A maker of hideously expensive beanies, a yet-to-be-listed fintech and a classic blue chip defensive stock were among the top picks at an investor forum run by the Geoff Wilson-backed Future Generation listed investment companies.
The selections, which covered local and global stocks, suggest that even when markets are expensive there is plenty of value to be found.
Gabriel Radzyminski, Sandon Capital – Consolidated Operations Group
Sandon Capital founder Gabriel Radzyminski plumped for minnow Consolidated Operations Group, which runs Australia’s largest broker network for SME finance, with a market share of about 16 per cent.
He said while fintech had threatened to disrupt this market, brokers remained the key way of connecting borrowers and lenders. COG plays the role of an aggregator, operating the broker network, taking a commission on loans written by brokers and providing other services.
“In the real world an app might not be the solution, so the broker is the trusted adviser to these businesses.”
The company, which recently announced a merger with CML Group, a provider of factoring products is trading at about 9¢ a share, but Mr Radzyminski valued the stock at between 15¢ and 20¢ a share, and higher if the merger is approved.
Marcus Guzzardi, Cooper Investors – Intercontinental Exchange
Cooper Investors portfolio manager Marcus Guzzardi, who runs the firm’s North American desk, picked a company run by what he described as “one of the most influential people in global financial markets”, the New York-listed Intercontinental Exchange.
The business, which acquired the New York Stock Exchange in 2013, is run by Jeff Sprecher, who is increasingly pushing into the provision of subscription data services to market participants.
“We think Jeff Sis a once- in-a-generation CEO,” he said. The stock is up 24 per cent year to date.
Cooper predicts revenue will grow at mid to high single digits, but on an operating margin of 60 per cent. And with the business trading at the same free-cashflow multiple as the broader US market, at about 21 times, the stock “represents phenomenal value”.
David Prescott, Lanyon Asset Management – Moelis Australia
Funds management and corporate advisory business Moelis Australia only listed in 2017, but David Prescott, managing director of Lanyon Asset Management, is tipping it’s just getting started.
With funds under management now at around $5 billion, and likely to go to $7 billion in the next two years on Prescott’s numbers, he believes the firm has reached a scale where adding more clients and funds won’t result in more costs.
The stock currently trades at $4.63, up 1 per cent year to date. But Prescott believes its asset management business is worth $3.30 a share, its corporate advisory arm is worth 90¢ and its investable assets are worth another $1.40 share, suggesting a $5.60 valuation.
“It’s a company that’s had a phenomenal start of its corporate life but we think its best years are ahead,” Mr Prescott said.
Nick Griffin, Munro Partners – Moncler
Nick Griffin, the founding partner and chief investment officer of Munro Partners looked to slopes of the European mountains Italy for his stockpick, suggesting luxury skiwear company Moncler can continue its strong recent run.
The company makes fabulously expensive gear for winter, with Griffin revealing the cheapest item it sells is a beanie for $US295 ($436). But its strategy of limiting supply has collided with surging demand from Chinese consumers, who are travelling the world increased numbers and have an eye for luxury.
“They spend voraciously, they gift voraciously,” Griffin said.
While Moncler is much smaller than luxury peers such as LVMH, Griffins predicts annual earnings growth of 15 per cent to 25 per cent and the possibility for M&A, given LVMH’s recent takeover of Tiffany & Co. suggest consolidation in the luxury sector is coming.
And Griffin sees particularly big growth ahead China, which will host the Winter Olympics in 2022.
“We think they’re going to be much more focused on winter wear in the years ahead.”
Jun Bei Liu, Tribeca Investment Parners – Tyro
Tribeca portfolio manager Jun Bei Liu plumped for one of the most anticipated floats of the year with her selection: payments provider Tyro.
The company, which will begin trading on December 6, will have a market value of around $1.3 billion when it lists.
Ms Bei Liu said the firm had one favour with retailers for providing a highly functional and integrated payments platform with less downturn than the platforms provided by the big banks, and had already grabbed a 2.7 per cent market share of a market she says is worth $651 billion, and growing at 7.5 per cent a year.
Tribeca believes Tyro can get its market share to 5 per cent, which would see its revenue triple.
Bill Pridham, Ellerston Capital – LivePerson
Ellerston Capital co-portfolio manager Bill Pridham is betting on a company that solves one of the great pains of modern life – dealing with call centres.
He says there are 270 billion phone calls made to 1800-style phone numbers around the world, which cost companies about $5.60 a call, or $1.5 trillion in total. It’s not just customers who get annoyed; staff attrition rates in call centres are around 40 per cent, leading to high training costs.
LivePerson helps big companies such as telecommunications companies, airlines and retailers move their help lines to message-based services, using mobile phones or messenger apps such as WhatsApp and Facebook Messenger.
The stock is up 110 per cent in the year to date and Mr Pridham is confident of further growth as awareness of these services grow among consumers who would much rather message.
“Customer care is becoming the number one differentiator for brands globally,” he said.
Matt Haupt, Wilson Asset Management – Amcor
The portfolio manager behind Wilson Asset Management’s blue chip strategy, Matt Haupt, believes packaging giant Amcor can extract the $US180 million of synergies promised from its merger with US group Bemis must faster than anticipated.
In addition, he expects the stock to rise as the number of covering the company in its new home market of the United States to grow from the current level of just three. WAM also expects that environmental concerns around the stock will ease as the market comes to understand the carbon reduction options created by plastics recycling.
Mr Haupt says Amcor is trading at around 16 times forward earnings, but with WAM expecting growth of 10 per cent to 12 per cent – much better than the 5 per cent to 10 per cent forecast by the company – that looks attractive.
“In this market, that looks like good value,” Mr Haupt said.
By James Thomson
