+$70M
DONATED
209
speakers
7700
attendees
250
partnerships
As inflation burns a hole in consumers’ pockets and the US housing market hits the brakes, two sectors that investors are likely to be fearful of are food delivery and housing.
But that’s precisely where New York hedge fund manager Ricky Sandler is putting his clients’ money.
Speaking to The Australian Financial Review before the Sohn Hearts & Minds conference, Sandler named global on-demand ride-sharing and food delivery service Uber Technologies among his top picks, alongside real estate marketplace Zillow.
Both stocks have cratered over the past year; Uber declining almost 40 per cent and Zillow’s valuation slashed by 70 per cent, as rising interest rates killed the pandemic unprofitable-tech boom.
But Sandler says both are at bargain prices, anticipating Uber will double in the next 18 months. Zillow, he says, is still priced for its disastrous entry into home-flipping while quietly improving its platform.
“Sometimes we go against the macro because that’s obvious and priced in,” he says.
“That’s what everyone is worried about but no one is looking at what’s really happening underneath. The cycle will come and go. We make longer-term investments, look beyond what people are worried about in the short term but over a two-year period, will normalise.”
Sandler’s Eminence Capital materially added to its Uber position in July at $US22.75, according to the firm’s latest shareholder letter.
Zillow is similarly a top 10 holding in the long/short fund alongside a basket of cannabis stocks, sports betting and gambling company Entain and chemical maker Ashland Global.
Sandler says Uber is a buy for three reasons: high margins; improving profitability; and structural advantages in food delivery that make it difficult for similar businesses to compete.
“When you look at Uber’s top five markets, they earn north of 30 per cent margins, but because they’re investing in the delivery business – because they’re investing in mobility markets – collectively today, they’re not there yet. But that’s going to become really visible over the next year or two, the profitability will go up.
“On the food delivery side, people compare Uber to DoorDash, but I think Uber has an advantage over everybody who is only in the food delivery business because they also have mobility.
“They can consolidate driver supply – their drivers can drive for Uber mobility or Uber Eats – and they can consolidate customers via Uber pass, offering savings on rides and eats, so they have a structural advantage.”
Uber is unprofitable today, but Sandler expects it to progress towards GAAP profitability, noting this will facilitate its entry into the S&P 500.
“Uber is one of the largest market cap companies not in the S&P 500, depriving the company of a meaningful passive ownership base,” he says.
“We expect this will change over the next couple of years.”
Asked about Uber’s exposure to the weakening consumer environment, Sandler thinks the market wrongly classifies ride services as a “high-price luxury” because it’s a cheaper option than hiring a car on a business trip or owning a vehicle and commuting.
He concedes there could be some weakness in food delivery but anticipates consumer habits will migrate from dining out to ordering in.
“Will some people stop ordering in from the local Italian and cook pasta at home? Yes, if they have to save,” he says.
“But today, the penetration rate of delivery is pretty slow and still going up and the potential for Uber to add delivery of packages or grocery.”
Sandler’s next pick Zillow, a real estate marketplace, is also faced by a tough set of economic circumstances.
US mortgage rates topped 7 per cent last week, the highest level in 20 years, and the latest sign that the Federal Reserve’s aggressive moves to slow the broader economy are hitting the housing market.
The company announced on Friday that it had laid off 300 staff as it contends with a slowing market. Last November, the Seattle-base company announced it was laying off a quarter of its headcount because of the closure of its home-buying business Offers.
Sandler is not deterred. “Zillow is priced this way because everyone is worried about the near term cyclically, and because historically they were in the home flipping business which lost them money,” he says.
“New management has come in and has made lots of changes; materially upgrading their technology, rolling out features that make it a better consumer experience and better monetising users.
“Everyone is worried about these macro things, and they’re missing what’s happening on a micro basis.”
Sandler is set to name his No.1 pick at the charitable Sohn Hearts & Minds conference in Tasmania on November 18. He says his trip to Australia is part pleasure, part scoping out opportunity as overseas investors eye Australia’s growing pension pot.
“There is an awful lot of money that needs to be invested offshore, and it’s growing at a good clip,” he said.
“We’re not trying to grow a lot, but asset diversity is really important to us in different markets.”
Eminence hasn’t “raised a penny” in Australia but has expanded across the Middle East. Assets under management across the firm sit at $5.6 billion with about $2.2 billion in the long/short strategy and $3.4 billion in the long strategy. Both strategies are open to new capital.
