HM1 Weekly Investor Update: 30 November



Hi everyone

Well here we are - a day away from December already. Cricket is back on TV, Black Friday/Cyber Monday online sales are on, and so the silly season begins yet again.

Stay with me here. I had dinner with some dear friends on Saturday night at a pub on Sydney's North Shore. We're all becoming accustomed to using our phone camera to 'sign in' whenever we go out, and pay for our food and drinks with Apple Pay or Samsung Pay (is that what it's called...sorry, I'm locked into the Apple ecosystem). For the first time ever though, we found a QR scanner on our table which, when tapped with our phones, up popped the menu. We were able to order our steak/duck/fish with just 3 clicks (including how well cooked I wanted my steak). How cool is that?! 12 minutes later our meals arrived (and cooked to perfection I might add).

It got me thinking. 

Will places keep using this type of technology when COVID is properly under control and we go back to 'life as we knew it'? 

Would I prefer to talk to a waiter/waitress going forward if I had the choice? More importantly, what about the younger cohort? After all, they are the future, and so what the under 30's think and do, is vitally important for the success of many such businesses.

It wasn't that long ago that we all held cash and a credit card in our purses and wallets to pay for various goods. Now we 'tap tap tap' (even for a bus ride) on our phone without thinking about it. It wasn't so long ago that we'd go to the movies for a night out. Now we have Netflix, Stan, Amazon, Google, and Foxtel on demand. COVID has accelerated these and other habit changes in our lives. 

I don't think I, or in fact many of us, will go back to many of the old habits we had. It's better and more convenient now. And that's what technology does - it makes life's hassles less of a hassle, so that we can enjoy what we set out to enjoy. Sure, it may be less social to order a steak on your phone compared to talking to a waiter, and yes, many relationships have been forged at pubs and clubs by such social interactions. I do however think that many (especially younger) people will prefer to click to order so that they can spend more time talking and engaging with their friends.

A major theme I took out of many of the presentations at this year's conference revolved around how changes in some of our habits might affect our lives. Look at some of the stocks that were pitched. Hello Fresh delivers quality fresh food to your doorstep, so you don't have to go to Coles or Woolies quite as often. Two managers pitched Tele-medicine companies (one in China - Ping An Healthcare; and one in the US - Teladoc), reducing the need to go to your local doctors surgery. Target Corp in the US is giving customers such a good 'click and collect' experience that its online sales are booming. Yeahka operates a technology platform that provides payment services to merchants and consumers in China like the QR scanner I described using at the pub. Temple and Webster allows you to buy your furniture from the comfort of your own home.

Our habits are changing faster than we realise, and it really feels like we just won't go back to some of these old habits. This is what our managers believe too. The younger you are, the more this applies too. As I drove past a cinema yesterday, I wondered if I'd ever go there again. Sad, but likely true.

In portfolio news this week, we have now purchased most of the names recommended at this year's conference. A couple of the stocks had some important news that was due for release this week and last, and so we held off buying our full amounts. Pleasingly, another of our stocks, pitched so passionately by Hamish Corlett; Slack Technologies (WORK.NAS) looks to have been approached by Salesforce for merger discussions according to the US press. The stock jumped some 40% last week as a result. Our NTA's were pretty flat for the week, as strength in Slack was offset by some pullbacks in other names in the portfolio. 

Global equity markets have staged a remarkable rally in November, with comfort over the Biden presidency and positive vaccine results overriding the increasing number of daily COVID cases being reported. How much the rally continues I cannot say. But I do say that many of our habits are changed forever.


Stay safe,

Rory Lucas
Chief Investment Officer
Hearts and Minds Investments Limited


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