Three things that got the team talking this week - Firetrail Investments

Weekly insights from the Trail

Three things that got the team talking this week

October 27, 2023November 3rd, 2023

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1. How low can you go…

Speculation on the impact of GLP-1s, or weight loss drugs, on all facets of daily life has been rife. But a lot of uncertainties remain to be worked through. At their result this week, Resmed provided their analysis of the impact of these drugs on their total addressable market (TAM) for sleep devices. Resmed estimates that out to 2050, GLP-1s may impact their potential TAM by ~14%. So instead of a potential population of 1.4 billion patients, this may reduce to 1.2 billion patients.

Resmed have sold around 22.5 million devices to date, and so even with a lower addressable market there remains significant headroom for growth to continue at or above historic rates. Resmed’s CEO, Mick Farrell, commented that they “are not seeing any significant change in the adherence rates” on their sleep device machines, but rather they are “seeing the number of new patients activated into the health care funnel picking up”. We continue to monitor this space!

Source: ResMed (October 2023)

2. The price is high…

Firetrail S3 Global Opportunities Fund holding Chubb released a strong 3Q result this week. Management remain disciplined in underwriting, and the operating backdrop remains supportive. In particular, Chubb have continued pushing price in their North American business as shown in the green bars below. This provides a good read through for the North American business of High Conviction Fund holding QBE as well.

Source: Chubb, Firetrail (October 2023)

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

3. Surprise sales…

We continue to be amazed at just how strong retailers remain, despite the cost-of-living pressures. BCF and Nick Scali on the right of the chart below had surprisingly strong August/September periods. The November 7 interest rate decision looms large as it comes two weeks before Black Friday sales are set to start. Although we have seen some very early promotional activity starting already…

Non-food retailer YoY sales growth

Source: Barrenjoey, Company data (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

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