In morning trade, the Nitro Software Ltd (ASX: NTO) share price is surging higher.

At the time of writing, the global document productivity software company’s shares are up over 6% to $3.14.

Why is the Nitro share price surging higher?

This morning Nitro released its first quarter update. As you might have guessed from the Nitro share price performance, it was strong performer during the quarter, reporting growth across all key metrics.

At the end of the quarter, the company’s annual recurring revenue (ARR) was 66% higher than the same time last year.

And while it hasn’t provided the actual ARR figure, this growth rate is well ahead of what is required to achieve its FY 2021 ARR guidance. That guidance is for ARR of between $39 million and $42 million, which represents year on year growth of 41% to 52%.

Another positive is the ongoing transition to a software-as-a-service model. At the end of the quarter, subscription revenue accounted for 61% of total revenue. This is up from 53% during FY 2020.

Also growing strongly were its cash receipts from customers, which grew 31% over the prior corresponding period to $12 million.

This strong growth was driven by increased usage and a number of key customer wins and expansions. The latter includes BNY Mellon, Howden Group Holdings, Mace Group, Petrofac, Continental AG, and Jeff Bezos’s Blue Origin.

And although it posted a net cash outflow from operations of $1.5 million, it remains in a very strong financial position to pursue growth opportunities. At the end of the period, Nitro’s cash balance stood at $41.8 million.

“The accelerating multi-year shift to a digital workplace”

Also giving the Nitro share price a boost was commentary from Nitro’s Co-Founder and Chief Executive Officer, Sam Chandler.

Mr Chandler spoke positively about the quarter, the remainder of FY 2021, and its long term opportunity.

He said: “The accelerating sales momentum we demonstrated at the end of FY20 has continued into the current year, with the strategic investments we made in our people, product suite and sales strategy across the past 12 months positioning us well to ride the global work-from-anywhere tailwinds.”

“As the world continues to manage the fall-out from the COVID-19 pandemic, digital-first and digital-only workflows are becoming increasingly entrenched. Throughout FY20, we laid the foundations to lead in this new environment by strengthening our leadership team, sharpening our go-to-market strategy to win and retain customers, and developing our document productivity platform, with the launch of Nitro Sign.”

“The results of this investment are demonstrated by our strong performance in the first quarter, which shows continued growth in ARR and subscription revenue. With a solid balance sheet and a scalable platform for growth, we are confident we can take advantage of the accelerating multi-year shift to a digital workplace to build a truly sizable and substantial enterprise software company.”

Outlook

Nitro has reaffirmed its guidance for FY 2021.

It continues to target ARR between $39 million and $42 million, revenue between $45 million and $49 million, and an operating EBITDA loss between $11 million and $13 million.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Nitro Software Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Woolworths Group Ltd (ASX: WOW) share price is under pressure this morning following the release of its third quarter update.

At the time of writing, the retail conglomerate’s shares are down 2% to $40.59.

How did Woolworths perform in the third quarter?

For the three months ended 31 March, Woolworths reported a 0.4% increase in group sales to $16,566 million. This was particularly impressive given that the prior corresponding period benefited greatly from COVID-19 related panic buying.

During the three months, Australian Food sales were down 0.7% on the prior corresponding period to $11,092 million. It was a similar story in New Zealand with sales falling 6.9% in local currency to NZ$1,792 million.

Offsetting this were strong performances by its BIG W, Endeavour Drinks, and Hotels businesses.

BIG W reported an 18.3% increase in sales to $1,024 million, Endeavour Drinks delivered a 6.3% increase in sales to $2,393 million, and the Hotels business reported an 11.5% jump in sales to $390 million.

Another big positive during the quarter was its ecommerce business. Group ecommerce sales increased 64.2% during the third quarter to $1.3 billion.

Management notes that in Australian Food, WooliesX eCommerce sales increased by 90.5% to $878 million with penetration of 7.9% compared to 4.1% in the prior year and 7.7% during the first half.

