Expert Investor: Hamish Corlett & Why He Pitched Slack At Sohn Hearts & Minds | TDM Growth Partners

HOSTS Alec Renehan & Bryce Leske|7 December, 2020

Meet your hosts

  • Alec Renehan

    Alec developed an interest in investing after realising he was spending all that he was earning. Investing became his form of 'forced saving'. While his first investment, Slater and Gordon (SGH), was a resounding failure, he learnt a lot from that experience. He hopes to share those lessons amongst others through the podcast and help people realise that if he can make money investing, anyone can.
  • Bryce Leske

    Bryce has had an interest in the stock market since his parents encouraged him to save 50c a fortnight from the age of 5. Once he had saved $500 he bought his first stock - BKI - a Listed Investment Company (LIC), and since then hasn't stopped. He hopes that Equity Mates can help make investing understandable and accessible. He loves the Essendon Football Club, and lives in Sydney.

This episode is a ‘must-listen’.

Hamish Corlett is a co-founder of TDM Growth Partners and serves on the Board of Directors of ASX-listed SomnoMed and Tyro Payments. He has significant experience in developing fast-growing software and FinTech businesses. Along with co-founders Tom Cowan and Ben Gisz, Hamish has overseen TDM’s incredible track record, delivering 20%+ returns over the past 15 years.

We were also joined by Rory Lucas who is the Chief Investment Officer for the ASX-listed company Hearts and Minds Investments (ASX: HM1). Hearts and Minds is a unique listed investment company that draws on the investing expertise of the Australian investing community to give back to charitable causes.

Hamish recently pitched at the Sohn Hearts and Minds Conference. It was an amazing pitch, where he put forward Slack as his high conviction stock.

We asked Hamish to join us, to unpack his thesis and the work he is doing at TDM and Hearts and Minds as a core portfolio manager. We also had Rory in to give us a wrap-up of the conference of 2020.

In this episode we discuss:

  • Rory’s thought on the conference for 2020, and the themes that emerged
  • Hamish’s journey in taking TDM from $1 million under management to over $1 billion
  • Why it’s important for Hamish and TDM to participate in the Sohn Hearts and Minds Conference
  • The investment thesis behind Slack
  • Why he was ‘sad’ to hear about the Salesforce announcement
  • What other high conviction stocks are in the portfolio
  • Plus, lots more!

If you want to see Hamish’s pitch, click here.

For more information on Hearts and Minds Investment, click here


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Bryce Leske: [00:00:57] Welcome to another episode of Equity Mates, a podcast where we follow our journey of investing, we break down the world of investing from beginning to do it and so that you can hopefully make some returns. My name is Bryce and as always, I'm joined by my equity buddy Ren. How's it going? [00:01:10][13.4]

Alec Renehan: [00:01:10] I'm very good Bryce, very excited for this episode. We are talking Hearts and Minds Conference. Yes. Before the conference we did a couple of episodes on it, spoke to Rory, the chief investment officer. I spoke to Nick Griffin, who pitched the last year. Yes, Lobach. The conference has happened and we've got one of the superstar fund managers here to tell us about his pitch. [00:01:32][21.2]

Bryce Leske: [00:01:32] Yeah, very excited to welcome Rory back to the show. Welcome, Rory. Thank you. And also, yes, superstar stock picker Hamish Colet from TDM Growth Partners. Hamish, welcome. [00:01:42][10.1]

Hamish Corlett: [00:01:43] I'm violently rejecting the superstar there. As a massive Equity Mates fan. [00:01:48][5.3]

Bryce Leske: [00:01:48] I'm stoked to have you. So for those that didn't get to watch the conference or haven't heard of Hamish before, Hamish is co-founder of TEDMED Growth Partners and serves on the board of directors of ASX listed company, Some Nomad and Tyro Payments. He has significant experience in developing fast growing software and fintech businesses, along with co-founders Tom Cowan, who we have had on the show. And Bangui's Hamish has overseen teardowns incredible track record, delivering twenty per cent plus returns over the past 15 years. That's where Superstar comes from, [00:02:22][34.0]

Hamish Corlett: [00:02:24] Tom and Ben. [00:02:25][0.4]

Bryce Leske: [00:02:26] And also a reminder, Rory Lucas's chief investment officer for the ASX listed company Hearts and Minds Investments. That ticker code is H.M. Won Hearts and Minds is a unique listed investment company that draws on the investing expertize of the Australian investing community to give back to charitable causes. So welcome to both of you. Thanks. [00:02:45][18.8]

Alec Renehan: [00:02:46] Great to be here. We had the conference on Friday the 13th of November, Friday the 13th, sometimes considered unlucky, but I think it was a good day for the Australian investing community and for H1N1. We saw some great stocks pitched. Rory, I want to start with you. How did you find the conference and what were your thoughts on the online format this year? [00:03:06][19.9]

Rory Lucas: [00:03:06] Obviously different from a physical conference that we've had down at the Opera House or down at Melbourne. I watched it in one of the boardrooms in the city of Sydney. It was still fantastic. You were able to hit pause if you needed to listen to something, if you wanted to listen to a pitch a second time, you were able to listen to it a second time, which was fantastic. But yet again, the speakers have just delivered some stocks that ordinary Australian investors just don't get access to. There's telemedicine in China and in the US there was payments, businesses out of China, Target Corp. in the US, all stocks that people will have heard of but have no idea how to be invested in. And 21st century email even was an idea that was pitched, which we may hear a little bit more of today. But it was just a it was a fantastic day and a fantastic few days because we're able to listen to it more than once. [00:03:55][49.2]

