There are three businesses the Forager team would love to own, if only Santa would give them the right entry point.
Portfolio Manager Gareth Brown would love to find Thule AB (STO:THULE) in his Christmas stocking. He’s owned bull-bar company ARB (ASX:ARB) for more than two decades and has made more than 30 times his money, plus dividends. So naturally, he’s got a soft spot for auto accessories.
‘Thule is one I’ve longed to own but somehow managed to miss each time it got cheap enough,’ he says. ‘They make accessories like roof racks and boxes, bike racks, ski racks and other outdoor gear that generally revolves around the family car.’
Gareth adds that accessories businesses like Thule are high-margin, high-return on equity. That’s because customers happily pay for brand and quality. Consciously or not, signalling is also part of the buying decision here, especially with the sort of man (mainly) who doesn’t do jewellery. Fellas that don’t follow the latest fashion trends, but never skimp on gear – especially gear that prominently sits on his car.
‘Thule is a really high-quality business. But because it’s selling mainly to car owners, it’s a stock that can get lumped into the “auto” category when the broader automotive industry turns south viciously, as it does from time to time,’ he continued. ‘It’s a business I’d love to own at half of today’s price. Hopefully we get our chance one day.’
For fellow Portfolio Manager Harvey Migotti, “secular growth” features in so many of his monthly report contributions that we’ve run out of alternate words in the thesaurus. He loves a long-term winner, and there is no better sector for that than semiconductors. Already kicking himself for missing Taiwanese giant TSMC (NYSE:TSM), equipment provider ASML (NASDAQ:ASML)is the one he would really love to see in the Christmas stocking.
‘The only question about semiconductor demand is how fast will the growth be,’ Harvey notes. ‘They are the most important component in a computer chip, and computer chips are about to be incorporated into almost every device and appliance you own. From cars to computers and phones to fridges, it’s no understatement to say the semiconductor is now the single most important product in the world.’
It’s a great sector, and ASML is the only provider of its high-end lithography equipment in the world. A monopoly in a high-growth industry? It doesn’t get much better than that, Harvey says.
‘It has historically been a cyclical industry. equipment provision is even more cyclical than end demand, which used to mean Santa turned up with some cheap ASML shares on a fairly regular basis,’ he continues. ‘I am worried, though, that with the structural changes in the industry, Santa might not be back for a long time.’
Just like Gareth and Harvey, the stock on CIO Steve Johnson’s Christmas wishlist is one that got away.
Having originally pitched it to the team as too expensive but worth keeping an eye on, Steve watched in horror as DocuSign’s (NASDAQ:DOCU) share price soared from $50 in 2019 to more than $300 in September of this year.
‘I had an early insight into how good this product is,’ Steve reveals. ‘My wife’s financial institution implemented it a few years back, plus a good friend started working at the company in sales and she told me she had never seen a product easier to sell.’
The main thing the product is known for is electronic document approvals. Gone are the days of print, sign, scan or fax – with DocuSign, you just click a button. Simple electronic document signing is becoming a commodity, though. Steve says DocuSign’s magic is in the complexity of large organisations.
‘Large corporations have a myriad of restrictions and authorisations around who can sign what and for how much. There are usually multiple people involved – often on opposite sides of the world – and approvals are sometimes needed dozens of times per day,’ Steve says. ‘That’s the magic of DocuSign. A trader in Melbourne can get authorisation from their boss who is on the golf course in Noosa. All it takes is one tap on their phone.’
The company’s share price has halved in the past couple of months, so Steve is more optimistic about Santa’s arrival than Harvey or Gareth. He thinks it still needs to halve again and that the company still has to prove its potential. But it is on the 2022 Christmas list.
What’s on your Christmas wishlist? Feel free to share your thoughts with us in the comments below.
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