravt Global has pitched Gitlab, a founder-led software business that is focused on DevOps at the Sohn Hearts & Minds Conference. Liow stumbled upon the company while researching Atlassian, which itself generated 20 times the return on capital since its IPO.
Yen Liow, founder and portfolio manager of Aravt Global, has a bullish take on Nasdaq-listed software development company GitLab, which he expects to soar in the coming years.
Pinnacle Investment Management is a multi-boutique fund manager that owns stakes in 16 Australian fund managers across Australia of between 23 to 49 per cent. It is led by CEO Ian Macoun who is said to be famous for picking star portfolio managers.
Atreides Management’s Gavin Baker has picked cryptocurrency exchange Coinbase Global at the Sohn conference, believing in its growth opportunities as more people embrace the crypto world.
Gavin Baker, managing partner and CIO of Atreides Management, a $4.5bn crossover firm based in Massachusetts, recommends investors hold Coinbase, a platform for investing in cryptocurrency.
There is no bigger or unsolved problem than taxes which remains consuming, complicated and error prone. Businesses still manage their taxes with a combination of pen and paper and excel and the complexities are only increasing. Babak Poushanchi says Avalara, based in Seattle, is solving the problem.
Spotify’s market-leading position in the future of audio will catapult the business to among the so-called FAANG stocks alongside the likes of Apple and Amazon, powering revenue growth and its share price, according to Hamish Corlett, co-founder of TDM Growth Partners.
FACT Capitals' Joyce Meng pitched Beauty Health Company at the sixth annual Sohn Hearts and Minds Conference. Meng is forecasting 30 per cent durable and organic growth driven by accelerating equipment placements and a price target of $40 a share for 40 per cent upside.
Moderna co-founder Robert Langer has said he’s confident the company’s vaccine will be effective against the omicron strain of COVID-19, but not as effective as it is against the original variant. “But that doesn’t mean it won’t be effective,” said Mr Langer.
Regal Funds Management has upended its short selling approach to combat the pressures of a rising bull market, focusing instead on share price blips that have included so-called meme stock GameStop, according to chief investment officer Phil King.
An experienced investor with a track record of short selling, King will be the only fund manager on the day tipping a short stock at the annual Australian Sohn Conference on Friday.
Peter Cooper, the founder of Cooper Investors, HM1 Core Fund Manager, shares his learnings from Charlie Munger.
Fund manager, Qiao Ma has tipped Hong Kong based global power tools and outdoor equipment company Techtronic Industries at the Sohn Hearts & Minds conference on Friday.
Hamish Corlett is the only stock picker in the history of the Sohn Hearts & Minds Investment Conference to pitch exactly the same company twice.
Firetrail Investments’ Eleanor Swanson has tipped ASX listed telco software company, Megaport, as the best stock for 2022 at the annual Sohn Hearts & Minds Conference.
Beeneet Kothari of Tekne Capital Management has chosen Delivery Hero as his stock pick at the Sohn Hearts & Minds conference, saying it is the best way to play the innovation and last-mile logistics trend.
Munro Partners’ Nick Griffin has pitched Nasdaq-listed Onsemi as his stock pick at this year’s Sohn Hearts & Minds conference, labelling it the ‘hidden hero’ of the path to decarbonisation.
Berkshire Hathaway vice chairman Charlie Munger, a longtime partner of Warren Buffett, has made his first appearance at the sixth annual Sohn conference in Australia on Friday.
Berkshire Hathaway’s veteran 97-year-old investor Charlie Mungert warns that he views today’s markets as wildly overvalued in places.
Fresh from picking last year’s 180 per cent gainer Nasdaq-listed Bill.com and other big winners such as DocuSign three years ago, Babak Poushanchi is back at Sohn in 2021 with another stock pick. This year the Cota Capital founder and tech-focused investor has named Seattle-based tax software business Avalara as his top pick.
Regal’s Phil King says he’s the only Australian hedge fund manager brave enough or silly enough to return to Sohn Hearts & Minds to pitch a short stock during one of the biggest bull markets of all time.
Griffin expects the car market will be 50 per cent electric by 2030. He likes Onsemi in particular because of its management, and the fact it is being priced as an industrial semiconductor producer.
Joyce Meng of Fact Capital says investors should take advantage of growing skincare spends.
Eley Griffiths small-cap portfolio manager David Allingham has picked Ian Macoun’s multi-boutique funds management group Pinnacle Investment Management as his top stock pick for the Sohn Conference 2021.
Moderna will know in just over a week how effective its COVID-19 vaccine is against the omicron strain, according to the company’s co-founder Robert Langer, who presented at the sixth annnual Sohn Hearts and Minds Conference.
Charlie Munger, the 97-year-old investor and polymath who has been the trusted sidekick of Warren Buffett for decades shared his thoughts on markets, investing and geopolitics in a wide-ranging interview broadcast as part of the Sohn Hearts & Minds Investment Conference.
