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Monthly Insights | A breath of fresh air for investors looking for global growth

Monthly Insights | A breath of fresh air for investors looking for global growth

August 2021

ResMed is a $50 billion medical device company that specialises in the treatment of sleep-disordered breathing and other respiratory illnesses. It is a market leader in the production of cloud-connected medical devices.

ResMed’s share-price has performed strongly in recent months, largely in response to a product recall by its main competitor Philips. Notwithstanding its near 40% rise, we believe ResMed remains a compelling investment opportunity with substantial valuation upside. In this article, we explain why.

 

ResMed 101

The most common illness treated by ResMed products is obstructive sleep apnoea – a condition in which sufferers stop breathing involuntarily for extended periods during sleep. It occurs because the muscles that support the soft tissues in the throat temporarily relax, narrowing or closing the airway such that breathing is cut off. Sleep apnoea can seriously inhibit regular functioning and is related to high blood pressure, heart attacks and daytime fatigue.

ResMed manufactures continuous positive airway pressure (CPAP) devices to assist patients with sleep apneoa. These devices send a steady flow of oxygen into the nose and mouth during sleep, keeping the airways open and allowing normal respiratory function. The CPAP device involves a machine and a separate respiratory mask, see figure 1.

Less common but equally debilitating is chronic obstructive pulmonary disease (COPD) – a lung disease that causes obstructed airflow and predominantly occurs in smokers. ResMed produces cloud-connected ventilators to treat COPD, depicted in figure 2.

 

A large addressable market with low penetration

ResMed’s addressable market is large, growing and predominantly unpenetrated. ResMed assumes a total addressable market of 1.5 billion people based upon the following estimates:

  1. Sleep apnoea – 936 million people with sleep apnoea world-wide – whether that be obstructive sleep apnoea, central sleep apnoea or a combination of the two.
  2. Chronic obstructive pulmonary disease (COPD) – 380 million people.
  3. Asthma – 340 million people worldwide. While asthma cannot be cured, its symptoms can be managed using ResMed devices.

While we think ResMed are overstating the opportunity by capturing cohorts with very mild symptoms, we do agree that the opportunity is very large.

Using a bottom-up approach, we estimate the sleep apnoea addressable market to be 401 million people, as reflected in the figure below:

ResMed believes penetration currently sits below 20%, which means more than 80% of the large addressable market is up for grabs.

Putting it together, we see significant growth for ResMed’s end market, driven by:

  • Population growth – more people in the world
  • Obesity growth – continued growth in obesity and prevalence of sleep apnoea
  • Penetration – awareness and treatment growing from current <20% levels

 

An opportunity to increase market share

ResMed’s key competitor in CPAP devices is Philips. In June 2021, Philips voluntarily recalled a range of products, including their legacy CPAP range.

The recall was driven by deterioration of the sound abatement foam used in Philips’ first generation DreamStation CPAP flow generators and several of its other devices. In total, it expects to repair or replace ~3.5 million devices over the course of 12 months.  The withdrawal of Philips from the market presents a significant opportunity for ResMed to dominate new CPAP flow generator installations over the near term while Philips is busy replacing its existing fleet.

Factoring in the impact of the recall, we expect a 10% increase to ResMed’s share of new patient demand in the first half of fiscal year 2022. Moving into the second half, as the impact of chip shortages lessens and ResMed is able to lift production, we see this share increasing further to 72%. There is the potential for even greater upside if ResMed can negotiate a lift in chip supply earlier than anticipated.

This trajectory does however depend on the pace with which Philips returns to market and begins servicing new patients. Currently, Philips expects to be out of market for twelve months, but their market share loss could last longer. Cochlear provides a useful case study – when it initiated a product recall in 2011, its market share remained depressed for almost ten years, showing a long-term impact on market structure. Even after Philips returns, we believe some of ResMed’s market share gains will remain.

With mask sales also likely to benefit as more new patients purchase ResMed devices, we see total revenue growth for ResMed in the mid-teens for at least the next two years.