Alec Renehan: [00:03:56] I think my biggest takeaway from the conference was a lot of the stocks that were pitched were stocks I had heard about. But just the clarity of thought and the insights that the pitches contained made me think about a lot of these companies in different ways. You know, like Slark, which we'll talk about. You know, you write in the media that Microsoft is bigger and all that stuff. And I never really thought about Slack as such a great asset until I heard Hamish SPAC or Target was another one. You know, you think of Target as like a slow growing bricks and mortar retailer. But my thoughts about it completely changed after the conference. [00:04:28][31.9]

Rory Lucas: [00:04:29] That's the beauty of what Eichman tries to give investors know you can buy Aussie stocks, you can buy banks, you can buy building materials. You can buy companies that dig iron ore out of the ground. But with that M1, you get access to all of these things. Yeah, I'm sure we'll talk a little bit about Spotify today, which Hamish pitched last year, like you say, stocks that we've all heard of. But people just don't realize that they can be invested in them and and get the returns that we've been getting in them like Tesla. Another example, obviously, last year, you know, shareholders got like a hundreds of per cent return by being invested in a company that makes 500000 cars a year. [00:05:04][35.2]

Bryce Leske: [00:05:07] So, I mean, we're only a few weeks since the conference, but are you happy with the performance so far? [00:05:11][4.4]

Rory Lucas: [00:05:12] Yeah, there's most of the stocks are up. A couple of them have come back a little bit, but it's not even one month from the conference. So I'd like to think of those as sort of random stock price moves, those ones. But generally, they're pretty good. There's been a bit of a rotation out of growth stocks recently in the market as people sort of think that we're going to return to normal. I'm not so convinced, especially having listened to the speakers, things are going to return to how they were. And in my update that I wrote last week, I spoke a bit about that and about how the habits that people have developed in the last 12 months through covid may well endure. We're realizing that life is actually better with a lot of these changes. I wrote about how I was at a pub on the North Shore of Sydney last weekend and I was able to tap my. Phone to and the menu pops up on my phone and I was able to order from the comfort of my table and glass of wine, I'm happy to do that going forward. [00:06:04][51.9]

Bryce Leske: [00:06:05] Table service. [00:06:05][0.3]

Alec Renehan: [00:06:05] Not bad. Yeah, yeah, yeah. Now, if people want to read more of Rory's thoughts, they can jump on the Hearts and Minds website, hearts and Minds Investments, dot com Dollars you and sign up for his weekly newsletter. Rory, I've got to say, there may have been some random stock price movements, but one that wasn't random since we first interviewed you. The hearts and minds share prices up about 14 or 15 percent. We're going to be labeling that the Equity Mates bump [00:06:28][22.8]

Speaker 3: [00:06:29] and we'll be able to do that all about [00:06:31][1.3]

Alec Renehan: [00:06:33] how much I want to turn to you. You pitched Spotify last year and you came back and pitched the stock this year. Slok, before we get into the companies, especially Slok and why you pitched it, it would be interested to hear a bit about your background. Bryce talked about the incredible growth that TDMA has seen. So can you tell us a bit about your story to where you are today? The question I know is specific. [00:06:54][21.4]

Hamish Corlett: [00:06:55] to investing [00:06:55][0.2]

Alec Renehan: [00:06:56] wherever you want to take it, but yeah, more and more your investing. [00:06:58][2.2]

Hamish Corlett: [00:06:59] I'll try to give you the abridged version of the investing story. And it started probably when I was early teens. My mom worked in mining companies. My dad was always involved in a range of business related things and I can't remember how. But I stumbled across a book called One Up on Wall Street by Peter Lynch. And it was a book, I think he specifically wrote it for teenagers that were interested in investing. And he was a great investor himself. And that's what really sparked the interest in investing specifically for me. Then read the Warren Buffett way from there. And fortunately, I grew up my now business partner, Tom Cowan, they made since we were three years old and we met the third of us, Ben, when we're eighteen, first day of university. So, yeah, kind of three little investment nerds that all had that in common. And I think there was there was always this idea. How good would it be to have our own little investment firm have a little bit of money and invest in great companies and do the Warren and Charlie thing? And it all became a reality kind of 2005 to 2010. We all kind of came together and address this issue of 15 years into what we hope is many decades more of the journey ahead. [00:08:10][70.9]

Bryce Leske: [00:08:10] Yeah, pretty inspiring story. I think a lot of people in finance have the small dream, not naming names to start their own thing one day. So, yeah, it's inspiring. So I guess the next question is turning attention to hearts and minds. Pretty phenomenal group of core managers. Why is it important to you to be involved in hearts and minds? And the one conference [00:08:30][20.0]

Hamish Corlett: [00:08:31] we all the whole team at Tedham just believes Hearts and Minds is one of the most genius ideas that anyone could have come up with to leverage their collective IP of some of the best investors in the country for the benefit of society and specifically medical research, where you've got a win win between all of those investors in Yemen who are getting great returns and all the beneficiary medical research organizations that are getting the grants. It's just a brilliant idea. It's the definition of a win-win and it's something that we're incredibly passionate about. Having said that, as I was certainly speaking for myself as a massively shy introvert, we didn't embrace the idea of getting involved in science and medicine early on at its first inception, because the idea of getting in front of a bunch of people and pitching a stock was not the kind of thing we did, but we saw the lot and kind of sucked it up and thought it's the right thing to do. And we've never looked back, loved it ever since, and we just want to get more involved [00:09:35][64.0]

Hamish Corlett: [00:09:40] we can get either of those to pick or get them to do it together. Then we've also got a bunch of other team members that we think would knock it out of the park. So I think we've got a bit of a stable of people that could do it. [00:09:51][11.0]

