Eight years after leaving Macquarie to build Firetrail, Portfolio Manager Blake Henricks remains single-minded in his goal: make money for clients. It’s a philosophy stamped into the Firetrail culture and one he reinforces by hiring people who invest their own savings. Here he covers everything from Cochlear to Life360, small caps to IPOs – and why his early struggles with maths ignited a desire to help people.
Your performance has been very strong since you and your team left Macquarie to set up Firetrail eight years ago. What’s driven that performance?
Our goal is brutally simple: make money for clients. That’s the only thing that matters. I practically stamp it onto the foreheads of anyone who joins Firetrail. I tell them we’re not here for bureaucracy or process for process’ sake. The end goal is returns.
So, we hire people who are hungry and who invest their own money. Being smart is not a differentiator – everyone’s smart in finance – but hunger and a genuine interest in investing are.
Philosophically, we believe that every company has a price. That’s different from the Warren-Buffett-purist approach of “just buy quality”. If everyone bought the same quality stocks, they’d go to infinity – and they don’t. Over time, all sorts of companies can make investors money, if the price is right.
For clients, that means no excuses. We’re not beholden to a style like value or growth or quality or large caps or small caps. We go wherever the opportunities are.
You’ve been underweight the banks. Is that a sector call or is it specific to Commonwealth Bank of Australia (ASX: CBA)?
A bit of both. Banks have had two big tailwinds. The first is higher interest rates. Transaction accounts pay nothing, and banks lend that money out at around 5%. Four years ago, they were lending that money out at just 2%; now they get 5%. That’s great for them. The second is lower bad debts. They’ve pushed a lot of riskier property lending to private credit, so bad debts remain low.
But looking forward, the sector is very competitive. Macquarie wrote 40% of all Australian mortgages in July. Judo and other banks are aggressive in SME (small and medium-sized enterprises) lending. Payments are competitive. Everywhere you look, margins are under pressure.
Did you miss out on the strong run in the banks?
We did okay, but being underweight the banks cost us around 3% over the past two years. That said, we still outperformed the market by 6% over that period by deploying that capital elsewhere.
CBA has fallen by 20% since June. Has that trade played out or is there further downside to come?
The banks need an alternative before people sell them. Quality growth stocks like CSL (ASX: CSL) and James Hardie (ASX: JHX) have disappointed, and resources have been mixed. If neither of those areas is firing, banks are the default. So until there is a strong stimulus from China or elsewhere to drive resources, or lower rates and more economic activity to drive industrials, the banks will be well supported.
That said, through a cycle, competition is the single biggest determinant – and it’s competitive in the banking sector.
You’re underweight cyclical and interest-rate-sensitive stocks. Do you position the portfolio around your rates outlook?
If rates were to fall, the portfolio should do reasonably well, but we don’t like taking big macro bets. We focus on controlling those risks rather than trying to predict them.
A big part of our process is thinking about competition. Not just competition within sectors, but competition among investors. For example, are we really going to generate an edge by building a 10,000-line model on BHP when 25 analysts already cover it? Probably not. We’re more likely to add value by doing deep work on companies that are less well covered and less loved.
It’s the same with interest rates. Everyone has a view, and plenty of people spend all day debating the outlook, but do we really have an edge when it comes to forecasting where rates go next? No. So, instead, we manage the risk thoughtfully.
Which sectors are you most excited about over the next 3–5 years?
Healthcare. Cochlear (ASX: COH), Fisher & Paykel Healthcare (ASX: FPH), and Ramsay Healthcare (ASX: RHC) are all in our top six holdings.
Cochlear and Fisher & Paykel are market leaders with 65% and 90% share respectively. Ramsay is more of a turnaround opportunity, but a very attractive one.
Global healthcare has actually been one of the worst-performing sectors recently due to US political noise, and some Australian companies have been caught up in that general healthcare malaise. But the companies themselves are delivering. Fisher & Paykel just reported double-digit revenue growth and 30% earnings growth. Cochlear continues to execute. Ramsay looks promising.
In a recent article in The Australian Financial Review, you described Cochlear as your contrarian call. Why is it important to have contrarian calls in your portfolio?
Fund Manager: Good question. Look, contrarian calls matter. If you pick companies that upgrade earnings, you do well. If you pick companies that upgrade when no one expects them to, you do even better.
Cochlear is contrarian because the implant upgrade market has been soft. People have delayed their implant upgrades because of rising living costs, which has hurt Cochlear’s results. So, it’s had a series of downgrades.
But the new Nexa implant launched mid-year. Surgeons and audiologists tell us they use Cochlear around 60% of the time; with Nexa they expect to use Cochlear 80–90% of the time, so you’ve got a product that’s going to drive major market share. The February results will give us our first full look at the product.
Any other high-conviction ideas?