 

Cloud-based care delivers increased efficiency and a better user experience

ResMed began its venture into cloud-based health informatics with the purchase of information technology group Brightree in 2016. It has since continued to add to its technology offering with the purchase of several other software providers, most recently Snapworx and Citus Health. These acquisitions provide ResMed with a substantial suite of digital solutions across a number of types of out-of-hospital care.

As shown in figure 4 below, the integration of Brightree services into ResMed products has substantially improved patient adherence rates.

We see scope for ResMed to continue to integrate its SaaS business more closely with healthcare providers over the medium-long term, driving significant value and improved retention.

 

Conclusion

ResMed is a market leader in the production of CPAP devices with a proven capacity to attract and retain a large customer base. We consider ResMed well-positioned to capitalise on the short-term market disruption caused by the Philips recall and to strengthen its leadership position over the medium to long term. Given this, we believe it remains undervalued by the market. ResMed is a holding in the Firetrail High Conviction Fund and the Absolute Return Fund.

 

Disclaimer:

This document is prepared by Firetrail Investments Pty Limited (‘Firetrail’) ABN 98 622 377 913 AFSL 516821 as the investment manager of the Firetrail Australian High Conviction Fund ARSN 624 136 045 and the Firetrail Absolute Return Fund ARSN 624 135 879 (‘the Funds’). This communication is for general information only. It is not intended as a securities recommendation or statement of opinion intended to influence a person or persons in making a decision in relation to investment. It has been prepared without taking account of any person’s objectives, financial situation or needs. Any persons relying on this information should obtain professional advice before doing so. Past performance is for illustrative purposes only and is not indicative of future performance.

Pinnacle Fund Services Limited ABN 29 082 494 362 AFSL 238371 (‘PFSL’) is the product issuer of the Fund. PFSL is a wholly-owned subsidiary of the Pinnacle Investment Management Group Limited (‘Pinnacle’) ABN 22 100 325 184. The Product Disclosure Statement (‘PDS’) of the Fund is available at https://firetrail.com/products/firetrail-australian-high-conviction-fund. Any potential investor should consider the PDS before deciding whether to acquire, or continue to hold units in, the Fund.

Whilst Firetrail, PFSL and Pinnacle believe the information contained in this communication is reliable, no warranty is given as to its accuracy, reliability or completeness and persons relying on this information do so at their own risk. Subject to any liability which cannot be excluded under the relevant laws, Firetrail, PFSL and Pinnacle disclaim all liability to any person relying on the information contained in this communication in respect of any loss or damage (including consequential loss or damage), however caused, which may be suffered or arise directly or indirectly in respect of such information. This disclaimer extends to any entity that may distribute this communication.

The information is not intended for general distribution or publication and must be retained in a confidential manner. Information contained herein consists of confidential proprietary information constituting the sole property of Firetrail and its investment activities; its use is restricted accordingly. All such information should be maintained in a strictly confidential manner.

Any opinions and forecasts reflect the judgment and assumptions of Firetrail and its representatives on the basis of information available as at the date of publication and may later change without notice. Any projections contained in this presentation are estimates only and may not be realised in the future.
Unauthorised use, copying, distribution, replication, posting, transmitting, publication, display, or reproduction in whole or in part of the information contained in this communication is prohibited without obtaining prior written permission from Firetrail. Pinnacle and its associates may have interests in financial products and may receive fees from companies referred to during this communication.

Monthly Insights | Lendlease stock story

Monthly Insights | Lendlease stock story

July 2021

One of the most compelling opportunities on the ASX today

Lendlease is one of the most compelling opportunities on the ASX today. While all the attention has been on Lendlease’s (now sold) engineering business and COVID impacts, the significant progress made in a key area of shareholder value creation over the coming years has been overlooked.

Lendlease is a global leader in property development and investment management. Their expertise and reputation in property development has seen the development pipeline grow to over $110 billion today.

In this article, we explain why we believe Lendlease presents a compelling investment opportunity and why a strategy to accelerate its highly sought-after developments has the potential to unlock value for its shareholders.