Alec Renehan: [00:09:52] Yeah. Ed Cowan is pitching in twenty twenty one. That's an honor. [00:09:54][2.8]

Hamish Corlett: [00:09:55] So is the media darling. So I should probably get the [00:09:59][4.0]

Alec Renehan: [00:09:59] one thing that I particularly admire about TDM is just how long term you guys are in your approach, and not just in terms of how long you hold a position, but how long you take to research it and do your due diligence and make sure that it is a good investment. Then, you know, Rory comes along, asks you to pitch and you have to turn all of that work, all of that due diligence into a ten minute presentation. What's that process like? [00:10:24][24.1]

Hamish Corlett: [00:10:24] And I find it hard fought so hard at Tiedemann. It's almost like we love the companies we invest in, like they're our kids. And so, yeah, you asked me about my daughter and how much I love her. I could talk your ear off for hours and it's like that with our portfolio companies. And so I never feel like with you know, with Spotify last year, Aslak this year, I never feel like I can do it justice in ten minutes. So it is a big challenge. And, you know, trying to make it engaging, entertaining, as well as trying to get across the salient points is not easy. Process. Having said that, it's a really, really important skill, it's something we do. You know, we've got interns that come through today and we do a lot of work with Sydney University, with their finance students. And one of the things that I try to bring home is the skill of being able to niland investment pitch, whether it's 30 seconds, three minutes, 10 minutes is such an important skill. And just look at Buffet like one of the reasons he has been so successful is his ability to communicate and cut through to the best investors in the world and people that know nothing about investing. And that's one of the things I love about what you guys do. You make it so accessible to people. [00:11:32][67.9]

Bryce Leske: [00:11:33] Well, it was one of the more entertaining pitches, so certainly got a lot out of it. So let's turn our attention to the pitch. You pitch the American software firm Slark. So for those who are unfamiliar with it, haven't used or heard of it before. Are you able to tell us a little bit about the company and perhaps key points about your investment thesis? [00:11:50][17.0]

Hamish Corlett: [00:11:50] Yeah, sure thing. So in terms of what it does, if you haven't used it before, it's a business software tool that's a channel based messaging platform. So what does that mean? It allows people within organizations to communicate together, to collaborate, to get projects done, to allow teams to work more efficiently, which was really important before covid and kind of mass adoption of remote working happened, but has only become more important. And probably the most important thing about the insight that we had was that that email sucks and email has been the way of communicating within business for, you know, a couple of decades. And it's inefficient, it's not secure, and it doesn't foster real collaboration between teams and within organizations. And a number of software organizations have been trying to solve that problem with better technology. And Slack was the one that nailed the product market fit that really nailed what that solution should look like, what the functionality feature should be, and that resulted in it growing from zero to a billion dollars of revenue. And, you know, five or six years is quite incredible. So, I mean, in short, it basically replaces email within an organization. [00:13:12][82.0]

Bryce Leske: [00:13:13] I have to ask, does I'm assuming TDM use it internally? [00:13:16][2.9]

Hamish Corlett: [00:13:17] There were ways and again, one of the great learnings from Peter Lynch was that the best way to come up with good investment ideas is with your own personal experience. So we were slack users for three years and we used it for free and we were heavy users for three years with the whole team using it for free. Didn't pay them a cent until more recently where the usage just went way up. And we eventually had to pay them a very small amount of money. But still we adopted it within TDM and the efficiencies that it brings is quite significant. [00:13:47][29.4]

Bryce Leske: [00:13:47] Did you test it against you mentioned the nailed market. Did you test it against its competitors internally or was that sort of a broader research process? [00:13:55][8.3]

Hamish Corlett: [00:13:56] Both. So at the time, I'd say I mean, we're a Microsoft organization, so now our leaning is towards standardization on Microsoft. I mean, generally that's what we've done. And over the years, Microsoft teams in recent years has improved. But Slack was so vastly superior for that use case and anything else we could find. [00:14:20][24.3]

Alec Renehan: [00:14:21] I want to ask you about that, because when I saw that you pitched Slok, it was really interesting to me. CELAC was one of those companies when an iPod was really interesting. Microsoft teams then sort of, you know, I think it was it was created, you know, it was created well after Slark. Its growth trajectory was incredible and, you know, just got so many users because people already have Microsoft Office and all that stuff. And it's like kind of fell off my radar after that. How do you think about a platform like Slike, trying to disrupt an incumbent that is, you know, quite sticky because of all the other products? [00:14:54][33.0]

Hamish Corlett: [00:14:55] As I said in the pitch, we love those set ups. We love the David and Goliath situations. It was the same Spotify going up against Amazon and Google and whatnot. The reason we love those situations is because the little guy often gets underestimated and that's what was happening. And I think that's the primary reason why Slack was so cheap, because Microsoft is a beast and they have executed exceptionally well in recent years and they've executed exceptionally well with teams as well. And that is a good product. We actually use it at TDM and we're a good example. I think with a proprietary we've done a bunch of proprietary research where we surveyed the world's top CEOs that some of the biggest companies in the world. But we've also surveyed thousands of both Microsoft teams and Slack users. And what we found was that for those organizations and for those teams that want to use the best of breed product, they use slack. And like him, we are a big Microsoft. Customer, but we also use slack because we want the best of breed for that use case, we also use Zoom because we want best of breed for that use case. Every time I open up my computer, Microsoft teams loads up and we use aspects of it, but we still want best of breed in those other areas. [00:16:11][76.4]