Management commentary

Woolworths’ CEO, Brad Banducci, was pleased with the quarter, noting that it was a tale of two halves.

He said: “There were two very distinct trading periods in Q3; the first seven weeks before we began to cycle COVID and the second six weeks as we cycled the peak growth of the prior year. Group sales growth was strong in the first seven weeks of the quarter. For the final six weeks, food and drinks sales declined on the prior year as expected, BIG W remained strong, and Hotels’ sales growth started to recover as it cycled closures at the end of Q3 in the prior year.”

“Despite the volatile trading over the quarter on a one-year basis, two-year average growth rates in Australian Food, Endeavour Drinks and BIG W remained above-trend,” he added.

Outlook

As expected, trading conditions are volatile and the company will soon cycle the elevated sales period from May and June 2020.

Mr Banducci explained: “Turning to current trading and outlook, sales growth for the first three weeks of April remained volatile and impacted by prior year growth rates and the timing of public holidays.”

“In Australian Food, total sales were broadly flat compared to last year. This reflects the cycling of mid-single digit sales growth in April last year in comparison to double-digit sales growth in May and June.”

It is a similar story for the Endeavour Drinks, New Zealand, and Big W businesses.

“Endeavour Drinks sales in April remained above last year but are expected to slow when we cycle growth of over 30% in May and June. While in New Zealand, sales growth was materially negative in April, cycling growth of over 20% in the prior year. BIG W sales growth has also slowed in the first three weeks of April, cycling growth in April last year of approximately 20%,” he added.

However, the Hotels business, which was negatively impacted by lockdowns, is expected to perform comparatively strongly.

“We continue to expect sales to decline over the March to June period for all businesses other than Hotels where Q4 F20 sales declined 86.3% on a normalised basis. “

Endeavour Drinks demerger

Woolworths advised that the Endeavour Group demerger remains on target for late June.

Subject to board and regulatory approval, demerger documentation is expected to be released in mid-May.

Dan Murphy’s Darwin Airport development update

In a separate announcement, Woolworths revealed that its plan to open up a Dan Murphy’s store at Darwin Airport has been terminated following a review. This news could be weighing partly on the Woolworths share price.

Mr Banducci said: “The insights and recommendations within the Gilbert Review will serve to strengthen Woolworths Group and Endeavour Group’s future stakeholder engagement. More importantly, it will create a platform for working better together in our engagement with Aboriginal and Torres Strait Islander peoples.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Woolworths Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Fortescue Metals Group Limited (ASX: FMG) share price is dropping today following its third quarter update.

At the time of writing, the iron ore producer’s shares are down 2% to $22.14. 

How did Fortescue perform in the third quarter?

Fortescue was a relatively solid performer during the third quarter, achieving flat year on year iron ore shipments of 42.3 million tonnes. This brings its year to date shipments to 132.9 million tonnes, which is 2% higher than the prior corresponding period.

Positively, the mining giant continues to benefit from rising iron ore prices. During the quarter, Fortescue averaged US$143 per dry metric tonne. This was up 17% on the second quarter and represents revenue realisation of 86% of the average Platts 62% CFR Index.

And although its C1 costs increased 16% quarter on quarter to US$14.90 per wet metric tonne (due to seasonally lower volumes and the strength of the Australian dollar), it is still averaging a lowly year-to-date C1 cost of US$13.45 per wet metric tonne.

This means Fortescue is generating significant free cash flow right now.

Management commentary

Fortescue’s Chief Executive Officer, Elizabeth Gaines, said “Fortescue’s excellent operating performance continues to drive strong results, with shipments of 42.3mt in the third quarter contributing to a record shipping performance for the first nine months of the financial year.

“The commissioning of the Eliwana mine has contributed to an increase in both ore mined and processed during the quarter, despite the impact of significant rainfall across our operations in the Pilbara.”