Lendlease 101

Lendlease operates across three business segments:

  1. Property Development – Partnering with large capital partners to design and develop high quality precincts in key gateway cities around the world.
  2. Investment Management – Management of these property assets on behalf of large capital partners such as pension funds, insurers, and sovereign wealth funds for a recurring annual fee.
  3. Construction – The construction of both external and Lendlease projects.

Why is Lendlease undervalued?

Lendlease began reporting cost overruns and issues at its engineering projects in 2017. Several issues within the division such as tunnelling in North Connex, construction delays at Melbourne Metro and the recent provision on completed legacy projects has resulted in losses of almost $1 billion. A poor experience for Lendlease and their shareholders.

In late 2019, Lendlease sold its Engineering business to Spanish firm Acciona. We believe that the Engineering business has been a major reason the firm’s financial underperformance, in addition to the large valuation discount applied to the total business by the market. Exiting engineering has created an opportunity for Lendlease to simplify its business and focus on Property Development and Investment Management.

More recently, due to COVID, Lendlease has had to pause the development of some of its major urbanisation projects. Property sectors like Office have seen a slowdown in tenant demand which has negatively impacted near term earnings. However, the outlook for planning approvals and capital partners has improved. At its recent operational update, Lendlease announced the approval of its residential tower at One Sydney Harbour, secured an investment partner at the Innovation District development in Milan, secured an anchor tenant at its third office tower at Melbourne Quarter, and sold 100% of the development for $1.2 billion to a Korean pension fund.

Beyond some of the recent challenges, the acceleration of the development pipeline looks very promising. As development of major project’s accelerate, we see upside to Lendlease’s Property Development and Investment Management segments. Which we explore in further detail below.

The potential upside?

1. Accelerating the development pipeline

Lendlease’s reputation and property development expertise has resulted in significant growth in their development pipeline across key gateway cities including Sydney, London and Chicago. Over the last three years, project wins have accelerated, and the development pipeline has grown from $71 billion to over $110 billion. Importantly, many of these projects have been secured with large capital partners, reducing the capital intensity and sharing the risk involved in major developments. Lendlease’s capital partnership model also allows them to leverage their strong relationships with large investors and institutional partners to accelerate future projects.

The development pipeline features several high profile and highly sought-after developments in key gateway cities such as:

  1. The $21.5bn Google project in San Francisco partnering with Google for the next 10 to 15 years to redevelop the tech firm’s land holdings into mixed-use communities including office, retail, residential and hospitality.
  2. Silvertown Quays in East London which includes a mix of office, 3,000 residential units across build-to-sell and build-to-rent and retail space.
  3. The Exchange TRX in Kuala Lumpur which comprises of over 2,000 residential units and 122,000sqm of retail property plus a hotel.

Lendlease also specialise in build-to-rent projects. These projects involve the development of major residential projects on behalf of long-term capital partners which are then leased out to provide a recurring income (yield) for the investor. Build-to-rent makes up 21% of the current development pipeline and Lendlease are seeing significant growth in the asset class due to undersupply of housing in cities like London, New York and Chicago.

Lendlease’s broad pipeline of highly sought-after developments have secured future earnings for the firm. Beyond the near-term challenges, Lendlease is well placed to grow future earnings by leveraging its capital partnership model and development expertise.

2. Growth in high-quality investment management earnings

As property development projects are completed, a large portion of these assets are managed by Lendlease’s Investment Management business. Upon completion, capital partners like superannuation and pension funds can outsource all management activities to Lendlease for a recurring annual fee (usually a % of the value of assets).

Today, Lendlease has $36 billion in Funds Under Management (FUM) which is expected to grow to over $80 billion in the coming years. In our view, Investment Management could account for around 50% of earnings in the next five years (compared to an average of 31% over the past five years).

Investment management businesses generally trade at a premium to reflect the stable, recurring nature of their earnings. As seen in Figure 2., Lendlease currently trades at a discounted valuation to peer asset managers such as Macquarie (MQG) or Goodman (GMG). As FUM grows (Figure 3) and Investment Management becomes a larger part of Lendlease’s earnings, we expect the Lendlease valuation to re-rate to reflect the higher quality mix of its Investment Management earnings, and the sale of its problematic Engineering business (which generally trade at a lower valuation multiple).