Bryce Leske: [00:16:12] A lot of people we speak to mention the incredible amount of due diligence that you guys do at TDM when it goes into research for these stocks. Did you literally survey thousands of people. [00:16:22][10.1]

Hamish Corlett: [00:16:29] I mean, it's incredible that we live in a day and age where we can do that. I mean, we use survey monkey quite extensively for that kind of thing. And it costs a bit of money. But it's amazing that we actually have the software tools and the ability to do something like that. So it's pretty cool. [00:16:45][15.9]

Alec Renehan: [00:16:45] Yeah, it just makes me think to imagine all this research you do on the companies that then don't make the portfolio. [00:16:50][5.4]

Hamish Corlett: [00:16:53] That's part and parcel. Whether we are the old, you know, between six or seven and 15 companies, it requires a hell of a lot of patience, a lot of kissing frogs and naughty whatever percent of the time the stocks that make the portfolio. [00:17:07][14.3]

Alec Renehan: [00:17:08] Yeah, there's been a bit of news recently about like Salesforce, the massive US software company has put a takeover offer on the table. The stock is up, I think, about 65 percent since you pitched it on the 13th of November. How are you thinking about that piece of news? And, you know, going forward? [00:17:29][21.0]

Hamish Corlett: [00:17:29] I'm sad. [00:17:30][0.2]

Alec Renehan: [00:17:30] Yeah, which is surprising because most investors would be pretty happy if their stock was up that [00:17:35][5.1]

Hamish Corlett: [00:17:36] we're pretty annoyed. It's not the worst thing in the world, clearly. And I think the transaction makes a hell of a lot of sense. I actually didn't think we thought Salesforce was such an obvious acquirer of the company, but we didn't think that Salesforce would necessarily be willing to pay the price that I take my hat off to Benioff, the guy and the CEO of Salesforce. He's a visionary. He is a beast in the software world. And I think it makes a hell of a lot of sense. I think they got a very good price and I think it's going to be very successful in their ownership. [00:18:11][35.3]

Alec Renehan: [00:18:12] We should say that in your pitch, you specifically called out Salesforce as a potential acquirer. So our theory is that Benioff was actually watching your [00:18:20][8.4]

Hamish Corlett: [00:18:24] I think is one of my three followers on Twitter. [00:18:26][1.6]

Bryce Leske: [00:18:29] Hamish can you just elaborate on why you were annoyed? I think for a lot of people listening, if they were to be in a company and then it gets a takeover and a jump, 70 percent would be the best news ever. Can you perhaps elaborate on why it's not good news? [00:18:42][12.9]

Hamish Corlett: [00:18:42] Yes, that's a fair point. I probably should elaborate on that is I mean, it's nice to get those returns in the short term, but I mean, we're in the business of investing in businesses that we think can compound for five, 10, 15 years. And businesses like Slark just don't come across a desk very often. And we genuinely believe that this was a business delivering transformational innovation to the way people work. And we're not looking back. And what happens in those situations, we believe, is for a company like Slack, which we believe is the clear leader and will own that space, its ability to continue to compound a very high rates for 10 or 15 years ahead. That's what we're playing for. So if I mean, I'm not a cricketer is a cricketing analogy, it's it was a not single like hit in the middle of the bat, but that's all it was for us. Put a hell of a lot of work into it. But, you know, we're in the business of hitting sixes. Yeah. [00:19:39][57.6]

Alec Renehan: [00:19:41] That's the business we need to get into. So I'm interested on that basis around. You know, you sort of had this you were projecting sort of 10 years out and you thought it was going to compound an incredible rates of return. And yet at the same time, you were saying in your due diligence, you barely gave them a cent when you were using the product. What did you see in the company and what do you think Salesforce saw in the company that sort of gives you that idea that in 10 years they can be so much bigger? [00:20:08][27.4]

Hamish Corlett: [00:20:08] So probably two slightly different things. But there is obviously overlap, like what we saw was a vastly under monetized asset that we believe was going to own that collaboration space not only within organizations, but between organizations over time. So the example of us not paying for three years, over 80 per cent of Slack's customers use the product for free. And it is the nervous system of the organization. I mean, its users are using it for actively for hours. Every day it is becomes absolutely integral. And once you're on slack and you've committed to it, you just don't move off. But over 80 per cent of customers do not pay. They've got an awesome track record of converting free users to paid over time. So they get you. On the product, and then over time, they will sell you to premium tiers for some customers. So there's a huge monetization opportunity that we saw over time. And we also believe that their ability to deliver more products, more value to customers over time just wasn't being priced into the stock at all. [00:21:17][68.8]

Bryce Leske: [00:21:18] Ren, you are all about getting fit. You've bought the and you bought the golf membership, you bought the gym membership and you're on the mind MasterChef. And even in lock down last year, you bought those resistance bands of Instagram that from memory didn't even come. [00:21:32][14.0]

Alec Renehan: [00:21:33] No, look, they didn't come. But all of that effort really was canceled out by the numerous menu log orders that were a real staple of my lockdown experience. [00:21:43][9.5]

Bryce Leske: [00:21:44] Well, we've just headed into a new financial year, so I think it's time you get money fit with Virgin Money, our latest sponsor. [00:21:51][7.0]

Alec Renehan: [00:21:52] That's right, Bryce with a high interest savings account bundled with a seriously rewarding everyday transaction account. You can manage your money easily on the go smash your savings goals and be rewarded for it. [00:22:04][11.9]

Bryce Leske: [00:22:04] And with the Virgin Money Go transaction account, you can earn rewards on your everyday spending with zero monthly fees. Sounds like just what you need. Ren. [00:22:13][9.3]

