Understanding the 4 pillar framework underpinning a high conviction strategy | TDM Growth Partners
Oct 2, 2023
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Ed Cowan, a former Australian cricketer turned funds manager, and Fraser Christie, a tech investing expert at TDM Growth Partners, dive into high conviction strategies. They share insights on two standout stocks, Guzman y Gomez and Rokt, detailing their growth journeys. Ed discusses the importance of building exceptional teams, while Fraser explains how to nurture startups in tech. The conversation also touches on the lucrative intersection of sports and investment, highlighting emerging trends in both fields.
TDM Growth Partners employs a four-pillar framework focusing on people, growth opportunities, competitive advantages, and pricing to assess investments.
The success of Hearts and Minds Investments emphasizes collaboration, allowing diverse perspectives to enhance decision-making and investment outcomes.
Key portfolio companies like Guzman y Gomez and Rokt exemplify significant growth potential, demonstrating the firm's commitment to long-term profitability and scalability.
Deep dives
Unique Investment Approach
Hearts and Minds Investments is characterized by its dual objectives of maximizing shareholder returns while supporting Australian medical research. The investment strategy focuses on creating a concentrated portfolio with a limited number of companies, typically between 10 to 15, which allows for deep insights and thorough analysis of each investment. This distinctive approach is coupled with a commitment to philanthropy, with significant portions of profits directed towards medical research initiatives. The unified structure and philosophy within the investment team emphasize the importance of collaboration and diverse thought, improving decision-making and outcomes.
The Role of Team Culture
Investing is framed as a team sport, crucial for the success of Hearts and Minds Investments. The emphasis on team culture ensures that all team members actively participate in discussions about potential investments, fostering an environment where diverse perspectives are valued. The investment team, which does not adhere to traditional titles, collectively contributes to analyzing and supporting selected portfolio companies. This collaborative culture is believed to enhance performance, as everyone in the team has a vested interest in the outcomes, creating a sense of accountability.
Operational Excellence in Investment Selection
TDM Growth Partners utilizes a four-pillar framework when assessing potential investments, which includes evaluating people and culture, growth opportunities, structural competitive advantages, and pricing. The emphasis on people and culture recognizes that these factors play a critical role in a company's long-term success, often dictating how effectively a business scales. Growth potential is assessed through market size, customer adoption, and product innovation, ensuring investments align with TDM's goal of compounding capital at high rates. Structural competitive advantages are identified via frameworks that help ensure a company maintains a strong market position, while valuation remains a focal point to maximize investor returns.
Success Stories: Rocked and Guzman y Gomez
TDM’s portfolio includes successful companies like Rocked and Guzman y Gomez, each demonstrating strong growth potential. Rocked operates as an e-commerce personalization engine, enhancing online shopping experiences by integrating complimentary product offers into checkout flows. With major clients like Uber and Ticketmaster, the company is positioned for continued expansion and profitability, benefiting from a founder-led team that is committed to driving growth. Meanwhile, Guzman y Gomez has rapidly expanded in the fast-casual dining market, capitalizing on the demand for healthy, customizable food options and unveiling plans for significant growth in Australia and potential international expansion.
Navigating Market Dynamics and Future Opportunities
TDM Growth Partners' unique approach provides resilience in a fluctuating market, balancing investments in both public and private sectors. The firm's long-term mindset supports its investment decisions, which are not swayed by short-term market pressures but rather focus on fundamental business growth and profitability. There is recognition that while public companies often report quarterly earnings, private companies can prioritize long-term strategy without the same immediate pressures. This strategy is expected to yield ongoing opportunities, particularly as the market stabilizes and new ventures are explored.
In this episode, CIO Charlie Lanchester engages with TDM Growth Partners, a HM1 Core Fund Manager. Meet Ed Cowan, a former Australian Cricketer with a knack for investing, and Fraser Christie, a tech investing aficionado. They share their unique investment philosophies and delve into two high conviction stocks recommended for the HM1 portfolio - Guzman y Gomez and Rokt. Ed discusses the art of building high-performing teams, while Fraser shares his expertise in supporting tech startups. Whether you're an investor or simply curious about finance, this episode offers a wealth of knowledge.
This is a Hearts & Minds Podcast, in partnership with Equity Mates Media
More insights from TDM Growth Partners can be viewed on their website
This communication has been prepared by Hearts and Minds Investments Limited (ABN 61 628 753 220). In preparing this publication the investment objectives, financial situation or particular needs of an individual have not been considered. You should not rely on the opinions, advice, recommendations and other information contained in this publication alone. The inclusion of third-party content does not in any way imply any form of endorsement by HM1 of the products or services provided by persons or organisations who are responsible for the third-party content. This publication has been prepared to provide you with general information only. It is not intended to take the place of professional advice and you should not take action on specific issues in reliance on this information. Past performance is not a reliable indicator of future performance.
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