5/8/2020 12:00:00 AM

Investor Update (08/05/20)

Dear Investor,

This week we talked to businesswoman and Pie director Cecilia Robinson, to get her perspective on businesses adjusting to a 'new normal'.

We asked:

  1. What has been happening in markets over the past week?
  2. What companies and industries will benefit going forward, and which will struggle?
  3. How will businesses work smarter post COVID?
  4. What’s one company you would be comfortable to buy and hold for the next 5 years?

Please send through any questions you have to [email protected]  and we will either respond directly or answer them in the next video update.

Look out for our May 'Slice of Pie' newsletter early next week.

I hope you have a great weekend.

Kind regards,

MIKE TAYLOR
Founder and CEO


 

 


Written version

Sam De Court: Hi, my name is Sam De Court and with me I have Pie Funds CEO Mike Taylor and Pie Funds independent non-executive director Cecilia Robinson with me today.

As you can see, we have another new face with us today, with Cecilia Robinson. Cecilia’s not part of the day-to-day team at Pie, however, she is a director of Pie Funds. She’s also a successful businesswoman and has founded numerous businesses, including My Food Bag, which I think we all know. And we thought it would be great to have a new perspective today, so thanks for coming on the call, Cecilia. So, we’ll start with you.

What’s been your favourite part of lockdown so far, not just as a wife and mother, but also as a businesswoman?

Cecilia Robinson: I like to think about the positive parts of it, because it has been challenging, but as a wife and a mother, probably what I’ve most enjoyed is the relationship between our kids has actually blossomed over that period, so it’s been really cool to see our kids really getting along. Look, they fight like anyone else’s, but they’ve really come a long way.

And for our businesses, it’s been pretty amazing to see the resilience of our people. When you look at My Food Bag, it significantly increased capacity to be able to deliver across New Zealand. We’re doing 10,000 extra deliveries to those in need, more than 10,000, and we’re also in the process of launching a health tech company, which is called Tend, so we’ve been working on Tend for about 14 months, as a health tech platform. We’re kind of shocked that we ended up being in the middle of a pandemic to launch a health tech platform. So, definitely, interesting times.

Sam De Court: There’s definitely some irony there. Now, Mike, let’s move to the more serious stuff. Now, what’s been happening in the markets over the past week?

Mike Taylor: Markets have been stable, Sam. Well, when I say that, they’ve been relatively stable compared to what we’ve been used to. And so, it’s a bit of an arm-wrestle still going on between the bulls and the bears, and there’s arguments I read every single day pitched for every single case. But what we have noticed in the past week is that it is starting to become more of a stock-picker’s market and I can give three examples of portfolio companies we own, two international and one in Australia, where our stocks have jumped 40 per cent in a day or two days, on the back of a good earnings result or some kind of stock-specific news announcement.

Sam De Court: What are those examples?

Mike Taylor: The examples are Afterpay in Australia. That jumped about 40 per cent when Tencent took a stake in them. In the US, we’ve had two examples, one is called LivePerson, which reported overnight, and they were up 40 per cent. And then, earlier in the week, there was one called Chegg, which is online education. That also jumped by a similar amount.

Sam De Court: We’ll turn back to you, Cecilia. In case the audience is wondering, we’ve already covered this before the call – Cecilia is in her home office, and that ginormous printer behind her is, in fact, her family’s printer. So, Cecilia, as an investor in various businesses yourself, what sort of companies and industries do you think are really going to benefit going forward? And what are the industries and companies that you think will really struggle?

Cecilia Robinson: Well, I think it’s interesting because people get quite scared that people will stop buying, but the truth is that when we go through a difficult time, people just buy different things, right? Like, the spending just changes, and while people might reduce their spending a little bit, they still are spending money, so you have to be focused on the things that people need, the necessities, rather than the luxury items right now. And there are companies that can really pivot in a Covid world, being in house and food and childcare has partially been, I guess, luck, but also a really clear selection at the time, because we knew those categories would be resilient, both through tough times, and people really wanted them when it was easier times, too, so I think those kinds of companies will do really well coming out of this.

I think it’s really challenging to see how some companies haven’t adapted to selling online. You look at big examples like H&M and David Jones in New Zealand. I think a lot of people would have liked to have been buying their goods – a lovely pair of nice slippers at home or some leggings – and you know you can’t buy it, so companies that haven’t pivoted enough to be able to deal with environment will really struggle. And that’s really about the innovation that takes place behind the scenes.

