In this second edition of our holiday stock pick instalment, we bring you picks spanning clean energy, healthcare, emerging markets and technology. These selections highlight sectors poised to capitalise on evolving trends and emerging demand.
Kieran Moore, portfolio manager, Munro Partners
Constellation Energy is a key supplier of nuclear power in the US, given it’s the largest operator of nuclear assets within the country. At Munro, we believe that Constellation Energy plays a critical role in progressing towards decarbonisation in the US, as nuclear energy provides a low greenhouse gas emission form of power. Additionally, as artificial intelligence (AI) applications continue to evolve, hyperscale data centre companies face increased pressure for the supply of clean power.
Over time, we believe Constellation Energy will benefit from this increased demand for power as hyperscale data centre companies build out their AI efforts.
Jun Bei Liu, lead portfolio manager, Tribeca Investment Partners
Sigma Healthcare Ltd: the merger with Chemist Warehouse has created one of the best retailers to be listed on the ASX, with still substantial growth opportunities here in Australia and abroad. We like it for its defensive growth characteristics and potential market opportunities.
John Stavliotis, lead portfolio manager, emerging markets, Asia and China, Antipodes Partners
Didi Global: Didi is the leading ride hailing app in China that has a strong presence in Latin America where it holds ~40 per cent share in key markets like Brazil and Mexico.
Despite an18-month suspension which saw Didi banned from the local app store and being delisted from the New York Stock Exchange, the company maintained market share above 70 per cent during the period, having turned profitable while it grew transaction revenue by over 10 per cent against a weak consumer backdrop. Didi is on track to see margins improve from around 3 per cent to high single digits over the next five years with international operations turning profitable in Latin America over the next three years.
Didi trades at ~6x 2026 EBITDA compared to 14x for Uber and 14x for Grab. We expect the company to list on the HK stock exchange over the next year, and if this is realised, we expect the valuation discount to close quickly.
Damon Callaghan, partner, investments, ECP Asset Management
Fineos is an unloved, underfollowed technology company with an increasingly bullish outlook. Fineos is leading in the development of modern core systems software for the life, accident and health insurance industry in both North America and ANZ. Over the last five years, a slow deal environment at a time when FCL was undergoing significant R&D to round out its IP for existing clients makes its backward-looking P&L uncompelling. The business, however, is approaching an inflection point.
After a decade-long R&D program, FCL has built IP for the industry (‘AdminSuite’) that is extraordinarily difficult to replicate. It has established a reputation as the software leader among major insurers and has recently developed tier-1 consulting partnerships set to drive new deals towards FCL’s solutions. While new deals for the industry have been slow since COVID, our research suggests that no other vendor has been winning in FCL’s place. Furthermore, one of its few competitors was recently kicked out of a major insurer and replaced by FCL – an event which increased our conviction that the company will emerge as the software vendor of choice when the deal environment accelerates.
The recent investor day caught investor attention. Management outlined plans for minimal cost growth over the coming five years and overlaid its expectations of meaningful revenue acceleration and margin expansion. While the company will remain subject to the vagaries of deal timing in a concentrated industry, if the trajectory articulated by FCL even partially emerges, the stock would appear to be compelling value at the current price, and likely see a significant re-rating based on a new investor narrative – a high quality, high barrier to entry, competitively dominant software leader in a large industry with significant growth runway.
The information featured in this article is general in nature and does not take into consideration your financial consideration or individual needs, and should not be relied upon.
