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How Perpetual’s star fundie picked COVID winners

Lachlan Maddock
— 1 minute read

Thomas Rice delivered more than 50 per cent returns through a period of savage market volatility. Here’s how.

Mr Rice manages Perpetual’s Global Innovation Share Fund, which delivered 53 per cent returns off the back of investments in companies that went on to be COVID winners – for example, Zoom, which Perpetual bought the day it went public in 2019. At the time, that was down to two key differentiators: the way it pushed video coding on to end users to create a more reliable stream, and its extreme ease of use.

“Zoom was set up so you could send anyone a Zoom link and they could join without signing up for an account. It seems normal now, but it wasn’t back then,” Mr Rice told InvestorDaily. 

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“This greatly removed friction from the process which meant people were more likely to use the product, and the product naturally spread virally since the act of inviting another person to a video call introduces them to Zoom. I actually came across Zoom about a year before the IPO because someone I know started using it regularly for video calls.”

Another bet that paid off was a 2017 investment in Axon Enterprise – a company that made tasers, but which had an emerging police body camera business that was “losing a lot of money” despite their impending wider adoption amid a number of high-profile shootings. Perpetual bought at $24 and sold at $65 when it felt the market was realising the opportunity. Now they’ve bought back in. 

“It’s important to understand that the business of police body cameras isn’t about a one-off sale like GoPro. It’s about data management,” Mr Rice said. 

“A police officer wears a body camera, puts it into an Axon Dock at the end of a shift, and the data is automatically uploaded to a cloud platform they run called Evidence.com. It’s a high-quality recurring revenue business that will expand the services they offer over time.”

Mr Rice says he’s a “bottom-up, fundamental stock picker” who’s equally comfortable investing in early-stage companies that are unprofitable but growing quickly and mature companies paying large dividends. He’s now trying to understand what habits have changed as a result of COVID-19 and whether those changes will still be around years from now, and believes that e-commerce “is a clear winner”. 

“How many people have tried ordering from Amazon for the first time during this pandemic and decided it’s actually pretty good? So Amazon will continue to benefit from that, even if part of the current impact is temporary, and that holds true for other e-commerce companies such as Kogan and Shopify,” Mr Rice said.

“We also think digital entertainment is a long-term beneficiary for the same reason. My mother-in-law signed up for Netflix for the first time during this pandemic and I’m sure she’s not the only one. While some will churn off, I think it permanently increases demand. The same is true for video games which are having a bumper year.”

 

How Perpetual’s star fundie picked COVID winners
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