HM1 Weekly Investor Update: 17 November

Hi everyone
 
I hope you’ve had a great week. We sure have, with our 2020 Sohn Hearts and Minds Investment Leaders Conference being 'released' last Friday. If you bought a ticket, you’ll see that the window for viewing the pitches and the keynote presentations has been extended until tonight 11:30pm (AEDT). They are even better the second time, especially Scott Galloway's speech about the state of the world! I didn’t want it to end! There were so many insightful tidbits which I'll try and share with you when I can.
 
The recurring theme that I took out of many of the presentations was that aside from the tragedy of COVID-19 and the family and friends we have lost to this horrible virus, society has, and will continue to form new habits, which will very likely remain a part of our lives once a viable vaccine has been developed and people no longer fear getting infected when they head into crowded areas.
 
What sort of habits am I talking about? 
 
Increased comfort in using a tele-doctor, buying more goods online, be it fresh food or furniture, having them delivered or picking them up and not having to get out of your car, advancing technology from cheques to apps for the 6,000,000 SME back offices in the USA, technology so that companies can communicate much better than via antiquated email (yes, I know this is an email!), and of course, 5G technology finally hitting our homes.
 
And so onto the new stocks, which will become 35% of the portfolio for the next 12 months.
 
15 stock ideas were pitched, and we have reported that all 15 will be invested into HM1. If you haven’t seen the stories in the media, the stocks (and a quick 1-line description of what they do) are:

 

As you can see, and probably won't be surprised by, improved healthcare is a major theme in the recommendations. 2020 will forever be remembered as the year COVID-19 changed our lives. Over the coming weeks, I’ll delve into many of the companies and explain what they do, and why our managers believe they will be great investments over the coming 12 months.
 
Yesterday we reported our most recent NTA’s of $4.10, $3.92, and $3.71. 
 
You will have noticed that in the updates (my weekly insights and the Monthly Investment Report), rarely do we talk about share price performance. Instead we talk about NTA movement and investment return. In fact, on a couple of occasions we have even been criticised for this, as some people see share price gains as the only relevant performance measure. We cannot control what the share price does on a daily, or even weekly basis. There are literally hundreds of thousands of investors who buy and sell shares on the stock exchange every day. They all have different reasons for doing so, whether they have become forced sellers of their shares because they may have lost their job, while others may have inherited some money, and wish to put it to work for them. There are speculators, and there are investors, all of whom have different information, different views, different needs, and different timeframes for their daily share trading. We aim to give our readers the best information available so that they can make the most informed investment decisions with their capital as possible. We strongly believe this is what the Net Tangible Asset (NTA) value provides. Each Monday, we publish HM1’s NTA value on three levels, namely pre-tax, post current tax, and post all tax (realised and unrealised). In previous notes I have explained why we report all three, and how each can be relevant for people in varying circumstances.
 
In the last few weeks, our share price has run way ahead of our NTA. This is what is meant by ' trading at a premium to NTA’. People often judge the relative value of a Listed Investment Company by its premium or discount to NTA. Many LICs currently trade at a discount, while HM1 is currently at a healthy premium. This is probably (I say probably because it’s just my own personal view, and not advice) because our investment performance has been strong recently, and new investors may have bought into the stock ahead of the conference and expectations of the new stocks performing well. 
 
We want all investors, financial planners, and advisors in HM1, both new and current, to understand as well as possible what they are buying and what they are getting for whatever price they pay. The purpose of these notes, and the weekly reporting of our NTA is for exactly that. 

 

Have a good week,

Rory Lucas
Chief Investment Officer
Hearts and Minds Investments Limited

 

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