Conclusion

Lendlease is a global leader in Property Development and Investment Management. With a development pipeline in excess of $110 billion and growing FUM in its investment management business, Lendlease is a compelling investment opportunity currently unloved and undervalued by the market. Lendlease is a holding in the Firetrail Australian High Conviction Fund and Absolute Return Fund.

 

Disclaimer

This insight is prepared by Firetrail Investments Pty Limited (‘Firetrail’) ABN 98 622 377 913 AFSL 516821 as the investment manager of the Firetrail Australian High Conviction Fund ARSN 624 136 045 and Firetrail Absolute Return Fund ARSN 624 135 879 (‘the Funds’). This communication is for general information only. It is not intended as a securities recommendation or statement of opinion intended to influence a person or persons in making a decision in relation to investment. It has been prepared without taking account of any person’s objectives, financial situation or needs. Any persons relying on this information should obtain professional advice before doing so. Past performance is for illustrative purposes only and is not indicative of future performance.

Pinnacle Fund Services Limited ABN 29 082 494 362 AFSL 238371 (‘PFSL’) is the product issuer of the Funds. PFSL is not licensed to provide financial product advice. PFSL is a wholly-owned subsidiary of the Pinnacle Investment Management Group Limited (‘Pinnacle’) ABN 22 100 325 184. The Product Disclosure Statement (‘PDS’) of the Fund is available at https://firetrail.com/products/firetrail-australian-high-conviction-fund. Any potential investor should consider the PDS before deciding whether to acquire, or continue to hold units in, the Fund.

Whilst Firetrail, PFSL and Pinnacle believe the information contained in this communication is reliable, no warranty is given as to its accuracy, reliability or completeness and persons relying on this information do so at their own risk. Subject to any liability which cannot be excluded under the relevant laws, Firetrail, PFSL and Pinnacle disclaim all liability to any person relying on the information contained in this communication in respect of any loss or damage (including consequential loss or damage), however caused, which may be suffered or arise directly or indirectly in respect of such information. This disclaimer extends to any entity that may distribute this communication.

The information is not intended for general distribution or publication and must be retained in a confidential manner. Information contained herein consists of confidential proprietary information constituting the sole property of Firetrail and its investment activities; its use is restricted accordingly. All such information should be maintained in a strictly confidential manner.

Any opinions and forecasts reflect the judgment and assumptions of Firetrail and its representatives on the basis of information available as at the date of publication and may later change without notice. Any projections contained in this presentation are estimates only and may not be realised in the future.
Unauthorised use, copying, distribution, replication, posting, transmitting, publication, display, or reproduction in whole or in part of the information contained in this communication is prohibited without obtaining prior written permission from Firetrail. Pinnacle and its associates may have interests in financial products and may receive fees from companies referred to during this communication.

This may contain the trade names or trademarks of various third parties, and if so, any such use is solely for illustrative purposes only. All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with, endorsement by, or association of any kind between them and Firetrail.

Monthly Insights | A new player unlocked in the (i)Game?

Monthly Insights | A new player unlocked in the (i)Game?

June 2021

Aristocrat is a A$27bn company operating in the gambling and entertainment industry. It sells and leases physical slot machines (Gaming), and produces online games played predominantly on mobile devices (Digital). Firetrail invested in Aristocrat in April last year because we believed the business was adequately fortified to negotiate the short-term pressures presented by Covid and that it would emerge from the crisis in a much stronger competitive position.

More than one year on, and despite sitting above where it was trading relative to the market pre-Covid, Aristrocrat remains a top portfolio holding in the Firetrail Australian High Conviction Fund for three key reasons:

  • Its strengthened position in Gaming post-Covid and our expectation of continued market share gains;
  • The upside opportunity offered by entry into the nascent iGaming industry;
  • Its conservative balance sheet position, with less than 1.0x gearing in September 2021

 

US gaming is booming

Aristocrat’s US Gaming business has been a success story for over a decade, consistently producing the best performing slot machines and gaining share from other incumbent operators. However, nothing could shield Aristocrat from the fact that when casinos are shut, gaming revenue goes to zero (as it is earned either from the outright sale of slot machines or as a share of machine revenue).

