Sydney’s most illustrious hedge funds – Caledonia, Regal and VGI Partners – have topped the charts with the best-performing stock picks at the 2017 Sohn Hearts and Minds charity conference.
GrubHub and Appen, technology stocks that Caledonia’s Mike Mesarra and Regal’s Phil King selected as long ideas, have more than doubled since November 16, 2017. Pandora, the Copenhagen-listed jewellery retailer, which VGI Partner’s Rob Luciano picked as a short, has more than halved in that time.
The Sohn Hearts & Minds Investment Leaders conference, in which Australia and the world’s top fund managers share their best ideas for medical research, is now in its third year and has raised over $8 million.
The top five ideas, which included Pengana portfolio manager Steven Glass’ pick to go long InterActiveCorp and Firetrail’s Blake Hendricks backing of ASX-listed plumbing goods manufacturer Reliance Worldwide, gained over 72 per cent, while the top ten ideas gained 36 per cent.
The stand-out stock idea was GrubHub, the US food delivery platform pitched by Caledonia’s Mike Messara, which gained 102 per cent in nine months.
The idea also helped Caledonia return 27 per cent to its investors during the 2017 financial year.
Regal’s Phil King’s tip to back ASX-listed Appen was the second-best performer – and the best-returning local idea. The software stock has risen from $5.69 in mid-November to $11.01 – a gain of 94 per cent.
“It’s in a sweet spot and is benefiting from the huge technological change, and the move to voice recognition and artificial intelligence. These are two areas the large technology players are throwing money at,” Mr King said.
He is still long the stock but says a repeat of that performance is unlikely. Tech stocks have had a great run both in the US and Australia but Mr King says its not a bubble.
“They are not grossly overvalued but some of them are overvalued and have to grow into their valuations over the next year or two.
“But these are real companies, making real earnings and growing strongly.”
Interestingly, a short idea made the top three for the first time as VGI bet that Pandora’s charm bracelets were a fad, and the company’s revenue and margins would come under pressure. The stock is down 62 per cent since then, while the chief executive recently headed for the exit.
Regal’s Mr King pitched an idea to short retailer JB Hi-Fi at the 2017 event and says there’s still good money to be made betting against over-valued companies, particularly during reporting season.
“There tends to be pressure on management and so for stock pickers that are prepared to do the work there are good opportunities,” he said.
The Sohn Hearts & Minds 2018 event will be held in Melbourne for the first time at the Hammer Hall on November 16.
The charity beneficiaries include Murdoch Children’s Research Institute, Victor Chang Cardiac Research Institute, MS Research Australia, Black Dog and other beneficiaries nominated by the Paul Ramsay Foundation.
As part of the fund-raiser two additional events will be held in September in Sydney and Melbourne in which financier and philanthropist Michael Milken will feature.
At last year’s event, the Ramsay Foundation invested $10 million in a portfolio comprised of the investment ideas recommended by some of the world’s top stockpickers at the 2017 event. That portfolio returned an impressive 36.2 per cent.
Ramsay Foundation board director Michael Traill said the return generated was “terrific” and said another $10 million would be invested in the 2018 stock picks.
“It hits two buttons and taps into the goodwill of the funds management,” he said.