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Weekly insights from the Trail

Three things that got the team talking this week

October 20, 2023October 27th, 2023
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1. Blood banks…

Firetrail High Conviction Fund Holding, CSL, held a capital markets day this week. It was pleasing to see that global plasma collections are growing strongly in FY24. Increased plasma collections help to drive the cost per litre down, as evidenced by data released by competitor Grifols. Behring, CSLs plasma division, makes up 2/3 of CSL group profit. We expect the Behring division can grow in the high-single digits, with the reduced cost per litre leading to stronger margins over the medium term.

CSL is one of our highest conviction positions and is currently trading at a 1-yr forward PE of 24x, a 40% premium to the ASX Industrials. 24x puts it on the same multiple as defensives like Woolworths, Wesfarmers and Sonic, for ~2-3x the earnings growth!​​​

Source: CSL (October 2023)

Companies mentioned are illustrative only and not a recommendation to buy or sell any particular security.

Cost per litre of plasma collection

Source: Grifols (October 2023)

Companies mentioned are illustrative only and not a recommendation to buy or sell any particular security.

2. Stability in instability…

Jamie Dimon, dubbed the most powerful banker in America, warned we are entering “the most dangerous time the world has seen for decades” at the start of the week. But despite all the macroeconomic events happening in the world right now, volatility hasn’t been this benign since pre-Covid. Up until Thursday, the VIX had been below 20 for >100 sessions straight (since April)!

Number of days VIX <20

Source: Refinitiv, Bloomberg, Evans (October 2023)

3. Drive away deals…

The number of passenger vehicles around the world is forecast to grow by 24% from 2022 to 1.6 billion by 2040, according to BloombergNEF. India is expected to increase its fleet size by close to 150% during the period to 100 million, while EM markets such as Southeast Asia and Brazil could see a 30% expansion. China is expected to account for nearly half of the global growth.

Tesla had a tough time this week after announcing weaker 3Q results, largely ‘driven’ by their price cutting strategy. The average selling price for EVs has declined 22% over the past year, moving from $65,000 to $50,683, according to Cox Automotive. That makes them only 6% more than the average selling price for all vehicles ($47,899).

Source: BloombergNEF (October 2023)

Source: Cox Automotive (October 2023)

Disclaimer

This article 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), the Firetrail Absolute Return Fund (ARSN 624 135 879), the Firetrail Australian Small Companies Fund (ARSN 638 792 113) and the Firetrail S3 Global Opportunities Fund (ARSN 653 717 625) (‘the Funds’). Pinnacle Fund Services Limited ('PFSL') (ABN 29 082 494 362, AFSL 238371) is the product issuer of the Fund. 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’) and Target Market Determination (‘TMD’) of the relevant Fund are available via the links below. Any potential investor should consider the PDS and TMD before deciding whether to acquire, or continue to hold units in, the Fund.

Links to the Product Disclosure Statement: WHT3810AU, WHT5134AU, WHT3093AU, WHT7794AU

Links to the Target Market Determination: WHT3810AU, WHT5134AU, WHT3093AU, WHT7794AU

For historic TMD’s please contact Pinnacle client service Phone 1300 010 311 or Email service@pinnacleinvestment.com

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.

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.

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.

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