Performance in Eminence’s long/short strategy has delivered outperformance since its inception in 1999. Returns have been strong against the MSCI World Index this year, with net returns of negative 7.8 per cent versus negative 25.4 per cent. The fund has underperformed over a 10-year period, net 6.3 per cent versus index returns of 8.1 per cent.
Sandler says gains this year have come from the short side of the portfolio, generating positive 19.2 per cent alpha while longs generated negative 11.4 per cent alpha, a theme that echoes local trends as short sellers come in from the cold.
Success has come from shorting IPO and SPACs that hit the market in 2020 and last year, such as Beyond Meat and fintech disruptors Lemonade, Upstart and Affirm.
“Looking into IPOs, we learnt that after the first two or three months, they drastically underperformed the market – on average about 15 to 20 per cent over the next 18 months,” he says.
An outspoken short seller, Sandler isn’t afraid of expressing his views, getting into stoushes with meme stock traders on Twitter.
“Dear AMC Apes, the executives at AMC thank you very much for making them rich. It’s a shame they all sold while you all HODL.” he wrote in a March tweet, before taking a months-long self-imposed break from the platform.
Asked why he engages, Sandler describes last year’s meme stock, short squeeze episode as more frighting than the COVID-19 market crash. Faced with a new and unknown force, he sought to understand what made the Reddit retail army tick.
Today, he’s managing meme risk by being “very diversified” on the short side, limiting exposure to meme stocks and tracking mentions on Reddit and options volume.
“It was a very challenging period,” he says.
“It was something new that we’d never experienced before from a group of people who were, in some ways, highly unsophisticated. And you would say, I’ll play poker against those people all day long, but in some ways, their actions created a lot of knock-on effects.
“We had enough risk management to ride through it, but it was almost more scary for me as an investor than the COVID drop because I understood it, I could understand why the market was down, but this thing on the short side was almost scarier because it was so hard to understand the behaviour, banding together on Reddit.
“Engaging with them on Twitter helped me to understand a little bit about their mindset.”
The Australian Financial Review is a media partner of sohnheartsandminds.com.au
This article was originally posted by the AFR here.
Licensed by Copyright Agency. You must not copy this work without permission.
Technology behind the tech; healthier lifestyles; the green transition and regulatory tailwinds. These are the mega-themes the smartest minds in the market are now firmly getting behind which they believe can help them deliver outsized profits.
Fund manager turned anti-corruption campaigner Bill Browder is advising investors to hang on to their cash until central banks stop raising interest rates and the cost of living starts to come down, before investing it strategically.
The Sohn Hearts & Minds Investment Leaders Conference, held annually, had before Friday’s event made more than $40m in collective donations to medical research. It applies the stock picks made by fund managers in an investment portfolio.
Professional gambler and arts impresario David Walsh had a brutal message for successful top money managers – you may just be lucky.
A room filled with 700 of the country’s financial luminaries and billionaires is a difficult place to pitch an investment idea but it’s a great place to raise money for charity.
Two hundred of Australia’s best and brightest money managers, bankers and entrepreneurs toasted the seventh Sohn Hearts and Minds conference at David Walsh’s Museum of Old and New Art, better known as MONA, in Hobart on Thursday night.
Top global money managers are telling investors to steer clear of companies that don’t make money and invest instead in unloved but profitable businesses, as continuing central bank interest rate rises threaten to keep markets falling.
Some of the top fund managers in the country will on Friday pitch their best investment ideas to the Sohn Hearts & Minds conference.
Perpetual’s star stock picker Anthony Aboud says companies with strong balance sheets will finally be rewarded for their discipline in an environment of rising interest rates and global market upheaval.
Perpetual’s top stock picker Anthony Aboud makes his money running against the crowd and this is why property trusts like Charter Hall are sitting right the top his list right now.
Twenty students from Kingston High School have been given the opportunity to attend the prestigious Sohn Hearts & Minds conference this week.
Gerry Cardinale, the owner of AC Milan and a host of other soccer, cricket, baseball and ice hockey assets is trying to double his money in the ‘resilient’ asset class.
Carleton’s conviction will be on full display on Friday, when he makes his third appearance at the annual Sohn Hearts & Minds Investment Leaders Conference, where stock-pickers share their best ideas in the name of medical research.
James Miller, a portfolio manager at Firetrail Investments, believes investors need to stop seeing the global decarbonisation push as a risk – and start seeing it as an opportunity.
Maggie O'Neill, Head of Marketing and Operations at HM1 joined Nick Griffin, CIO of Munro Partners to discuss the history of Hearts & Minds, Munro Partners' involvement and Nick's upcoming stock pitch.
