Tansy Harcourt, Senior Reporter at The Australian. 

He is the man who describes Ferrari as a “consumer staple”.

Zehrid Osmani, global equities fund manager at Martin Currie, is one of a team of stockpickers working with Future Generation, an ASX-listed investor which backs local charities.

Osmani’s view on a consumer staple might be different to the ­average Australian, who is more likely to buy a Ford Ranger than a Ferrari, but the fund manager has loved the stock since it started trading in New York almost a decade ago and ranks it up with artificial intelligence “enabler” Nvidia as definitely one to own.

“On the AI side, we believe you have to focus on the picks and shovels — the enablers of AI, the companies that will be more likely to monetise from AI … what we’re looking for is companies like Nvidia,” Osmani says.

Companies such as Ferrari and Nvidia might seem at first glance to be at opposite ends of the investment universe, yet their commonality includes strong earnings valuations and cash flow rather than optimism for the future, barriers to entry, and powerful market positions.

Case in point is the market obsession with AI and the amount of companies whose share prices are soaring because they might cash in on the significant structural change it will bring.

Martin Currie tracks more than 50 AI-related stocks and, over the past 12 months, their share prices have risen on average by 60 per cent. Their sales estimates have not moved and their earnings estimates have only moved up by 7 per cent.
“You can see there is anticipation that some of these companies might monetise, but that hasn’t translated yet in earnings upgrades,” Osmani says.

Nvidia is one of Martin Currie’s largest holdings because the microchip processing giant is trading on actual earnings from the AI revolution, rather than just looking like it might.

“Nvidia’s share price has gone up over 280 per cent over that same period, but its earnings estimates have been upgraded by over 380 per cent,” Osmani says. “So really the share price actually hasn’t even managed to keep up with earnings upgrades.”

For AI to work effectively, it leans on graphics processing units (GPUs) — once just the obsession of gamers looking for the best and fastest visuals — because they can perform thousands of tasks more efficiently than a computer processor.

“To harness AI you need faster computing power, so faster microchips, and Nvidia is a leader by far the GPU space — those faster micro processors,” Osmani says.

So important is Nvidia to the AI world, stockmarkets are watching for news from its annual Global Technology Conference, which begins in the US on Monday evening with a keynote speech from Nvidia CEO Jensen Huang, and features xAI’s Igor Babuschkin and Microsoft vice-president of generative AI Sebastien Bubeck.

In the highly speculative AI space, Osmani also likes Microsoft because the company has a ­direct 49 per cent shareholding in Open AI, a significant cloud services business and is an enterprise software company set to benefit from upgrades companies are likely to make as they try get on board with the changes AI will bring.

“We believe corporates are more likely to spend on AI faster, or more rapidly and to a bigger extent because they will very quickly understand that AI is a way of making them more creative and or more productive,” Osmani says.

Also in AI, the investor likes Cadence Design Systems, a company which builds tailor-made microchips for companies trying to harness new innovations. But his funds are certainly not all tech-­related and sports car maker Ferrari is one of Martin Currie’s “most predictable” investments.

Ferrari holds its appeal because “its pricing power is so strong” and it can control supply to the point where limited edition model Ferraris, which may sell for $US1m, can sell out before production has even begun.

“It’s a big position in our strategy, and the way we describe Ferrari is that it is a consumer staple,” says Osmani, adding upon questioning it is so for “high-net-worth individuals”.

“It’s one of the most predictable in terms of earnings because it tends to be fully utilised in terms of production, because it’s got a long waiting list of demand,” he says. “They tend to have a very predictable revenue and earnings pattern.”

Osmani favours Moncler in the luxury goods space because the company still has retail growth potential and has “remained creative”.

For those who can’t afford a Ferrari or Moncler apre-skiwear, the fund manager holds cosmetics giant L’Oreal. “Ultimately, this is affordable luxury,” Osmani says.


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