And then you’ve got companies like Zoom, you know, who have been blossoming, and in the industry that we’re entering, with our company called Tend, which is tele-health, you look at Teladoc in the US. I think they’re the second stock to Zoom. You just have to look at categories that are going to be successful in this environment, and understand what consumers want, and what they’re going to be purchasing.

Clearly, companies that are heavily reliant on people movement, you know, tourism, airlines, hotels, are all going to struggle for the foreseeable future, and I think we heard our prime minister say that we’re going to be at Level 1, or Level 2 until a vaccine is found, and we have to think realistically how long that’s going to take for New Zealand. Unfortunately, I think it’s going to take longer than we believe it will.

Sam De Court: Thanks, Cecilia. So, will businesses find ways to work smarter? And I guess the question for you as a director of various businesses, is how does that change your strategic thinking in those roles?

Cecilia Robinson: Yeah, it absolutely does. A glowing example is that six months ago, for Tend, we were adding a staff member. We decided to just put it on a contract and we said, you’re in Wellington, you can never be part of the executive team permanently, so we’ll just contract you and start it up, and six months later, I’m employing him as my head of operations. And part of the executive team being in Wellington; it hasn’t actually mattered, and this is what we’re actually being challenged on here is how we’re going to live and work differently.

Commercial property is a really interesting category, because previously it was seen as quite safe, but what we’ve found now is that so many people can work remotely. Should companies be investing in the level of infrastructure they’ve had in the past, and would it be more beneficial to work in a more ad-hoc way, or more in a flexible working way, which is what Covid actually demands? So, I think that the way we do business is going to change. You know, John Key said that the commercial real estate market is basically heading for a train wreck, and I agree with him.

I think we have to think about how we’re going to work differently, and I think that actually brings a huge amount of opportunity, because I think there are some really realistic cost-savings that companies can make through the process and I’m really excited about discovering those.

I think, for Pie, I’m just really excited about the coming months and years. I really think that you’ll notice that there’s a lot of renewed excitement about the opportunity inside the business. And I think that we know how good and bad times look, and the team is incredibly well equipped to be able to understand how to manage through those times, and I think as time progresses, what you’ll see from Pie is that they’ve got an in-depth understanding of how people will continue to buy products, and that’s really exciting.

Sam De Court: Thanks a lot, Cecilia, and now Mike, you’ve mentioned stock-picking before, so I’ll put you on the spot. Name a stock that you would happily buy today for five years.

Mike Taylor: That’s an interesting one, because previously you might have said things like Auckland Airport might be something that you’d just buy and put in the bottom drawer, where I think we need to resist the temptation to buy those type of assets that are deemed as cheap, like airlines or tourism operators because their road to recovery will be long, and we don’t exactly know what exactly it’s going to look like.

So, if you think about a safe, low-risk option, and nice and boring, I would say to buy Amazon, because Amazon is kind of like the world’s infrastructure today. It’s embedded in everything and as you can see, people have been using Amazon more in this Covid environment, and I think that’s a trend that’s set to continue.

If you wanted to take a more risky bet, we’d try to pick something that was more emerging than Amazon is, because it is a household name, is I’d look for things that previously had to be done face-to-face that can now be done online, where we might not have thought we could before, so obviously that’s not a haircut, but it is something like education; it’s something similar to what Cecilia’s doing with her new business, in medical visits. As we’ve seen, you don’t have to go to the doctor face-to-face any more, you can do it online, and things like that.

It’s trying to pick businesses that can become household names within the next five years. Go back five years ago and nobody had heard of Zoom. Even five years ago, people didn’t even have Netflix in the house, but they do now. Try to pick something that’s an emerging trend and it’s in the areas that we can now do virtually. So, in the portfolio, for example, we’ve got a couple of companies; I’ve just mentioned one before, Chegg, which provides online education. We’ve also got Shop Apotheke in Europe, which is an online pharmacy, so things like that are the future, from our perspective.

Sam De Court: Great. So, thank you very much, Cecilia, for joining us, and thank you, Mike. And thanks everybody for watching. And have a great weekend.


To download our product disclosure statements, go to www.piefunds.co.nz.  Past performance is not an indicator for future returns. This information is general in nature only. Before relying it on it, we recommend you discuss with an expert

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