Buy Hold Sell: 4 disruptive winners and 2 overhyped darlings

Buy Hold Sell

Livewire Markets

Which were the winning listed companies of the last decade? Just take a look at the pointy end of the global rich list: Amazon's Jeff Bezos, Tesla's Elon Musk, Facebook's Mark Zuckerberg, Microsoft's Bill Gates, Google's Larry Page and Sergey Brin. 

But then these companies weren't always at the top. They had to displace others (General Electric, anyone?). And what they all have in common, beyond technology, is disruption. Which begs the question: which up-and-coming companies are now charging to the finish line - ready to take them on and even surpass them in the never-ending race to global domination? 

In this episode of Buy Hold Sell, two global growth juggernauts - Nick Griffin from Munro Partners and Alex Pollak from Loftus Peak - share their thoughts on four stocks already on the path to global disruption. 

These include Uber Technologies, which has completely changed the way we eat and travel; PayPal, the payments giant taking on the world's banks; NVIDIA, which is leading the charge on artificial intelligence computing; and Peloton Interactive, the exercise bike reinventing the way we work out. 

Plus, our fundies will each share one stock that they think the market isn't getting right. 

Note: You can watch, listen or read an edited transcript below. This episode was filmed on 29 April 2021.


Edited Transcript

Bella KidmanWelcome to Buy Hold Sell brought to you by Livewire Markets. My name is Bella Kidman, and today we're going to be taking out the old crystal ball, dusting it off and making some predictions. That's right, today we're going to be discussing four global growth stocks with disruptive potential and two that may have passed their best. And to talk to me about this today, I'm joined by Alex Pollak from Loftus Peak and Nick Griffin from Munro Partners. 

Nick, let's start with Uber. It's hard to imagine that Uber could be even more disruptive than it already is. Buy, hold, or sell?

Uber Technologies (NYSE: UBER)

Nick Griffin (BUY): Yeah, so we've got Uber as a buy. We would argue any app that gets to the front page of your phone and is used weekly generally has got your eyeballs and can ultimately evolve into something much bigger. We've seen that happen with Facebook, we've seen that happen with Google. Uber is just part of the way through this journey. And so ultimately an app that is used consistently around the world, the competitive dynamics are coming down and we think it's a super app, with a long runway of growth ahead of it, and with other things it could do outside of just ride home.

Bella Kidman: It's definitely on my front app screen. Buy, hold, or sell on Uber?

Alex Pollak (SELL): I'd have to put it as a sell. It is already capped at $100 billion. For me, it's a company in search of a business plan. Remember they started off with drivers and then the discussion was going to be driverless and then they had to transition to food and then they're transitioning to freight and there was going to be the flying cars. Khosrowshahi, the CEO of Uber, I think is doing a great job repurposing the company into the areas that work, but it's not persuasive for me. It's still making lots and lots of losses and the cash flows while improving are still pretty heavily negative. So it's a sell for me.

PayPal Holdings (NASDAQ: PYPL) 

Bella Kidman: Okay. Next up we have PayPal. Another fan favourite, obviously a huge payment system recently entered into the buy now pay later space. Buy, hold, or sell?

Alex Pollak (SELL): Oh, it's a great company. We really, really like it. It has around 350 million users around the world. It's really moved to dominate the space in a lot of different players. It's bigger than JP Morgan for argument's sake. But the valuation right now kind of suggests that they need 20% top-line growth in kind of perpetuity, certainly for the next five or seven years. And so while we love the company and this is a company with a great business plan, it's just too expensive. So I'd have to say we are a sell.

Bella Kidman: Nick, PayPal just keeps growing and growing. It was up 125% over the last 12 months. Is it a buy, hold, or sell?

Nick Griffin (BUY): Yeah, we still think it's a buy. It's obviously had a good run as Alex mentioned. But again, front page of your phone, disrupting banks around the world. I think the key thing to remember about PayPal is you really just slowly eroding the profit streams of every bank on the planet. And I would just point out the banks only really exist to collect cash. Their regional - Bendigo bank, Bank of New South Wales - that's why they exist. Once cash disappears why does your bank have to have a physical presence? And that's really going to allow PayPal to move into all these other areas. And we see that happening with crypto already or merchant acquiring. And that runway for growth just really goes well into the distance. And so yeah, it's maybe a little ahead of itself, but definitely not one we're going to step off today. So it's a buy.