Bob Desmond is Head of Claremont Global and Co-Portfolio Manager. He will present at the Sohn Hearts & Minds Investment Leaders Conference in Tasmania on November 18.
An increasing intransigence from authorities in Beijing toward private enterprise - and harsh pandemic restrictions - might be keeping some investors away, but the same factors are creating good opportunities in Chinese stocks.
Joyce Meng is a presenter at this year’s Sohn Hearts & Minds Investment Leaders Conference on November 18, which takes place in Hobart and aims to raise money for medical research.
Founder, CIO and CEO of Eminence Capital Ricky Sandler talks about his journey launching the $5.7 billion dollar asset manager, how the market has changed over the past decade and his motivations for participating in this year's Sohn Hearts & Minds conference.
Munro’s Nick Griffin on why he prefers Alphabet and Amazon over Meta, shorting industrials and Chinese equities, and his top picks for the energy transition.
When Auscap Asset Management founder Tim Carleton tips a stock at this month’s Sohn Hearts & Minds conference in Hobart, he doubts it will be a name that shocks investors.
One of the nation’s most influential fund managers has warned that investment markets have entered a “new phase”, with hidden risks in the form of debt sitting in super funds, private equity and big investors that is set to test the financial system.
The veteran fund manager says the most uncertain period of his career will deliver huge opportunities – providing his firm can stick to its system.
When former Amcor chief executive Ken MacKenzie was named the new chairman of BHP five years ago, that was a sign for top-rated fund manager Peter Cooper to move back into the mining giant.
Speaking to The Australian Financial Review before the Sohn Hearts & Minds conference, Sandler named global on-demand ride-sharing and food delivery service Uber Technologies among his top picks, alongside real estate marketplace Zillow.
Jun Bei Liu is the lead portfolio manager at Tribeca Alpha Plus Fund. Ms Liu is set to present an investment idea at the Sohn Hearts & Minds conference in Tasmania on November 18.
Desmond, who worked in London before moving to Australia in 2008, is making his first appearance at the annual Sohn Hearts & Minds Investment Leaders Conference, where fund managers give their favourite stock tips to raise money for medical research charities.
Regal’s hedge fund focused on the resources space has thumped the market and its top stock picker, Tim Elliott, says resources stocks are still cheap.
The WaveStone principal says retail will drop away but quality operators will find a way through.
Catherine Allfrey, Principal and Portfolio Manager of WaveStone Capital will be speaking at this year's Sohn Hearts & Minds Conference in Hobart which raises funds for Australian medical research.
There are many descriptors for Browder, including Russia’s anti-corruption crusader, and its most dogged oligarch hunter. But it’s his title as Putin’s No.1 foreign enemy that bestows on him another label - consummate survivor.
Bill Browder, once the largest foreign investor in Russia and the man behind the global Magnitsky justice campaign, says the US is the weakest link in the war in Ukraine.
Bill Browder, the fund manager who has become one of Vladimir Putin’s fiercest critics, says the Russian leader is increasingly desperate, but no less dangerous.
On November 18, Griffin – with $4.7bn under management at Munro Partners – heads to Hobart for this year’s face-to-face pitch to investors on his 2023 pick.
Tim Carleton, founder of Auscap Asset Management and 2022 Conference Fund Manager sat down with Equity Mates to discuss his investment philosophy and what makes a great Australian company.
When investor Kara Nortman and actor Natalie Portman decided to start a soccer team, they created a brand that has grabbed the sporting world’s attention.
Australia’s sports leagues are being held back by a culture of conservatism and need to be more open to private equity investment or risk falling behind, investors say, with Netball Australia’s rejection of a $6.5m bailout cited as just one example of administrators’ aversion to private capital. Conservative Australian sports leagues are ‘letting investment opportunities pass them'.
Sporting teams and leagues are becoming serious investments for global firms managing billions of dollars, as private equity funds eye off the sector’s growth potential and resilience to economic slumps.
Bill Browder, one of Russian President Vladimir Putin’s fiercest critics, the founder of Hermitage Capital and the man behind the Magnitsky Law on human rights, will headline this year’s Sohn Hearts & Minds investor conference.
A financier and political activist who is viewed as a key enemy of Russia’s government will address Australian investors on the war in Ukraine at this year’s Sohn Hearts and Minds conference, as the conflict continues to have a major influence on global markets.
Keynote speaker will be Bill Browder, the former Hermitage Capital hedge fund manager that has become an arch nemesis of Russian President Vladimir Putin, as he has lobbied governments to black-list senior Russian officials attempting to shift their assets offshore.