“Against the backdrop of the record performance in our iron ore business and our clean energy focus, Fortescue is well-placed to finish the financial year strongly, as we continue to meet demand from our customers and deliver value for all stakeholders,” Ms Gaines concluded.

Outlook

Pleasingly, Fortescue’s guidance for FY 2021 shipments and C1 costs remain unchanged.

It continues to expect shipments of 178 million tonnes to 182 million tonnes with C1 costs of US$13.50 to US$14.00 per wet metric tonne.

However, its capital expenditure guidance has been revised to a range of US$3.5 billion to US$3.7 billion. This is up from between US$3 billion and US$3.4 billion, reflecting the ongoing strength of the Australian dollar, continuation of critical path works at Iron Bridge, and investments by Fortescue Future Industries in decarbonisation initiatives.

It could be the latter change that is weighing on the Fortescue share price today.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The next couple of weeks will see the big four banks all hand in their latest report cards. Ahead of their releases, I am taking a look to see what the market is expecting from them.

On this occasion, I’m going to look at the Westpac Banking Corp (ASX: WBC) half year result.

What is expected from Westpac in the first half?

Westpac is scheduled to release its half year results on Monday 3 May.

According to a note out of Goldman Sachs, its analysts have pencilled in cash earnings (before one-offs) of $3,400 million. This will be up 242% on the prior corresponding period.

From this, it expects the Westpac board to declare a fully franked 56 cents per share interim dividend.

What else should you look out for?

Goldman has suggested that investors keep an eye on volumes, asset quality, and expenses.

In respect to volumes, the broker is forecasting first half total lending growth of 0.1%. It advised that it will also be paying close attention on commentary around how volumes are trending and whether the bank is on track to return to peer levels.

As for asset quality, Goldman notes that Westpac reported a bad and doubtful debt benefit of $501 million during the first quarter. This was significantly better than the broker was expecting. Positively, the broker appears to be expecting further improvements in its asset quality.

It commented: “We currently forecast 1H21E BDDs/TL of -4bp from 27bp in the previous half and will be interested in hearing management commentary around whether they expect these current trends to persist.”

Finally, Goldman points out that Westpac’s expenses reduced by 2% during the first quarter. And while it acknowledges that management is forecasting expenses to rise slightly over the full year, Goldman is expecting first half expenses to be lower half on half.

It explained: “We are forecasting 1H21E expense growth of -1.1% hoh and note that WBC is due to announce a Cost Reset plan at the 1H21 result.”

Is the Westpac share price good value?

Goldman Sachs currently has a buy rating and $26.67 price target on the bank’s shares.

Based on the latest Westpac share price of $25.30, this implies potential upside of 5.4% over the next 12 months.

Though, this potential return stretches to approximately 10% when you include dividends.

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Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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It’s been a topsy-turvy 12 months for shareholders of ASX tech company and neobank Tyro Payments Ltd (ASX: TYR). After a surprisingly swift recovery from the COVID-sparked market crash last March, Tyro shares bounced around a bit over the latter half of 2020 before plunging to a new 52-week low of $2.31 in mid-January.

Since then they have rallied again, storming back up to $3.60 as at Wednesday’s close. Despite their mid-January blip, this still puts Tyro shares up over 10% year to date.

Company background

Before investigating the drivers behind the share price volatility, it’s worth taking a look at what Tyro actually does.

Tyro supplies EFTPOS payment terminals to small businesses. In fact, outside of the big four banks, Tyro is the largest supplier of EFTPOS terminals in Australia. The company also provides merchant banking services and develops software to help its clients manage their business banking needs.

Tyro also provides business lending options, and its platform is fully integrated with accounting software developed by fellow fintech Xero Limited (ASX: XRO).

What has driven the Tyro share price volatility?

The January share price collapse was triggered by news the company’s EFTPOS terminals had suffered connectivity issues. This was followed by a short-seller report by Viceroy Research which alleged (among other things) the outage was caused by a faulty software patch that would cost Tyro $12 million to repair.