During this ‘peak-Covid’ period, Aristocrat used its strong balance sheet to position itself to benefit when casinos reopened. Specifically:

  • Casino customers were offered financial and operational support;
  • Temporary pay cuts were enacted to minimise redundancies; and
  • R&D teams were maintained at full capacity to ensure a strong game pipeline.

This enabled Aristocrat to hit the ground running as casinos opened back up over the second half of 2020. With the US economy brimming with stimulus, and some other entertainment/travel options remaining inaccessible, casino revenues have since gone from strength to strength. Incredibly, even though some restrictions are still in place and a reasonable number of casinos remain closed, Mar-21 and Apr-21 casino revenues were 10% and 24% above pre-Covid levels, respectively.

Covid has driven a greater focus on optimisation of slot layouts, which has further skewed floor share and revenues towards Aristocrat’s machines. As shown below in Figure 2, Aristocrat gained an additional ~2% share of the US leased game market between Dec-19 and Mar-21. Even though it now owns more than 1/3 of all leased machines in the US, we believe its high level of R&D investment versus peers will underpin continued share gains from here.

iGaming plays to Aristocrat’s strength in content

iGaming is a term that refers to online casino gambling, or more simply, casino games like slots and blackjack that can be played on a mobile phone. It is currently generating annualised industry revenue of ~$3.5bn across six states in the US, with potential for more states to follow, albeit at a slower pace than online sports betting. Given Aristocrat’s strength in land-based casino content, there appears to be a latent opportunity in iGaming, but how significant could it be?

New Jersey has the longest history of iGaming. It was legalised in the state in 2013 but really only took off after online sports betting started in mid-2018. It has now grown to be ~30% of the size of the land-based casino market by revenue.

Somewhat surprisingly, iGaming’s recent success does not appear to have come at the expense of land-based casinos. Over the period leading into Covid, New Jersey’s land-based casino revenue was growing at ~20% (versus 6% across the USA) despite the fact that iGaming was growing at 70%. It is still early days in most other states, but benchmarking the US to Australia on gross gaming revenue per capita suggests that there is room for both the land-based and online casino markets to grow in the US.

A more difficult question to answer is what parts of the value chain Aristocrat would like to target in this market. Early evidence suggests that superior land-based content does translate to the online world:

“170% more GGR per game on slots recognised from US casino floors vs unknown international slot games” – US iGaming platform provider, GAN.

It thus appears likely that Aristocrat’s content will have high monetisation potential in iGaming. It could pursue a strategy of making its content broadly available to the whole iGaming market, or pursue a more narrow segment of the market and tie it to a platform offering to capture a greater share of the value chain. We think iGaming has the potential to add up to 10-15% to group EBIT over the next 3-5 years, and would give Aristocrat leverage to a high growth, recurring revenue market. We remain tuned for further developments.

Conclusion

At Firetrail, we believe Aristocrat is well positioned to continue to consolidate its competitive position in the US gambling and entertainment industry beyond its strong post-Covid recovery. We anticipate that high levels of R&D will underpin continued market share gains. Furthermore, entry into the iGaming industry provides a latent upside opportunity, which we believe will grow alongside, not at the expense of, the land-based market.

Aristocrat is a key position in Firetrail’s high conviction portfolios.

 

 

This paper was prepared by Firetrail Investments Pty Limited (ABN 98 622 377 913, AFSL 516821) (Firetrail). It is general information only and has been prepared without taking account of any person’s objectives, financial situation or needs. It is not intended as a securities recommendation or statement of opinion intended to influence a person or persons in making a decision in relation to investment. Any persons relying on this information should obtain professional advice before doing so. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information. This document may contain information contributed by third parties. Firetrail does not warrant the accuracy or completeness of any information contributed by a third party. Any views expressed in this document are opinions of the author at the time of writing and do not constitute a recommendation to act.

ASX and Firetrail Investments: 3 fundamental rules of investing

ASX and Firetrail Investments: 3 fundamental rules of investing

Which house is the better investment?

