Last year’s top stock calls from five fund managers who we invited to the Livewire studio brought the house down with a 59% return. The exercise was meant to be a bit of fun and get you thinking about the various angles different fundies look at when making high conviction calls.
This year we’ve upped the stakes and asked nine contributors to come along and share their #1 idea for 2020 spanning domestic and international companies across various sectors and capitalisations.
Our 9 featured experts include David Allingham of Eley Griffiths Group who topped the 2019 league tables with +195% on Alacer Gold and ‘Mr. Consistent’ Ben Clark of TMS Capital, the runner up with +92% on Xero.
Access the video or transcript below to see which stocks the fundies reckon will deliver the goods this year.
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Everyone get out your pens and pencils, the experts are going to give you that one stock that's going to perform like no other in 2020. What's one stock that's going to win you the title in 2020. What's it going to be?
David Allingham, Eley Griffiths Group
WISR. The code's ASX:WZR. It's a disruptor in the personal lending market. There's about $50 billion of loan origination in personal lending in Australia. These guys have a really innovative model around customer acquisition, and that's not via marketing spend like a Prospa. It's actually via creating a wellness concept. So, what's good for the consumer will attract consumers. A bit like the Afterpays being in the buy now pay later space. And the key we think in the next year or two has been that NAB has just provided them a third party funding facility, and they are now internalising their loan books. So rather than getting a management fee, which they've been getting for the last year or two, they're actually internalising their net interest margin. So, they'll be taking it from a 2% margin to a 6%, effectively tripling the economics of the business.
Nikki Thomas, Alphinity Investment Management
A business called Ingersoll-Rand (NYSE:IR), which is going to break apart and become a climate business and an industrial business. And I think the climate business remains very underappreciated. The climate business leans heavily in on improving sustainability of the environment, better air conditioning units in buildings. Buildings are 30% of CO2 emissions, and they are taking market share. And I just think the market still prices it as a bit of a boring industrial, and there's a really lovely story that's going to emerge through 2020 for Ingersoll-Rand.
Service Stream (ASX:SSM)
Rachel Cole, NAOS
So one for this year I think is Service Stream (ASX:SSM). It's a business that does critical network infrastructure services to the telco and utilities space. It's had a good run and it's come off recently. Looking forward, they've got a couple of catalysts this year. They've got a really strong balance sheet. They've got net cash. They can go out and make an acquisition. Outside of that, they've got the 5G work which has potential upside going forward. And as they transition from the NBN, away from the activations and connections into more maintenance style work, I think on 15 times it looks like good value.
EML Payments (ASX:EML)
Josh Clark, QVG Capital
EML Payments (ASX:EML) I think will be a lucrative bet in 2020. It provides payment services predominantly in the card space. So think salary packaging, gift, and incentive cards. You've got some exposure in malls - they've just recently won in the US. They do in the tens of billions in retail sales, as far as I can work out. Also, a tailwind would be the US deregulation of sports betting online. Those two things are going in its favour.
Blake Henricks, Firetrail Investments
Nufarm (ASX:NUF). It was our top stock last year. It didn't play out exactly as expected. What you're buying and what matters for Nufarm is two things: crop protection and the seeds business. So crop protection, it's on its knees. I mean, you've got the Australian drought, you've got floods in the US, and they're struggling to get product in Europe. But where Nufarm gets really exciting in 2020 is the seeds business. Omega-3's been commercialised. And while some people think it's a pie in the sky technology last year, or in 2019, they planted 37 thousand acres. That's 140 square kilometres. It's huge, it's real, and it's going to come into people's radar.
City Chic (ASX:CCX)
Andrew Mitchell, Ophir Asset Management
City Chic (ASX:CCX). Now this is plus size women's clothing, and it's got a great market position in Australia. But what we really like it for is the US potential. You saw growth in the US accelerate in the second half of last year, and to couple with this they've made a very smart acquisition in Avenue. If they are able to take the costs out like we think they can and stabilise that top line, we think it could add $15 to $20 million of EBITDA to the business.
Ben Clark, TMS Capital
Amazon (NAS:AMZN) is trading on an EV to EBITDA of 17 times this year's earnings. Catalysts I could see coming in the year. Amazon Prime has been rolling out one day shipping to its customers the last 12 months. There's been a real acceleration in sales as that's occurred, but they've been wearing much higher shipping costs at the same time, about 1.5 billion US dollars-per-quarter-increases, so in 2020 I think that shipping costs line can normalise, the sales growth continues and you see a meaningful increase in the profit line of that business.
Alibaba (NYSE:BABA / HKE:9988), what a business that is. It has this huge Chinese eCommerce tailwind, Taobao and Tmall, $900 million of GMV, two times the size of Amazon globally, 670 million active customers, but the really interesting thing about Alibaba is the breadth of what they have exposure to. They have a cloud business, they have maps, they have digital assistant, they have a commerce, they have delivery and that gives them a huge advantage in building an advertising business in future as well.
Matthew Kidman, Centennial Asset Management
I going to go really small: BidEnergy (ASX:BID): $100 million market cap, net cash of about $8 million, no more capital raisings, just about to get into profitability. It specialises in electronic bill management for utilities, not just energy but water and others for companies who pay a lot of bills, obviously hundreds of them, thousands. They manage it for them. They can save them money, they can get the right products for them. They've gone global now. They've gone out of Australia, the US, UK and beyond, and I think that's a great growth story about getting a niche and owning it globally. So I think we can do really well out of that.
MK: Everyone out there listen to the reigning champ, and we're all a little bit... wiser.