Ramsay. It’s a classic “unloved value” stock – like Treasury Wine Estates (ASX: TWE) or Domino’s Pizza Enterprises (ASX: DMP) – that has disappointed on earnings for years. Ramsay’s margins fell from 15% to below 10%, and the stock has underperformed the market by 70% over seven years.
To be blunt, the only way these companies get out of jail is if they start beating expectations or stabilise and Ramsay is starting to show the hallmarks of that. It has a new CEO, a strong industry backdrop, and early signs of improvement. The latest quarterly showed Australian earnings up 5.8%, when the market had expected a 2% fall. The stock jumped 16% on the result.
There’s also a lot of easy operational improvement available. Rostering is still done by text message. Not many industries in 2025 are doing that at scale!
And Life360 (ASX: 360)? I know you’ve said the market is underestimating its upside?
Life360 is amazing. Personally, I hate using it – my daughter made me download it, and I lasted five minutes – but the mega-trend is anxiety. People want to know where everyone is all the time. Where’s my child? Are they trapped in a cave?
What’s remarkable about Life360 is that 80% of customers come through referrals. Most companies spend huge money on Google or AI-driven marketing. Life360 grows virally.
Once a US state hits 3% penetration, growth goes vertical. And because location sharing must be on for the app to work, they have incredibly rich data – which can be monetised through targeted advertising. So, if you’re walking past a JB HiFi store, it can ping you and say, “Come in for an extra 5% off.”
Do you use AI or alternative data – like foot traffic – in your investing?
Yes, we use AI – but for efficiency, not for alpha. A 40-page legal brief or technical report can be summarised in seconds. It helps us ask the right questions faster.
But the idea that you can turn on ChatGPT and beat the market is naïve. If we can use it today, you’ve got to know hedge funds were using it in some form 10 years ago. Our advantage remains bottom-up: incentivising our staff to play in areas that are less well-researched, to get first-party insights, to speak to suppliers, customers, competitors and so on. That’s where our value-add is.
As for foot-traffic or credit-card datasets or the like, that edge is gone. Big investors pay millions for that data and they’ll know the sales figures before the CEO does! So if you’re using a data set that’s freely available, the person paying for it knew about it a month ago. And in investing, the person who knows first is the winner.
One clear impact of AI is that volatility on results days has doubled. A third of all companies moved more than 8% on results day this season. Markets price information faster than they ever did. So if readers feel like things are more volatile today, they are!
If you want to play in the less well-covered space, does that mean you’re focused mostly on small caps?
Generally, yes. The ASX is incredibly concentrated; the top 10 stocks are 50% of the index. We’re typically 20–30% underweight those and allocate to less-covered opportunities.
Small caps have shown signs of life. Is this a one-off or something more durable?
I think it’s longer term, but it needs better economic conditions. Plenty of companies have been talking about recession-like conditions for two years. If things turn, small caps can really run – they’re leveraged to economic activity.
So far, the strength has been narrow, mainly in tech. A proper recovery would broaden out.
You’ve been active in IPOs, like Virgin Australia (ASX: VGN), GemLife (ASX: GLF) and Greatland Resources (ASX: GGP). What’s your outlook for the IPO market in 2026?
The pipeline is big. When I was in the US in June, every investment bank said the same thing: there are strong pipelines, but they’ve been delayed by political uncertainty. We’ve come a long way since then.
I think 2026 will be a busy IPO year. GemLife has done very well. Virgin hasn’t moved much in share price, but operationally it’s performing strongly.
You run a concentrated portfolio. How do you manage risk?
First, we take a team approach. We have three portfolio managers – Patrick Hodgens, Scott Olsson and me – all with different strengths and perspectives. That diversity prevents us from falling in love with a single theme.
Second, we manage thematic risk. Some concentrated portfolios end up with 15 of 20 stocks in resources. We won’t do that. We want multiple ways to win.
Third, if we’re wrong, we move on. No hesitation. Domino’s is a good example: we exited, and it halved again afterwards.
You once wanted to be a maths teacher. What drew you to that – and does it connect in any way to why you invest pro bono on behalf of Future Generation Australia?
It does. I’ve always liked helping people. That’s why I coach basketball now – it scratches the same itch.
And honestly, it comes from my own experience. I actually struggled with maths in Year 8 or 9. I failed a test and Dad, who was a journalist, sat me down and said, “Mate, this is not good.” We worked through it together, and eventually I went on to do four-unit maths, then maths at university and first-class honours.
I’m not telling you that to boast; the point is the opposite. I remember what it feels like to struggle at something. If I could work it out, I genuinely believe anyone can. And that’s why I like helping people.
So, when Geoff and the team asked if we’d manage money for Future Generation – to help not just the shareholders but also the not-for-profits – it was the easiest decision I’ve ever made.
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