House A. A Wooden shack on the outskirts House B. Harborside mansion
Source: Shutterstock

I’ve asked investors this question many times. Some speculate that the wooden shack is on hectares of valuable land. Most choose the harbourside mansion overlooking Australia’s east coast. But the answer is, we do not know. We are missing the fundamental inputs to make an informed investment decision.

Whether you are investing in real estate, a private venture or a publicly listed company, you need to know the price of the asset. Without a firm view of the quality of the asset and what you are paying for it, you move from the realm of investing into speculation.

At Firetrail, we follow three simple fundamental rules of investing to guide our company research and investment decision making:

  1. Every company has a price
  2. Focus on “What Matters”
  3. Take a longer-term view

In this article, I explore these fundamental principles and provide an example of how you can incorporate them into your own company research, using Qantas Airways (ASX: QAN) as our case study.

Rule 1: Every company has a price

When you are looking to buy a house, most people have a price in mind that will make their purchase a good or bad investment. If you overpay for a house, no matter how nice the home or the suburb, it is likely to turn out to be a bad investment.

Investing in a listed company requires the same thinking. Every company has a price. And the price you pay is a critical factor in whether your investment turns out to be good or bad.

So, how do you compare what different companies are worth?

One of the most used approaches in the equity market is to look at a company’s valuation using a price-to-earnings (P/E) ratio. Commonly referred to as the price multiple, the P/E ratio provides investors with a guide to how much they need to invest to receive a dollar’s worth of earnings in return.

Importantly, P/E ratios (or valuations) are not static. They generally rise when things are going well for a company and fall on the back of negative news. These valuation re-ratings can create opportunities for fundamental investors to uncover undervalued companies.

Qantas has historically traded at a P/E ratio of 9 times – a significant discount to the average Australian listed company, which typically trades at around 16 to 20 times.

The reason for the discount is that Qantas operates in a volatile industry (all global airlines trade at a discount) and its earnings are cyclical – often affected by external events such as travel demand, consumer confidence, oil prices, and a global pandemic!

In March 2020, the Qantas valuation hit a low of around 4 times P/E. Its share price traded from above $7 to a low of almost $2 in under 2 months.

As a fundamental investor, the question for Firetrail team was whether the current price was justified due to the global pandemic, or whether the market had incorrectly extrapolated Qantas’ current misfortunes into the future?

The key to answering this question was to understand “What Matters” for Qantas.

Rule 2: Focus on “What Matters”

When researching a company, it is important to cut through the noise and focus on what will drive the earnings and the share price of the business into the future.

At Firetrail, we call it focusing on “What Matters”. We believe focussed research gives us an edge to uncover opportunities when other investors are distracted by negative news and sentiment.

In March 2020, two key things mattered for Qantas:

  1. Balance sheet and cashflow: could Qantas survive an extended period of lockdowns?
  2. The domestic market, which has historically accounted for around 85 per cent of Qantas’ earnings.

The key questions our balance-sheet and cashflow analysis tried to answer were:

  1. How much cash did Qantas have on its balance sheet?
  2. How much cash was it burning through in a lockdown scenario?
  3. What were CEO Alan Joyce and the team doing to raise additional capital and reduce costs?

Following our research on the balance sheet, speaking to management, and our own desktop and field research, we believed Qantas would be able to raise sufficient cash and cut costs to survive until late 2021 in an extended lockdown scenario.

Many investors do not realise Qantas’ international business is only a small driver of company earnings. In FY19, international travel was only around 15 per cent of the airline’s earnings.

The bigger driver of Qantas earnings is the domestic business, including domestic travel (corporate and leisure) and the highly valuable Frequent Flyer business.

In our view, to invest in Qantas you did not need to believe international travel would return anytime soon. But you did need to believe domestic travel would return before international borders opened.

