In this second edition of our Holiday Stock Picks installment, we bring you picks spanning clean energy, healthcare, emerging markets and technology. These selections highlight sectors poised to benefit from developing trends and emerging demand.
Kieran Moore, Portfolio Manager, Munro Partners
Constellation Energy is a key supplier of nuclear energy in the US, as it is the largest operator of nuclear assets in the country. At Munro, we believe Constellation Energy plays a critical role in progressing toward decarbonization in the U.S., as nuclear energy provides a form of power with low greenhouse gas emissions. Additionally, as artificial intelligence (AI) applications continue to advance, hyperscale data center companies face increased pressure to deliver clean energy.
Over time, we believe Constellation Energy will benefit from this increased energy demand as hyperscale data center companies build on their AI efforts.
June Bei Liu, Lead Portfolio Manager, Tribeca Investment Partners
Sigma Healthcare Ltd: The merger with Chemist Warehouse has created one of the best retailers listed on the ASX, with still significant growth opportunities here in Australia and overseas. 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 China’s leading ride-hailing app with a strong presence in Latin America, where it holds a ~40 percent share in key markets such as Brazil and Mexico.
Despite an 18-month shutdown that saw Didi banned from the local app store and delisted from the New York Stock Exchange, the company maintained a market share of more than 70 percent during the period, turning profitable while growing transaction revenue by more than 10 percent on a weak user background. Didi is on track for margins to improve from about 3 percent to high single digits over the next five years, with international operations turning profitable in Latin America in 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 Hong Kong Stock Exchange next year, and if that happens, we expect the valuation discount to close quickly.
Damon Callahan, Partner, Investments, ECP Asset Management
Fineos is an unloved, under-followed technology company with an increasingly bullish outlook. Fineos is a leader in the development of modern core system software for the life, casualty and health industry in both North America and ANZ. Over the past five years, the slow deal environment at a time when FCL has undergone significant R&D to complete its IP for existing customers makes its retrospective earnings and losses inconclusive. However, the business is approaching a tipping point.
After a decade-long R&D program, FCL has created an IP for industry (“AdminSuite”) that is extremely difficult to replicate. It has built a reputation as a software leader among major insurers and recently developed tier 1 consulting partnerships designed to drive new business to FCL solutions. Although new deals for the industry have been slow post-Covid, our research shows that no other supplier has outperformed FCL. Additionally, one of its few competitors was recently ousted by a major insurer and replaced by FCL, an event that increased our belief that the company will emerge as the software provider of choice as the deal environment accelerates.
The recent investor day attracted the attention of investors. Management outlined plans for minimal cost growth over the next five years and topped its expectations for a significant acceleration in revenue and margin expansion. While the company will remain subject to the vagaries of deal timing in a concentrated industry, if the trajectory laid out by FCL even partially plays out, the stock looks compelling at the current price and is likely to see a significant re-rating based on a new investor narrative – high quality, high barrier to entry, competitively dominant software leader in a large industry with significant growth.
The information presented in this article is general in nature and does not take into account your financial considerations or individual needs and should not be relied upon.