Alec Renehan: [00:22:14] Yeah, the FBI twenty one get Ren fit. Didn't quite work, but if twenty to get Ren money fit might be to go [00:22:22][8.4]

Bryce Leske: [00:22:23] back to your own Bayt Virgin money terms and conditions and monthly criteria apply. Now let's get back to the show. I'm interested, you mentioned you're in the business of sort of compounding over 10, 15 years, but in the same breath you mentioned in your pitch that this is a company that is likely to be acquired. There are five sort of potential acquisition businesses out there. Where were you expecting it to be sort of a target in its in its lifespan or the lifespan in which you would [00:22:51][28.1]

Hamish Corlett: [00:22:51] invest in our minds? That really hinged on what the founders wanted to do. So Barefield and Callinan's. And that's what you never really know. So this has happened to us a bunch of times. And sometimes the businesses say standalone, if they keep executing well and the founders want to continue to keep going, then they stay standalone. What you can't account for is if the founders are to see a better future for the company with the acquirer, or if I mean being a public company CEO, especially in the US, is hard. It's no life for anyone. And we've been through that a bunch of times where CEO, you know, the CEOs, when we speak to them after an announcement like this, are always taken aback by our response, which is why you do it. We're sad. This is really disappointing. And they're expecting us to be really happy because I just got out and, you know, often they just say, look, it's Raph. I want to spend time with my family or whatever it may be. So and which is completely understandable. Yeah. [00:23:50][58.8]

Alec Renehan: [00:23:51] Speaking of this massive jump in share price, well, Hamish may be lamenting the lost opportunity, you know, the long term opportunity. Rori, I imagine you're pretty happy because the structure of the H1N1 portfolio is the conference. Stocks are only held for 12 months. So having one of the conference stocks be acquired in that time at a big premium to its share price probably makes you smile. [00:24:15][23.8]

Rory Lucas: [00:24:15] Absolutely. 70 percent return, 65 percent return in three weeks. Yeah, that's fantastic. But like I said here, the disappointment in his voice, like our conference stocks, to use the cricket analogy again. Yeah, we're off the mark. Yeah. Yeah. With with a one or a two, you know, 12 months to go on the conference stocks. And we've also got the core stocks. The more winners that we have, the better for shareholders because there's always going to be something that goes wrong. And even though they're all high conviction ideas, something that comes out of left field. Yeah, but now ecstatic with it, [00:24:47][31.8]

Alec Renehan: [00:24:47] I'm interested to know the portfolio management. So once Hamish pitches the stock, you add it to the portfolio and a new and Himesh talk together around that select position over the course of the year when Salesforce announced the acquisition. The share price obviously pops. Do you guys go? Well, this acquisition might not go through. Let's sell now. Or do you want to hold it for the twelve months? What was that conversation like between the two of you? [00:25:10][22.6]

Rory Lucas: [00:25:11] Yeah, it's exactly that. I reached out to Hamish or any of the other managers when there's news on a stock. And does this change your thesis? Do you want to hold it? We hope we go through the options. At the end of the day, it's up to our fund managers to decide which option to take. I let them know the options. And in this case, it's a case of I nervous that the deal won't go through. Or do you think this is just going to play out and therefore there's likely to be no returns for the next eleven and a half months. And so we go from there and sort of up to Hamish and we're still working that out. What we're going to do with this one? [00:25:41][30.2]

Alec Renehan: [00:25:41] Yeah. Yeah. I mean, I'm not sure if the deal is fully done, but it feels like it's a done deal, doesn't it? Yeah. [00:25:47][5.2]

Hamish Corlett: [00:25:47] I mean, we've been wading through all the documentation. It feels like a done deal. And I mean, there's a nine hundred dollars million break fee. And Stuart, the founder, sounds like he wants it to go ahead. Yeah. Yeah, I suspect it's a done deal. [00:26:01][13.6]

Alec Renehan: [00:26:01] Yeah. It's annoying that, like, Microsoft didn't come in and start a bidding war or something like that. [00:26:05][3.8]

Hamish Corlett: [00:26:06] We always thought I mean, I think Microsoft would love to own it, but I think there'd be antitrust issues all [00:26:11][5.6]

Alec Renehan: [00:26:11] over the place. Yeah, yeah, yeah. So any Equity Mates out there that are interested in saying Hamish pitch, you can head to the Stadium Growth Partners website where both his Spotify pitch and his pitch are posted there would highly recommend them. Yeah. Yeah. I do want to turn to the core part of the HMO portfolio because TDM is a core portfolio manager as well. Maybe Rori, just as a reminder, for people who haven't heard our earlier episodes, do you want to just remind people how the conference docs in the core portfolio work together for HMO? [00:26:44][33.1]

Rory Lucas: [00:26:45] So we've got two sets of managers. Fortunately, Hamish's in both sets, but we've got six core portfolio managers which manage sixty five per cent of the portfolio between them, and then the thirty five per cent remaining is allocated to the conference docs, which rolls each twelve months. So as core managers are Caledonia Cooper, investors Magellan, Regal, Paradice and Tedham Growth Partners, they each give us their three highest conviction stock ideas, which we manage. And then, as we've seen the conference stocks, it's one idea from each of those managers. [00:27:19][33.8]

Alec Renehan: [00:27:19] Yeah, yeah. It's a pretty it's a superstar lineup, of course. Managers. Sure, it's pretty impressive. And the other important thing to note is with the core portfolio, it's not a twelve month time. [00:27:29][10.0]

Rory Lucas: [00:27:31] Exactly, exactly. They can hold them for as long as they like, we generally say we expect it to be three to five years. But listening to Hamish talk, if it's a 10 year plan, we're happy with a 10 year plan, [00:27:40][9.8]