From e-signatures to last-mile logistics and facials, the annual conference showed that waves of disruption continue to break in different ways across different sectors
Investment legend Charlie Munger says the current climate on global markets is crazier than the dot-com bubble two decades ago, as he savaged the boom in cryptocurrencies as insane and backed China’s ban on the digital assets.
Regal Funds Management’s Phil King says it’s a tough market for short sellers but it didn’t stop him from nominating a prominent one at Sohn Hearts and Minds today: FlightCentre.
Moderna’s co-founder expects the biotech’s vaccine will be at least somewhat effective against the Omicron variant, but says his company can quickly pump out variant-specific boosters for new strains when needed.
Moderna co-founder Robert Langer has suggested the vaccine maker will know within days if its mRNA Covid-19 vaccine is effective against the new variant, Omicron, as he predicted future mutations and the likelihood of the virus becoming “something life flu” that will require regular vaccine boosters.
Eleanor Swanson of Firetrail Investments sat down with Equity Mates Media ahead of this year's conference. Eleanor shares the story of her first investment, breaks down the small cap landscape and shares some of the best companies that she's come across during her time in the markets.
Fund Manager Mark Nelson of Caledonia to interview Berkshire Hathaway's Charlie Munger at the sixth annual Sohn Hearts and Minds Conference.
For all that heavyweight finance names Michael Walsh, David Paradice, Matthew Grounds and Gary Weiss have in common professionally, one thing they can’t seem to find consensus on is music.
Babak Poushanchi, one of the legends of the Sohn Hearts & Minds conference, has opened up about his approach to riding the disruptive technology boom.
Conference Manager Joyce Meng's FACT Capital is proof that the existing Wall Street model could be wildly improved upon.
Cota Capital’s Babak Poushanchi emerged the top picker from the 2020 Sohn Hearts & Minds Conference, with his pick, bill.com, share price up more than 200 per cent.
Yen Liow of Aravt Global sat down with Equity Mates Media ahead of this year's conference. Yen shares the story of his first investment, Aravt's investment philosophy, his thoughts on the future of the payments industry and why he's excited to be a part of the Hearts & Minds family.
Returning Conference Manager Beeneet Kothari talks 'quick commerce', a topic at the heart of his stock pick for the 2021 Sohn Hearts & Minds Conference.
Hearts and Minds Investments Limited (ASX:HM1)'s Chief Investment Officer Rory Lucas and founding Hearts & Minds supporter Phil King of Regal Funds Management recently spoke with the hosts of You're In Good Company, an Equity Mates Media podcast.
Returning Conference Manager Nick Griffin of Munro Partners attempts to capitalise on the climate change thematic that it has declared as the biggest investment opportunity since the internet.
New Conference Manager Eleanor Swanson was instrumental in convincing the investment team at Firetrail Investments to buy into AfterPay.
As a rising star within Firetrail Investment Management, Eleanor Swanson was instrumental in getting the firm to back Afterpay when it was trading at just $20, winning over the senior investment managers.
Eley Griffiths Group portfolio manager David Allingham says the Sohn Hearts and Minds Conference is the Australian investment management industry’s answer to the Woodstock Festival.
Returning Conference Manager Qiao Ma is planning to tip a Hong Kong-based consumer brand player when she fronts the annual Sohn Hearts & Minds conference next month.
Returning Conference Manager Beeneet Kothari sat down with Equity Mates to discuss his first investment, views on China and Cryptocurrency, and why he loves being involved in the Sohn Hearts & Minds Conference.
The payments sector has entered a golden era, says Avart Global’s Yen Liow, who hails from Melbourne.
Moderna co-founder Robert Langer says vaccine development for a range of diseases – not just Covid-19 – will be one of the biggest trends among biotechnology in coming years.
Professor Robert Langer, the billionaire co-founder of vaccine maker Moderna says that early investors in the biotech startup should share the credit for the development of the company’s coronavirus vaccine.
The powerful technology that has enabled mRNA vaccines to save millions of lives during the coronavirus pandemic has much broader potential, according Bob Langer, one of the co-founders of Moderna.
Beeneet Kothari admits it’s been a ‘bloodbath’ for Chinese tech stocks this year, but there are two good reasons he thinks the sentiment will shift.
Charlie Munger, Warren Buffett's trusted man, to headline Sohn Hearts & Minds 2021 Conference.
Charlie Munger, who will headline this year’s Sohn Hearts & Minds Conference, places one quality above all else: patience.
Warren Buffett’s right-hand man Charlie Munger is the headline act at Sohn Hearts and Minds this year and the 97-year-old investment legend is expected to offer forthright views on global financial markets which are now at a critical juncture.
Legendary investor Charlie Munger to headline Sohn Hearts & Minds 2021 conference.