In addition, our analysts’ research indicated that once domestic travel did reopen, Qantas would be in a stronger position than most investors expected, due to:

  1. Private equity acquisition of key competitor Virgin Australia: Our view was that private equity owners would focus on industry profitability as opposed to market share. As the market leader (around 65 per cent domestic market share) with industry-leading profit margins, Qantas stood to gain the most from a rational competitive environment.
  2. A transformational cost-out program aimed at reducing the cost base for Qantas: We believed this would result in a leaner Qantas with greater profit potential in the domestic market as travel returned post the pandemic.
  3. Qantas Frequent Flyer business (QFF): The QFF business had proved resilient during the pandemic. Some of Qantas’ largest customers, such as Woolworths, received record sales and demand for QFF points during the pandemic.

Putting the research together, our analysts believed that:

  1. Cash: Qantas had sufficient cash to survive an extended period of lockdowns beyond our worst-case scenario domestically.
  2. Domestic recovery: A rational domestic market, cost-out program, and strong QFF business underpinned a better-than-expected earnings recovery over the medium term.
  3. Valuation: The current valuation factored too much negative news about international travel into the share price, which was only a small part of Qantas’ earnings.

Rule 3: Taking a longer-term view

The final fundamental principle of investing at Firetrail is to take a longer-term view.

We believe a 3-year view provides a realistic timeframe to be rewarded for your investment. And is a long enough timeframe to differentiate your views from market participants such as sell-side analysts who generally take a 12 to 18-month view, in our experience.

Firetrail materially increased its position in Qantas during March 2020, almost doubling our investment following our company research focussed on the fundamentals, including valuation, earnings drivers (What Matters), and taking a longer-term view.

Today, the Qantas share price has more than doubled from that investment in March 2020 to around $5 per share in late April 2021.

In our view, this is a proven approach to invest in companies such as Qantas, which is a key position in the Firetrail Australian High Conviction and Absolute Return portfolios.

 

This communication was prepared by Firetrail Investments Pty Limited (ABN 98 622 377 913, AFSL 516821) (Firetrail) as the investment manager of the Firetrail Absolute Return Fund (ARSN 624 135 879) (the Fund). It is for general information only. It has been prepared without taking account of any person’s objectives, financial situation or needs. It is not intended as a securities recommendation or statement of opinion intended to influence a person or persons in making a decision in relation to investment. Any persons relying on this information should obtain professional advice before doing so. Past performance is not a reliable indicator of future performance.

The Fund is issued by Pinnacle Fund Services Limited (ABN 29 082 494 362, AFSL 238371) (PFSL). PFSL is not licensed to provide financial product advice. The relevant Product Disclosure Statement (‘PDS’) is available at www.firetrail.com. Any potential investor should consider the relevant PDS before deciding whether to acquire or continue to hold units in a fund. Please consult your financial adviser before making a decision.

Firetrail Analyst Series 2021 | One Aussie company that’s just doubled its appeal

Firetrail Analyst Series 2021 | One Aussie company that’s just doubled its appeal

To kick off the analyst series for 2021, Firetrail Portfolio Manager, Ramoun Lazar, takes us on a deep dive into the US housing market. The current market conditions, including low interest rates, record-breaking consumer savings and seemingly never ending stimulus, have created the foundation for a global housing boom! Ramoun discusses how Firetrail is taking advantage of these conditions through portfolio holding James Hardie (ASX:JHX), and the future growth potential for the stock.

 


This communication was prepared by Firetrail Investments Pty Limited (ABN 98 622 377 913, AFSL 516821) (Firetrail) as the investment manager of the Firetrail Australian Small Companies Fund (ARSN 638 792 113) (the Fund). It is for general information only. It has been prepared without taking account of any person’s objectives, financial situation or needs. It is not intended as a securities recommendation or statement of opinion intended to influence a person or persons in making a decision in relation to investment. Any persons relying on this information should obtain professional advice before doing so. Past performance is not a reliable indicator of future performance.

The Fund is issued by Pinnacle Fund Services Limited (ABN 29 082 494 362, AFSL 238371) (PFSL). PFSL is not licensed to provide financial product advice. The relevant Product Disclosure Statement (‘PDS’) is available at www.firetrail.com. Any potential investor should consider the relevant PDS before deciding whether to acquire or continue to hold units in a fund. Please consult your financial adviser before making a decision.