Alec Renehan: [00:27:41] listening to how much talk it might be, a 25 year old. [00:27:43][2.2]

Hamish Corlett: [00:27:46] one of our highest conviction investments were for over 15 years. Well, it's getting up there. It's gone from it's a company called Mineral Resources. I think when it IPO, it was 90 cents and instead of ten dollars million or less. And now it's a one billion dollar obediah business and six billion dollar market caps. [00:28:10][23.8]

Bryce Leske: [00:28:10] I still got runway [00:28:11][1.2]

Hamish Corlett: [00:28:12] and it pays a dividend and it's still got we think that billion dollars of the or got a two or more. [00:28:18][6.1]

Alec Renehan: [00:28:18] Wow. Coming as well. So I guess the natural question is, is that one of your higher conviction stocks in the portfolio? [00:28:24][5.9]

Hamish Corlett: [00:28:25] It is. As I said, we've owned it the entire time where incredibly high conviction and it is it's in the mining services sector like you couldn't find a tougher sector to operate in. But in terms of innovation, it is one of the greatest innovation stories in our country that I've ever known. [00:28:45][19.8]

Alec Renehan: [00:28:45] So I just want to make a note that you listen to how much talk about mineral resources there and then you watch his pitch at the conference last year and mineral resources didn't even get the first billion. He mentioned it, but only as a stock that he didn't. So maybe the question is what stock took top billing from mineral resources last year were [00:29:06][20.4]

Hamish Corlett: [00:29:06] really torn between Spotify and mineral resources at the time. And fortunately, we got the best of both worlds in that Emma chose to pitch mineral resources, so did an absolute cracking job. The pitch was not only awesome in terms of the actual investment pitch, but I was in hysterics the entire time. So she ended up doing what would have been a much better job than we would have done. And we got to do Spotify, which is a lot of fun. [00:29:32][25.6]

Bryce Leske: [00:29:32] And is Spotify still a high conviction for you? I mean, we're in the podcast game. We can sort of see where it's going, but where does it sort of sit on your right on in there? [00:29:41][8.9]

Hamish Corlett: [00:29:42] The inevitable later of audio globally. And audio is a massively growing market, as we're saying, not only with music, but with podcasts, audio books, you name it. We're at the early stages. You know, it's a 60 billion dollar market cap business now. And when it gets to that point and the flywheel starts spinning as fast as it is for that business, we think it's game over. So it's got a hell of a lot of momentum they're executing. Awesome. Yeah. And we're still on and we're excited about it. [00:30:12][31.0]

Bryce Leske: [00:30:13] I mean, even the thing that they do at the end of what they're doing it right now, they're sort of your yearly rap where it tells you how many podcasts you listen to, how many new genres, and then people sort of share that. And it's just a great marketing tool that they've developed to spread the word of Spotify. [00:30:28][15.2]

Hamish Corlett: [00:30:28] And the veracity of that feature in and of itself is genius. And it just really shows how far ahead they are. If you compare to Apple Music, the major the other major competitor songs. [00:30:40][11.8]

Bryce Leske: [00:30:46] If I want to come on and defend [00:30:47][0.9]

Alec Renehan: [00:30:48] It's got room for improvement. [00:30:48][0.0]

Hamish Corlett: [00:30:51] So, yeah, it's pretty cool the kind of stuff they're coming out with and it's just it keeps coming. [00:30:55][3.9]

Alec Renehan: [00:30:56] So I'm sensing a bit of a theme with those two pictures and Spotify, the David versus Goliath, you know, the slack V, the Microsoft, the Spotify, V, the Apple. You like picking the small guy, fighting a big guy. [00:31:08][12.0]

Hamish Corlett: [00:31:09] Probably that dates back to our childhood. And I think we've always been kind of the small guy mindset. And when, like when we started our team, we invested exactly the same way as we invested now. But we started with just this tiny amount of money. And we used to get the question like, how could you actually compan when you're competing in inverted commas against you and beat us hedge funds and Perpetual's and all these types of things. So I think we always had a natural leaning towards backing the small guy. But it really comes down to this idea that at the end of the day, in pretty much every business and every industry, customer experience wins. As simple as that sounds, we live in a world where that is more true than ever. And to deliver the best customer experience, we believe in most cases you have to be solely focused on that customer experience. So, yes, large conglomerate type businesses like Microsoft and Amazon can still exist and they can still be successful. But a major category like audio, Spotify being an example, we believe it takes complete focus on audio as your only mission to deliver the best customer experience and to give it a plug. One of the wonderful things they've done this year is adding video. In app to the podcast, just as an example of a feature which is awesome and would love to see you guys adopt, [00:32:34][85.0]

Bryce Leske: [00:32:36] probably driven by the Joe Rogan deal, to be honest. Yeah, it was. Yeah, yeah. I mean, huge amount of money. But yeah, I think if you look at how YouTube do recommendations and that user experience and you compare it to where audio is now, it's nothing like YouTube. But you can see Spotify is certainly going down that route for sure, which is good to see for us anyway. [00:32:56][19.9]

Alec Renehan: [00:32:57] Podcasters Stadium wants to get some exposure to the podcasting space. Happy for you to start your due diligence. [00:33:02][5.1]

Alec Renehan: [00:33:05] Maybe we should say TDM actually does have some exposure to the podcast space. And if you want to listen to Ed Cowans podcast scaling up available on Spotify. I believe [00:33:16][10.6]

Bryce Leske: [00:33:16] so. Hamish Minerals, Mineral Resources, and Spotify, a couple of the core positions. Are there any others? [00:33:22][5.3]