NVIDIA Corporation (NASDAQ: NVDA) 

Bella Kidman: All right, next up we have NVIDIA. They are a chip manufacturer in the gaming industry. Buy, hold or sell?

Nick Griffin (BUY): Yes, that's a buy as well. If you believe artificial intelligence is the future then you should believe in NVIDIA. It's as simple as that. Their GPU's - they are the number one semiconductor manufacturer or designer of motherboards in the world. They literally go into everything, cars, data centres, you name it. And all of them are being used for accelerated computing, which is effectively to do AI task flows. And so we like the company a lot, also had a good run, but it's still a long runway of growth in front of it. So it's a buy.

Bella Kidman: This theme has really accelerated during COVID. Does it have any more room to run? Buy, hold, or sell?

Alex Pollak (BUY): We're still a buy on NVIDIA, I agree with Nick on this. They are the new Intel. What they're doing with this merger with Arm is profound. It's the holy trinity for them; CPU, GPU, DPU. And they're disrupting everything from cars to computer games, to your email. So they're across everything so to speak. And they've got I think quite a long way to go. They're a very prospective company.

Peloton Interactive (NASDAQ: PTON) 

Bella Kidman: Okay. Next up, we've got Peloton Interactive. We're getting healthy here. It's the manufacturer of interactive bikes and treadmills. Buy, hold, or sell?

Alex Pollak (BUY): Look, that's kind of an easy one, right? Everybody's bored on their treadmill, right? So give them some entertainment and sell them a bike in the process. I mean it's a beautifully simple model. I like the company, I think they're going to do really well. I know they've had some negative press from people getting hurt by the treadmills, but treadmills are like that. So I think they're going to continue to do well.

Bella Kidman: So it's a buy?

Alex Pollak: Yeah.

Bella Kidman: Everybody still needs to exercise from home. Gyms are still closed in some areas of the world. Buy, hold or sell on Peloton?

Nick Griffin (HOLD): So we're a hold on this one. I really like the product, it's a great product, have captured the imagination of consumers around the world. But ultimately a physical business, it is a physical product. There are competitors that will come along. And so there are network effects at play here, but not as much as we'd see from a purely digital business like an Uber or a PayPal. So this one's a hold for us.

Nick Griffin's overhyped pick: GameStop (NYSE: GME)

Bella Kidman: Okay. We've talked about stocks that could disrupt. Now tell me your one stock that you think has just been overhyped by the market.

Nick Griffin (SELL): I mean I basically came up with GameStop and I know this is an old story, but I just want to encourage the viewers not to do this. This stock is still actually very close to where it was when it was in the news. People are still believing that this company is going to morph into something, some sort of crypto-type currency. And I would just encourage anybody who's doing this to please stop doing this. This is a licence to lose money.

Alex Pollak: Not for everybody.

Nick Griffin: The company will simply issue you stock, it will issue you shares. It's not a cryptocurrency, it's not closed. They'll literally issue the shares and pay themselves the money. And all you're doing is giving them the platform to do that. And so I'd encourage people to please stop doing that.

Alex Pollak's overhyped pick: Tesla (NASDAQ: TSLA)

Bella Kidman: Alex, there's not much more overhyped than game GameStop. What's your over-hyped peak?

Alex Pollak (SELL): Look, it's a company that we have owned and love, it's Tesla. And we bought it three or four years ago on the basis they'd get to a million cars and at a million cars at $60,000 a car that was $60 billion and at a 25% EBITDA margin, that was $15 billion and 10 times with $150 billion. Right? But now at this price, three-quarters of a trillion, the company needs to get to 5 million cars at all those metrics to actually generate something in the order of $75 billion worth of EBITDA. And at a 10 times multiple that's $750 billion in 2028. It's a sell. There's just a lot of water to flow under the bridge before we get to that point. Other things will happen as Winston Churchill said, "events, dear boy".

Bella Kidman: They're big, they're global and they're disruptive, but if they don't play their cards right, they may end up being overhyped. Either way, they're set to make an Uber impact.

What global company do you think is overhyped? 

Our guests believe that GameStop and Tesla have run too hard, with both these stocks up more than 2856% and 333% over the past 12 months, respectively. But what do you think? Let us know what global stock you think is overvalued in the comments section below. 

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Buy Hold Sell

Buy Hold Sell is a weekly video series exclusive to Livewire. In each episode two fund managers give their views 'Buy, Hold or Sell' on five ASX listed companies. Not recommendations, please read the disclaimer and seek advice where appropriate.

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