Buy Hold Sell: 5 innovative growth stocks

Buy Hold Sell

Livewire Markets

It's easy to be wowed by the massive changes our ancestors experienced — aeroplanes, electricity, the shoelace  — and underestimate the ones we ourselves are living through.

So get ready to dive in my friends, because as this week's Buy Hold Sell shows, we're absolutely swimming in innovation. And the pace of change is ramping up too. 

From a company pioneering a new type of audience interaction in videos, to a full-service financial firm for cryptocurrencies, and a global behemoth that specialises in making "dreams come true". 

Livewire's Ally Selby sits down with Heath Behncke from Holon and Michael Frazis from Frazis Capital to sift through some of today's biggest and brightest innovators.

Plus, we also asked them to bring along a global powerhouse whose value hasn't been truly recognised by the market. What more could you want? 

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


Edited Transcript

Ally Selby: Hello and welcome to Livewire's Buy Hold Sell. I'm Ally Selby, and today, we'll be discussing three innovative stocks ready for takeoff. Plus we've asked our fundies to bring along one under-appreciated stock that is light years ahead of its competition. I'm joined by Heath Behncke from Holon and Michael Frazis from Frazis Capital. 

First up, we have Bilibili, which is a mix between TikTok and YouTube. It's a Chinese video-sharing website. Heath, I'll start on you. Is it a buy, hold, or sell?

Bilibili (NASDAQ: BILI)

Heath Behncke (BUY): For us, it's a buy, Ally. We've got it in the portfolio. The young ones are really gravitating to this in China — a couple of hundred million users are active on the platform. Hell of a lot of engagement. You look at their engagement stats, it's through the roof. Unbelievable, at 83 minutes a day on average. And we see that, actually, there's a very, very big market opportunity for them to compound at very hefty rates, in terms of 25% to 30%, in terms of the underlying user growth over the next two to three years, and then start to monetise that. So we should start to see a move into significant profitability.

Ally Selby: Over to you Michael. As Heath mentioned, it hasn't been able to turn a profit yet, but its share price rose around 70% over the past year. Is it a buy, hold, or sell?

Michael Frazis (HOLD): It's a hold for us. It's a fascinating company, clearly winning on engagement. There are two things that worry us. The first thing is that it is losing money. And the second thing is the political regime in China is targeting user engagement, and trying to figure out how they can stop children from spending so much time glued to their screens. So I do worry that Bilibili's in the wrong place at the wrong time, with respect to the next set of regulations that come around governing that kind of thing. So that's why it's a hold, and not a buy, for us.

Galaxy Digital (TSE: GLXY)

Ally Selby: Staying on you, Michael. Next, we have Galaxy Digital. It's a cryptocurrency-focused financial services firm. Is it a buy, hold, or sell?

Michael Frazis (BUY): This is a definite buy for us. What Mike Novogratz, the founder, is trying to build is a full-service investment bank. So they'll do capital markets, prime brokerage, deal with institutional clients, advisory, and also venture capital. And I think, again, it's a market leader. So that'd be able to track the best investment opportunities, the best talent, and have the best growth trajectory as well. So a definite buy.

Ally Selby: It has had a fantastic growth trajectory. Its share price has lifted around 470% over the past 12 months. Heath, over to you. Is it a buy, hold, or sell?

Heath Behncke (BUY): Look Mike Novogratz, who's the leader here and founder, is being very, very instrumental and leading the charge on institutionalising crypto. He's in a great position. For us, it's at the smaller end because the average market capital we look at is very large; around $2.5 billion. If I was looking down there, it would absolutely be a buy. Novogratz is actually right across the spectrum when it comes to providing, in theory, what is the Goldmans for crypto in many ways, with what he's actually looking to achieve over time. So I think he's got a great reputation, and he's attracting the right people to execute on a very, very large vision.

Walt Disney (NYSE: DIS)

Ally Selby: Next up we have Walt Disney. Its share price has risen around 40% over the past year and about 107% since the lows last year. But then again, who hasn't been streaming? Staying on you, Heath, is it a buy, hold, or sell?

Heath Behncke (SELL): For me, this is a sell. I tend to have a preference for businesses that are quite focused. And of course, Walt Disney's got a foot in one camp and a foot in the other. They've done really well with the streaming. But for us, it's one that's not really of interest.

Ally Selby: Over to you, Michael. It's got a forward P/E of around 72 times, and a market cap of US$324 billion. Is it a buy, hold, or sell?

Michael Frazis (HOLD): It's a hold for us because there are things we like, and there are things we don't. The thing we like is it's a recovery play going into recovery, which is excellent. And we used to like streaming, but now it's very clear that streaming is quite saturated in the United States. So the combination of those two things: the slowing down of the streaming market, where they're going to be investing a lot of money and sinking a lot of cash, and then a one-off recovery. For us, it's interesting, but not as compelling as it was, say, a year ago when streaming was growing much faster. So it's a hold.

Ally Selby: Okay, Michael. I'm absolutely champing at the bit for what your next answer is. We've asked you to bring along an innovative company that has been undervalued by the market. What is your company for us today?

Opendoor (NASDAQ: OPEN)

Michael Frazis: The company I'm bringing is Opendoor. This is a US company that basically buys houses at a small discount to what they calculate the fair value to be using artificial intelligence and algorithms. And the reason that's compelling is because selling a house is a pain in the neck. In the US, there's buyers' agents and selling agents — and all kinds of commissions. Opendoor will give you your money within a week with one inspection. So it makes things so much faster and easier. And again, we don't have opinions on these things. We look for traction, and it's growing extremely fast. And if you think about it, there are only a few sectors that have been resistant to e-commerce. They're autos, really high-end luxury fashion and real estate. And both of those first two have cracked. Carvana in autos, Farfetch in luxury fashion. And we think Opendoor will do the best at trying to bring that internet revolution to real estate. So that's why we're excited about it.

Roku (NASDAQ: ROKU)

Ally Selby: Awesome. Thank you so much. Heath, over to you. Your time in the hot seat. What innovative company have you brought for us today?

Heath Behncke: Yeah, Ally, the innovative company is Roku, which is really providing the operating system for the world to digitise TV. So think of it as the Microsoft operating system, what they did. And they're like Netflix five years ago in that they are starting to roll that out globally. And it's been very clear over the last 12 to 18 months or so that people are recognising the position they're actually in. And particularly, also, post-COVID, I think advertisers are really starting to understand the benefit of shifting from analog to digital TV. We think they've got a very big future ahead of them. And again, this is a company that's taken 18 years to build. But they're right at that tipping point where you're going to see them start to roll out the plan globally.

Ally Selby: Well, thank you so much for your time today, Michael and Heath. We hope you enjoyed this episode of Buy Hold Sell. If you did, why not give it a like. And subscribe to our YouTube channel. We're adding new content every week.

What innovative company do you think has been undervalued by the market?

Heath believes that Roku has plenty more potential ahead of it, while Michael is really excited by the opportunities for Opendoor. But we would love to know what you think. Let us know what innovators you are backing in the comments section below. 

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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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