FYI | Nov 27 2019
By Peter Switzer, Switzer Report
Seven hot stocks from hot fund managers
The Sohn Hearts & Minds conference is open to everyone as long as you have over $3,000 to hang out at the Sydney Opera House to listen to the views of two American legends of investing — Ray Dalio of Bridgewater Associates and Howard Marks of Oaktree Capital. These guys were the headline acts last Friday and basically told us that they’re playing attack when it comes to investing but with a defensive bias. I was invited along as a guest of one of the sponsors. This organisation raises serious money and gives it to organisations engaged in medical research.
Both weren’t telling us to go long stocks with our ears pinned back but neither were they card-carrying doubters of the US economy and Wall Street. That said, they reminded us that we’re in the end play of the bull market but no one knows when it will end.
Like me, Howard thinks “this time it is different” with negative interest rates and central banks virtually handing out “free money”. But the difference that prevails also means something different of a ‘black swan’ kind could easily glide into our investing world.
I was reminded of the value of investing with some defensive assets. If you’re fully invested and a 50% crash comes (like the GFC), you need a 100% rebound to get your capital back to where it was before the market slump. However, if you design your portfolio with fixed interest and bonds, so your portfolio falls say 20% in a crash, then you only need a 25% rebound to bring your capital back. And history says our market rebounds anywhere between 30% to 80% in the first year after a big crash.
Apart from hearing from these doyens of investing, we also went to the Sohn conference to hear from some Aussie and foreign fund managers who gave us their best ideas.
Last year, Jun Bei Liu from Tribeca Investment Partners starred with her Oriental Education and Techno both doubling in value. This year she put her investment muscle to the test and has given a2Milk ((A2M)) the nod for the year ahead.
Later I asked her whether the acquisition of Bellamy’s by a Chinese company could spell trouble for a2Milk. She said no, categorically. There is enormous growth potential in both China and the USA.
And here’s a fact I didn’t know: Chinese children stick to formula milk until they are five years old! Aussie kids toss it in after a year!
FNArena’s [database of leading broker] analysts aren’t as wildly keen on a2Milk as Jun Bei, with a 5% downside predicted but I think she is on to something. Last Monday on my TV show, my usual group of smarties were talking up A2M as we focused on food stocks. And from Tuesday to Friday, the stock was up close to 17%!
The stock that got huge thumbs up from two fund managers was Mineral Resources ((MIN)). Airlie fund manager Emma Fischer built a big case for the stock, the numbers and the CEO, Chris Ellison, and then TDM Growth Partners’ Hamish Corlette, who actually told us to believe the Spotify story, if you want an overseas stock, then simply threw in his big ‘love’ for MIN, as well.
That was an unsolicited vote of confidence in the company.
On Spotify, he thinks the company has so much market share to look forward to as the world embraces music via the Internet and the company is positioning itself to build its paid-for-service while boosting numbers and ads on the free-way to use Spotify.
By the way, MIN is a $14.56 stock and is rated highly by FNArena’s analysts, who have a target of $16.30, which implies a 12% upside.