CIO Insights - 28 June

Hi everyone
 
As Sydney enters its second day of lockdown, I hope it has become clear to everyone that COVID-19 is almost certainly going to be a part of our lives for a very long time. In just the same way the Global Financial Crisis of 2008 is now a part of business and economics teaching about how the finance industry was changed forever, I have no doubt that COVID-19 will be the event that is talked about for decades to come, as the major turning point in much of how we live our lives. And I mean the global population, not just the island that is Australia. We all heard about how the pandemic ravaged the United States, the United Kingdom, and more recently India, but did you know that whilst South America has just 5% of the world’s population, it now accounts for a quarter of the global death toll?
 
According to the Director-General of the World Health Organisation, the delta variant is already present in 85 countries around the world and will likely become the dominant variant in the US next month. Over the weekend, India warned of a worrying new variant, Delta Plus, which can only further validate the theory that this morphing pathogen will challenge any hope of a return to pre-pandemic life around the world.
 
Over the next couple of months, I’ll make some refresher commentary on the theses behind the conference stocks we hold and how they are playing out, as well as releasing the names of the confirmed speakers we will have for the 2021 Sohn Hearts and Minds Investment Leaders Conference (to be held on December 3). Given the events over the last week or so, I’ll end the local financial year commentary on the more general thoughts I have made above, and how I think the portfolio of stocks we hold remains aligned with how it appears the remainder of this year (and beyond) will most likely play out.
 
The stocks that were pitched in November 2020 were:

  • Bill.com Holdings (US)
  • CSL Limited (AU)
  • DISH Network Corporation (US)
  • Fisher and Paykel Healthcare Corporation (AU/NZ)
  • Hello Fresh SE (EU)
  • Nintendo Co. (JP)
  • Ping An Healthcare and Technology Company (HK)
  • Shenzhou International Group Holdings (HK)
  • Slack Technologies (US) – taken over by Salesforce and exited.
  • T-Mobile (US)
  • Target Corporation (US)
  • Teladoc Health (US)
  • Temple and Webster Group (AU)
  • Treasury Wine Estates Limited (AU)
  • Yeahka Limited (HK) – exited after c150% share price rally

 
A quick scroll down the list and you can see that many of these companies have developed technologies or are specialised in areas of our lives that saw accelerated adoption in the early months of 2020 as lockdowns and isolation became more prevalent. And, as it appeared the virus was under control/ vaccines became available over the latter part of 2020/early 2021, the share prices of many such companies retreated, as investors saw it more and more likely we would return to pre-pandemic life. As the delta variant, and other mutations establish themselves, I think more and more people will start to accept that life as we know it has changed forever. And the result surely has to be more people using virtual healthcare, more people ordering their food via contactless delivery, more people buying furniture, wine, houses, cars, you name it – online. Demand for video games can only go one way – those of us with kids must see how much they use their PlayStation/Nintendo/Wii consoles. Quality companies who are changing how we live will do well.
 
I was asked last week if shareholders were able to see a detailed list of shares held by Hearts and Minds Investments. As I have said before, we only publish the entire portfolio once a year. This is a statutory requirement and is done as at June 30 (this Thursday). This will appear in our Annual Report, which will be released in late August. Please understand that we don’t publicise the highest conviction stock ideas of our six core managers outside of the Annual Report as a courtesy to them, as we feel it is their intellectual property to disclose, not ours, should they wish to do so. We aim to give as much portfolio colour as possible in these regular updates, and our Monthly Investment Reports, which are freely available on our website here.
 
And so, into July, which must be the best month of the year for sporting enthusiasts. Wimbledon, The Open Golf Championship, and of course my favourite; Le Tour de France. For anyone who saw the first stage and the two horrific crashes, I hope it’s a lesson in how this silly, self-absorbed need of some people to be seen on TV can have such devastating consequences on innocent sportsmen & women around you. Be aware peeps!!
 
Stay safe

 

Rory Lucas
Chief Investment Officer
Hearts and Minds Investments Limited

Reminder: these are simply my general views and should not be taken as investment advice

 

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DISCLAIMER: This communication has been prepared by Hearts and Minds Investments Limited (ABN 61 628 753 220). In preparing this document the investment objectives, financial situation or particular needs of an individual have not been considered. You should not rely on the opinions, advice, recommendations and other information contained in this publication alone. This publication has been prepared to provide you with general information only. It is not intended to take the place of professional advice and you should not take action on specific issues in reliance on this information. Past performance is not a reliable indicator of future performance. This document may not be reproduced or copies circulated without prior authority from Hearts and Minds Investments Limited.