Hamish Corlett: [00:33:22] Another one, the way where high conviction on is tyro payments, where I'm a director on the board of a company. It's a wonderful business. We feel like the best years just ahead of that. We're passionate about the SBA, the small business owner in Australia, and backing small business owners. And that's what TIROS all about. It's built this wonderful software led payments platform and that is our way of building into really offering more value added services for small business in Australia and giving them a better experience than the big four banks, quite frankly, have given them for the decades that have gone past. [00:34:00][37.8]

Alec Renehan: [00:34:00] You know, one quick question, a little bit off topic, but I think something that TDM is particularly interested in is that teams for companies and one really important team is the board. Obviously, your role as a board member of TIRO. How do you see yourself as a board member? Like what do you think best practice for board members are? And probably most importantly, as retail investors like Bryce and I like most of the Equity Mates community, what should we look for in a board member? Like what's a red flag? What's a positive sign? [00:34:28][28.0]

Hamish Corlett: [00:34:29] We're really passionate about this. And the way he led the questions, exactly how we say we said at the time the board is a team and each board member has a different role, hopefully, brings different skill sets, different personal characteristics, and how that team comes together in our experience, that really defines the quality of the board. So you actually can't really look at each individual and make an assessment. It's all about how that team operates together. So one of the things that we like to see isn't necessarily definitive of good or bad, but consistency of a board working together as a team. You think about the great teams in sport over the years. There's a real consistency of them playing together. And so that's like one of the things that we would look for in a board. And one of the other things that we're very, very passionate about is ownership. And that's probably the easiest thing to diagnose from a retail investors perspective. How many shares does each director own that is critical to really assessing the alignment between you and that director? [00:35:31][61.9]

Alec Renehan: [00:35:32] Turning back to the conference, let's assume that slike gets acquired. What do you do there or does that position sit in cash or for people holding AGM? One did put a second conference on just featuring Hamish [00:35:44][12.1]

Alec Renehan: [00:35:48] You know what, if you wanted to, would be happy to host it. [00:35:50][2.1]

Rory Lucas: [00:35:51] We would like to do that, especially with Hamish for the first nine months of the twelve months. What we generally do when the fund manager decides to exit the position is that we reallocate those proceeds across the other conference stocks. And in that I actually speak with each of the managers and find out whether they are buyers of those stocks at that time because there's been some share price move, sometimes the share price has fallen, sometimes the share price has run hard. And it's interesting to see the managers that whether or not they're ongoing buyers at the market price, sometimes they're not, even though the price has fallen. And to me, that's an indication of what their conviction is. You know, we see plenty of people. The stock's up 50 per cent. I would like to. Do you think we should buy some more now? Yeah, absolutely. And you hear it in their voice. And this is a conviction fund and to see the conviction in the managers at that time. So this one is set a record for what's likely going to be the quickest liquidation. We're still looking at alternatives. As we've said, Hamish is a TDMA, a core manager as well. So we're looking at alternatives. The likely outcome is at the moment is that the slack proceeds will be redistributed across the other conference stocks. [00:37:03][71.3]

Bryce Leske: [00:37:03] Yeah, yeah. A record for the quickest, most disappointing liquidation. [00:37:06][3.6]

Alec Renehan: [00:37:09] So I just think we should put this in context. What Spotify was up about 80 percent last year when I was in the portfolio, is that right? Yeah. Yeah, about that. And you're on track for about 70 per cent in the space of a month. So what should we expect, you know, a week next? Oh, seven percent in a week. [00:37:25][16.1]

Rory Lucas: [00:37:25] I think Spotify is up another thirty or something percent. In the last month or so. [00:37:30][5.5]

Alec Renehan: [00:37:31] so you transfer it from the conference stocks to the core stocks, so HMO and unit holders capture that as well. [00:37:36][5.1]

Rory Lucas: [00:37:37] Yeah, that was a great example of a discussion that Hamish and I had about the conviction of the stocks. And if Spotify being a core and a conference manager, if if the conviction is still high and there's so much more to play out, which as you can say, Hamish believes we were able to move that stock into our core portfolio and remove one of the other core stocks. [00:37:57][20.0]

Alec Renehan: [00:37:58] I'm predicting that in 2021, whatever stock you pitch at the conference will have the highest quality bump where everyone will say, well, he's nailed it. Last two, let's buy. [00:38:07][9.1]

Rory Lucas: [00:38:09] That's where it all comes down, has blown up. [00:38:12][3.2]

Alec Renehan: [00:38:13] It's an incredible track record. And it's incredible what both of you guys do through this item one fund and you know where we're just happy we get to speak to both of you and, you know, learn more about it. And I think our listeners are really enjoying or they definitely enjoyed the conference and enjoying hearing from the managers. [00:38:28][14.9]

Bryce Leske: [00:38:29] So, Hamish, you did say you were a shy introvert, but are you on Twitter or anything where our audience can follow you, or is it just through the TV and website? [00:38:37][8.0]

Hamish Corlett: [00:38:38] As I said, I am on Twitter. My Twitter following is probably confined to my family and I am on Twitter and LinkedIn, and they're probably the two social outlets to check out what I'm kind of putting out, a lot of which is TDM scaling up podcast promos. [00:38:56][17.9]

Bryce Leske: [00:38:57] No, you do also write for the insights on the TDM website. So I would recommend the Equity Mates community checking that out as well as some fantastic stuff there about the network effect and all sorts of things. So head over there and you can find more of what Hamish and the stadium guys are thinking about. [00:39:11][14.2]

