HM1 Weekly Investor Update: 7 December

Hi everyone
 
I hope all is well, and you have a well earned break coming up.
 
A short update this week, as the monthly report is being finalised and will be released to the market, and your inboxes by Wednesday. The NTA for the portfolio was unchanged for the week.
 
2020 conference attendees, as well as regular readers of the financial press and my updates will be aware that Treasury Wine Estates (TWE. AX) was pitched as a high conviction stock recommendation by Jun Bei Liu of Tribeca Investments Partners. I have been asked by a few of our readers whether the recent news of tariffs being levied on Australian wines, and on TWE in particular, had changed the investment thesis behind HM1 holding the stock. Jun Bei spoke to ausbiz TV last week where she addressed the matter in public. Here it is if you want to watch it for yourself (subscribe for free).
 
At the time of the conference, it was known that the Chinese government would likely place tariffs on wine and other goods that are sold into China. The quantum of such tariffs was not known. Markets try and price outcomes all the time, and sometimes they are right, and sometimes they are wrong. Given the announcement was imminent, we did not buy the entire position immediately, as with another stock in the portfolio that was in a similar position. This is what you get when you own HM1 - our ongoing interaction with the fund managers, especially around news events. In the case of TWE, the share price fell after the announcement of much larger than expected tariffs (169.3%) on their products. After Jun Bei confirmed that she believed the investment thesis was still very much in place, and most probably even stronger than ever, this allowed us to buy the remainder of our position at more exciting levels. As with all of our managers, both core and conference, regular dialogue allows for more optimal portfolio risk management than investors simply buying and managing the stocks themselves.
 
Hopefully, many of you have already listened to the Equity Mates podcasts we recorded recently, where Nick Griffin from Munro Partners spoke about why he recommended The Trade Desk at the 2019 conference, and Amazon in 2018, and where I spoke about the journey of HM1 so far. Well last week, I had the privilege of recording further podcasts with Equity Mates and two more of our managers; the first was Hamish Corlett from TDM Growth Partners - he pitched Slack Technologies last month, which has just been bid for by Salesforce, as well as Spotify last year. You can listen to the episode right here. The second was with Qiao Ma from Cooper Investors, who pitched Shenzhou International this year, a textiles business in China that manufactures clothing for Nike, Puma, Adidas and Uniqlo. A fascinating listen, which will be released on Thursday. 
 
As if TDM haven't done enough for HM1 already, last week on their own podcast, Scaling Up, Ed Cowan had a chat with Magellan supremo, Hamish Douglass, who is another of the HM1 core managers. If you want to learn a thing or two from these two gurus, listen here. Scaling Up is a wonderful series (3 in fact) of interviews Ed has conducted with CEOs and Founders who have successfully Scaled Up their businesses from start-up to success story. I particularly enjoyed the Guzman and Gomez story myself.
 
I promise that you will learn more from listening to the wisdom of guys like Hamish Douglass, Hamish Corlett and Qiao Ma than just about anywhere else!
 
Next week I'm going to talk about one of our keynote speakers from this year's conference and the book he's just released about the world post corona. 

 

Until then, stay safe,

Rory Lucas
Chief Investment Officer
Hearts and Minds Investments Limited

 

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