In the spirit of reconciliation Sohn Hearts & Minds acknowledges the Traditional Custodians of country throughout Australia and their connections to land, sea and community. We pay our respect to their elders past and present and extend that respect to all Aboriginal and Torres Strait Islander peoples today.

Star fund managers look beyond pandemic for enduring winners

Star fund managers are betting that companies in e-commerce and healthcare that thrived during the COVID-19 pandemic remain solid long term bets as the virus permanently alters consumers behaviours and values.
Jonathan Shapiro
AFR
 • 
Nov 13, 2020

Star fund managers are betting that companies in e-commerce and healthcare that thrived during the COVID-19 pandemic remain solid long term bets as the virus permanently alters consumers behaviours and values.

 

At the Sohn Hearts & Minds charity conference, held virtually for the first time, fund managers tipped Australian online retailer Temple & Webster, German-listed grocer Hello Fresh, New Zealand-listed healthcare company Fisher & Paykel and telemedicine plays Ping Ang Health online and Teledoc to post further gains into 2021.

 

That is even as news of a vaccine triggered a rotation out of stay-at-home tech stocks and into beaten-up sectors.

 

Todd Guyot, of one of Australia's top hedge funds, Regal Funds Management, said ASX-listed online retailer Temple & Webster had further to run after gaining 284 per cent this year.

 

The company is still growing even the economy reopened in July and August.

 

That, he says “demonstrates the impact of repeat customers, which is a direct correlation with the customer experience."

 

"If customers get what they want correctly and in a timely manner, they will more than likely come back,” he said.

 

The obvious question, he says, is what will happen when COVID-19 "ceases to be a major issue."

 

But he believes that in Temple & Webster’s case it can further expand its online market share.

 

Milford Portfolio Manager William Curtayne picked New Zealand local hero Fisher & Paykel Healthcare, which is up 60 per cent this year, for similar reasons.

 

The COVID-19 pandemic has exposed its products to doctors and hospitals around the world, he said.

 

Obliterating barriers

Fisher & Paykel shares have gained this year due to the growing use of its humidifiers and its Optiflow product, a breathing apparatus that helps deliver more oxygen to patients than traditional support.

 

But he says the pandemic has "obliterated" the key challenge of educating doctors and getting hospitals to buy the company's equipment.

 

Curtayne says 60 per cent of the company’s sales come from its hospital division, which he believes will further grow.

 

While a vaccine may be on the horizon, Curtayne expects F&P sales to grow as Europe and North America confront second waves of the pandemic.

 

Nick Griffin of Australian based global growth fund Munro Partners tipped German-listed HelloFresh, the online grocer, to capitalise on the digital shift that COVID-19 triggered.

 

The company, he said, was already well positioned heading into the pandemic.

 

That is because they spent the best part of a decade building infrastructure to take a leading position in 14 markets.

 

“We’ve actually seen this movie before. It was done by Amazon,” said Griffin.

 

“Once you have the infrastructure you can offer a better service to clients. That allows repeat customers and allows them to recommend to other customers. So you get an acceleration in market share," he said.

 

"HelloFresh has effectively destroyed most of their competitors in the US.”

 

The pandemic has also put health-technology stocks in focus.

 

Virtual healthcare could be the next megatrend and two global fund managers picked companies that they believe stand to win.

 

Cathie Wood, of ARK Invest, whose 2019 Tesla tip was the top performer placed her 2020 chips on Teledoc. The company, she said would solve a pending shortage of physicians in the US at a time when demand was about to soar.

 

"The US could be short 100,000 physicians in the next 10 years that's on a base of 1 million and that's 10 per cent. On the primary care side, the number is 40,000 and that's almost a 20 per cent shortage relative to demand."

 

Prince Street's David Halpet picked up on the same theme, but tipped China's Ping An as a better way to invest in telemedicine.

 

Ping An offers a mobile platform for online consultations, hospital referrals and appointments, health management, and wellness interaction services within China.

 

“Coronavirus is a key inflection point for digital health globally and the change in the business plan makes an attractive entry point," he said.

 

I believe this is a stock that can grow five to ten times over the next five years.”

 

The pandemic has been kind to the tech giants, such as Amazon, which New York University professor Scott Galloway said was "invented in central casting for a pandemic."

 

But Gavin Baker of Atreides Management is betting that bricks and mortar stores will learn to compete with the e-commerce giants.

 

He picked discount retailer Target as his top investment on account of it's strong e-commerce sales growth and investment in information technology.

 

Another stay-at-home-stock that has been left behind in 2020 is workplace communications tool Slack.

 

The company is one of the most shorted US software stocks as traders bet it will struggle to compete with Google Workspace and Microsoft Teams. That's even as the temporary move by employers allowing staff to work from home seems to be a permanent trend.

 

But TDM's Hamish Corlett said Slack was a cheap undermonetised asset that could become a takeover target.

 

Ackman sticks to big companies

No fund manager has navigated the COVID-19 pandemic better than Bill Ackman.

 

His fund, Pershing Square, headed into the crisis owning companies that would get hit right between the eyes by the pandemic. That includes takeaway chains such as Starbucks, Chipotle, and Restaurant Brands International, and hotelier Hilton.

 

But Ackman retained most of his holdings and placed a derivatives hedge that netted billions of dollars of profits.

 

Ackman told the Australian media last month that companies such as Starbucks would survive while smaller coffee shops would struggle to stay open.

 

The pandemic he said played into the hands of large listed companies with deep pockets.

 

He says Hilton's franchise business model meant it did not have to wear the immense fixed costs associated with running a hotel.

 

"It's not a capital-intensive business, so they can make it through this," he said. "Meanwhile in the hotel business there are going to be a lot of people turning in their keys."

 

 

This article was originally posted on The Australian Financial Review here.

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


Further Reading

103
speakers
146
partnerships
3100
attendees
+$20M
DONATED