Alec Renehan: [00:39:11] Yeah, and watch those two stock pictures. Yes. Yeah. And just a reminder, if you want to read Rory's newsletter about the HM1 fund, go to the Hearts and Minds investments. Today, you, Himesh, we like to finish with the final three questions. Rori, we've already asked you when we interviewed you. So if people want to hear Rory's answers, they can go and check out his interview. But Hamish will ask you these three questions. The first one is, do you have any books that you consider must read [00:39:36][24.7]

Hamish Corlett: [00:39:37] investing books or general life books? [00:39:38][1.5]

Alec Renehan: [00:39:39] We say investing or otherwise, [00:39:40][1.2]

Hamish Corlett: [00:39:41] I'll stick to investing. Otherwise, I probably keep going. [00:39:43][2.4]

Alec Renehan: [00:39:44] Actually, give us the list of all [00:39:44][0.0]

Hamish Corlett: [00:39:47] I've got to start with the three most fundamental books that shaped me as an investor was one up on Wall Street, Peter Lynch, the Warren Buffett Way and Built to Last, which was the first of the Jim Collins books that led to good to great, and that it was really Jim Collins that shapes so much of how we think about business investing. [00:40:08][20.7]

Alec Renehan: [00:40:09] Second question. What is your go to source for investing information? And I might put a little bit of a TDM twist on this, given that you guys are probably best in class in terms of due diligence for companies, words you'll go to source for information about companies, [00:40:23][14.3]

Hamish Corlett: [00:40:24] maybe a little bit of boring answer, but actually hasn't changed since I was a teenager. Prospectuses and annual reports. Yeah, okay. That's my go to I actually never read broker reports. Basically, I rarely read the newspaper. I like really understanding the company from the company's eyes. [00:40:41][16.9]

Alec Renehan: [00:40:41] Yeah, that's great. And it's great news that that's something that's accessible for retail investors as well. If you told us it was private, Zoom calls with the CEO [00:40:49][7.7]

Hamish Corlett: [00:40:52] I should say one of the wonderful things that have happened in the last five years is getting access to CEOs and CFOs and whoever from the business via podcasts. We still have those one-on-one conversations, but you don't feel like you need to because you can, you know, almost build these intimate relationships with CEOs just by listening to their podcast and hearing how they think. [00:41:14][21.4]

Alec Renehan: [00:41:14] Yeah, one other information source that I think is underutilized, but I'm interested to know your thoughts on it. What do you think about earnings calls where analysts are asking questions to the company's management? [00:41:24][10.0]

Hamish Corlett: [00:41:25] I love earnings calls. Yeah, I listen to as many as I can. It's only confined to the hours and the day. I just find I learned so much, whether it's businesses that we're invested in or not invested in, in industries that we're interested in or not interested in. I just like consuming all of that kind of experience that different leadership teams are having, you know. Yeah. And so one of the things that we've done to make that more accessible to people, instead of having to go to an individual company website and listen to it on one times, you can go to a podcast that we've put together called Earnings Season, where we basically compile as many earnings calls as you can in the one place you can listen to it more efficiently. You can press pause and come back to it. And that's just something we just put out their friend. [00:42:13][47.9]

Alec Renehan: [00:42:14] So we said, you know, we could help them get exposed to the podcast, but it's turns out they already are. [00:42:18][4.2]

Alec Renehan: [00:42:20] scaling up and earning seasons. Two good tdm podcast. So the final question, how much that we like to end these interviews with. If you think back to your younger self, you know, when you. Just getting interested in investing as a teenager, rating one up on Wall Street, what advice would you have your younger self [00:42:35][15.3]

Hamish Corlett: [00:42:36] specific to investing? This is the advice I give to younger people that are interested in investing. So I guess I'd give it to myself, which is to find out who you are as an investor. There's no one way and there are so many different forms of investing. So try to understand what your strengths are, what your interests go towards your passions. Some people that could be early stage could be late stage, could be different industries. It could be a whole range of things. So we're really passionate about how we do things that TDM and it works for us and it works for what the kind of things we're good at. But it's not the only way to compound capital. So that's probably the advice. The only other thing I'd say is just to get in the arena. There's no substitute for putting no matter how much money you have, putting some capital at risk. Invest your own money at an earlier stage as you can, because that's where you find out about investing. cope with a stock going down 50 percent. That kind of stuff takes your conviction. And that's kind of where the true richness of investing learning is much. [00:43:41][64.9]

Bryce Leske: [00:43:41] We just submitted the first draft for our book and I think that advice needs to go on the front page. [00:43:45][4.2]

Bryce Leske: [00:43:50] firstly. Rory, thank you again for your time. I think the fifth episode you're in now and you know, it's been an awesome journey, capturing, I guess, the beginnings and understanding of H1N1 all the way through to the 2020 stock pictures. So it's been awesome. Thank you. [00:44:03][13.3]

Rory Lucas: [00:44:03] Loving being here. Hopefully you'll ask me back. [00:44:05][1.7]

Bryce Leske: [00:44:05] Certainly will if you ask us to the conference again next year. And Hamish, great to have you in the studio. I think hearing everything that you're doing at TDM and, you know, a bit of insight into your pitch was phenomenal. And our audience certainly would have got a lot of value from it. But also, thank you for your time to do the conference as well. I know a lot of our audience did manage to watch that and would have got a lot out of it. So a big thing. [00:44:29][23.7]

Hamish Corlett: [00:44:29] So I'm really glad that's the case. And love being on the show with you. And thanks so much for having me. [00:44:34][4.4]

Alec Renehan: [00:44:34] Thank you. Thank you. [00:44:34][0.0]


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