The Sohn Hearts & Minds conference is a decade old and, if the crowds were any indication, has not lost any of its vigour.
From the Sydney Opera House, fund managers, bankers and others in the audience heard from everyone from former prime minister Julia Gillard to one-time Donald Trump confidant Anthony Scaramucci.
The conference took place amid one of the worst falls on the ASX in months, driven by concerns about stretched valuations at major tech companies.
1. Brookdale Senior Living
Vihari Ross | Antipodes Partners
Brookdale Senior Living, the largest provider of senior housing in the United States, is perennial Sohn presenter Ross’ stock pick this year.
The company has a market capitalisation of $US2.2 billion ($3.4 billion) after the shares more than doubled in value this year.
Ross cited the growing number of Baby Boomers who were about to turn 80 in the next year and said the best thing to come out of this “silver tsunami” was the valuation opportunity in this stock.
“The market has stopped paying attention [to Brookdale] when it’s at the cusp of a very significant turning point,” Ross said, adding there would be a huge undersupply of retirement housing and a huge surge in demand.
2. Morimatsu International
Eric Wong | Stillpoint Investments
Morimatsu, a Hong Kong-listed modular construction and core industrial equipment company, is what Wong calls a “factory of factories”.
“It doesn’t just deliver factories. It co-designs the manufacturing process with its clients, and that process knowledge gets embedded into the modular architecture of each project, which makes the next one faster, lower risk and harder to replace over time,” the American fund manager says. Wong described Morimatsu as a “value stock”.
“Profitability has soared. In 2018, net margin wasn’t even 5 per cent, and today it’s 13 per cent. We believe Morimatsu is undiscovered and mispriced.”
3. SLB
Robert Mullin | Marathon Resource Advisors
Oil field services company SLB, also known as Schlumberger, is a century-old Houston-headquartered company and has barely recovered after weeks of weak commodity prices, according to Mullin.
Aside from its oil drilling business, SLB is also a technology company after purchasing Fairchild Semiconductor in 1979.
Mullin described the company as an “OG in AI”.
“They bought Fairchild Semiconductor, which was the original company that launched the integrated circuit, and the year after that, they formed the Fairchild Laboratory for artificial intelligence research in 1981. That’s right, when Zuckerberg and Altman were crawling around in their nappies,” he said.
4. Steel Dynamics
Peter Rutter | Life Cycle Investment Partners
“You should look beyond the household names when stock picking,” says the London-based investor, pitching the Nasdaq-listed steel producer headquartered in Indiana.
Steel Dynamics, Rutter said, was “a leader in its field as a result of its differentiated culture”, adding the stock outperformed the global steel sector and the S&P 500 last year.
He cited three major catalysts: an inflection point in its new mill; a well-timed expansion into aluminium that was creating a new profit stream; and a cyclical upswing in the steel market after years of oversupply. “Steel Dynamics shares all three of these attributes,” Rutter added.
5. PB Fintech
Samir Mehta | J O Hambro
PB Fintech, the Indian insurance and lending products platform, is listed on the National Stock Exchange and has performed “poorly” over the past year, Samir Mehta said.
That poor performance was good for investors looking for a bargain, he added.
“It’s virtually a monopoly as an insurance agent in India. On the other hand, they are also building a marketplace for savings and wealth management.
Mehta said PB Fintech was “profitable and spewing out cash flows”. The Singapore-based fund manager said his base case was for a 60 per cent upside in the stock.
6. TKO Group
Qiao Ma | Munro Partners
TKO Group is the business formed by the merger of Endeavor’s Ultimate Fighting Championship and World Wrestling Entertainment, and Ma says it’s a bet on UFC chief executive Dana White and super agent Ari Emanuel.
“It produces some of the most unique, one-of-a-kind content. It makes a lot of money ... and as a stock, it is still undiscovered,” she said. “TKO is a cash-flow machine. Its margin is already at 35 per cent in terms of EBITDA margin, which is one of the highest in media.”
And, Ma added, it’s still pretty cheap. “This gusher of a cash-flow machine that’s growing 15 per cent per year, you only pay as of now, 17 times.”
7. Puulio
Emerson Moore | Ampfield Management
Puulio, the Finnish retail chain with a market capitalisation of €1.2 billion ($3.7 billion) has almost no net debt and is a gold mine, according to Moore.
It’s “not scary, like things like kangaroos and Gina Rinehart,” he said.
The company, founded in 1982, specialises in low-value consumables used for do-it-yourself projects, and Moore’s fund has a 10 per cent stake.
He said the first thing that caught his attention about the stock was that it had the highest new store return on investment of any rollout globally. The second was that operating earnings grew more than 20 per cent annually.
8. Heidelberg Materials
Mohammed Anjarwala | Advent International
Heidelberg Materials’ earnings per share could pop from just under €13 to about €24, Anjarwala says, because of “volume, pricing, capital return and share buybacks”.
“In a frothy market with elevated multiples, we think this has an attractive risk-reward,” he said. “I’m going to go old school and bring us back to the basics. I’m going to talk about cement.”
The fund manager said the stock was “cheap on an absolute and relative basis. At 12 times earnings, it’s attractively priced”.
Heidelberg operates primarily in Germany and has a 50 per cent market share in its relevant markets, he said. That means they have “real sustained pricing power”.
9. Monday.com
Ben Hensman | Square Peg
“They are hungry. They move fast,” Hensman said, speaking about Monday.com’s two founders Roy Mann and Eran Zinman.
“They attract incredible talent to pursue this vision that the work can disappear into the software, and they can solve this tax on work for all of us.”
The Melbourne-based investor pitched the $9 billion workplace software company, saying it was the best value buy on the market.
“This should be an expensive offering on the markets today, but no. Today, you can get Monday at the best value it’s been at since its public IPO in 2021,” he said.
The stock has slumped 30 per cent so far this year on the Nasdaq.
This article was originally posted by The Australian Financial Review here.
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