Tyro put its shares into a trading halt in order to respond to the various allegations made in the Viceroy report – most of which the company claimed were false or misleading. But it wasn’t enough to stop the bloodletting – Tyro shares shed close to 30% of their value in around a week.

More recent news

Tyro has been releasing weekly business updates in response to the ongoing COVID-19 pandemic. In the company’s most recent announcement, covering the week ended 23 April 2021, Tyro reported an 18% rise in total transaction value versus the prior comparative period. As of 23 April 2021, Tyro had processed over $20 billion worth of payments for the fiscal year to date, versus slightly under $17 billion for the same period in FY20.

Where to next for the Tyro share price?

So far, Tyro has done well to shrug off the January short-seller report and keep its share price climbing higher this year. Despite all the recent volatility, as well as the business headwinds created by the COVID-19 pandemic, Tyro shares have now increased around 30% over the last 12 months.

The company has the added benefit of being tied up closely with the post-pandemic economic recovery. As customer foot traffic returns to retailers, restaurants and other small businesses, transaction volumes could continue to grow. However, the obvious flip side to this is that another major coronavirus outbreak and any associated lockdowns could drive more volatility in the Tyro share price.

Despite the risks, Tyro sees itself as an exciting disruptor looking to take some market share away from the major banks. Along with a new generation of other breakthrough ASX tech companies like Xero, Megaport Ltd (ASX: MP1) and Bigtincan Holdings Ltd (ASX: BTH), it will be interesting to see how the Tyro share price performs over the next twelve months.

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Rhys Brock owns shares of BIGTINCAN FPO and MEGAPORT FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends BIGTINCAN FPO, MEGAPORT FPO, and Tyro Payments. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia has recommended BIGTINCAN FPO and MEGAPORT FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The GPT Group (ASX: GPT) share price is on watch this morning after the real estate investment trust (REIT) released its latest quarterly update today.

Why is the GPT share price on watch?

Investors will be watching the Aussie REIT’s shares after the latest update. GPT reported strong rent collection outcomes across its portfolio, highlighted by 105% of net billings collected. Retail collections totalled 110% as GPT continues to collect on outstanding debtors arising from the COVID-19 disruptions.

GPT reported the operating environment was “strengthening” as the post-pandemic economic recovery continues. Office portfolio occupancy fell to 91.9%, down from 94.9% in December, following practical completion of GPT’s 32 Smith, Paramatta development. 

GPT reported 37,300 square metres of office leasing year to date, including heads of agreement. In logistics, occupancy slipped by 300 basis points to 96.8% in the quarter after recent lease expiries in Melbourne.

The GPT share price is one to watch this morning as investors process the latest numbers. Retail total specialty sales climbed 12.4% with total centre sales up 8.0% compared to the March 2020 quarter. In specialty, general retail (+25.5%) and leisure (+20.3%) led the way while cinema sales and travel agencies remain depressed.

The company reaffirmed its FY2021 guidance numbers. The Aussie REIT is targeting funds from operations (FFO) per security growth of 8% with estimated distribution per security (DPS) growth of 12% on 2020.

GPT also unveiled a new funds management partnership during the quarter. GPT and QuadReal Property Group entered into an $800 million capital partnership to expand its logistics exposure and funds management platform.

More than 20 per cent of capital has now been committed by the joint venture. That includes acquisitions and development purchases in Melbourne and Brisbane with more on the way.

Foolish takeaway

The GPT share price is one to watch this morning after the Aussie REIT’s latest quarterly update. “Strengthening” conditions bode well for shareholders eyeing off GPT’s target FY2021 distributions.

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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

It’s already been clear in recent weeks that digital-advertising companies are benefiting from a surge in ad spend from marketers. Starting with better-than-expected results from Snap last week, Google parent Alphabet then confirmed this bullish narrative on Tuesday with results that crushed analyst estimates.

But Facebook‘s (NASDAQ: FB) results may be the icing on the cake. Its first-quarter results absolutely obliterated expectations. Here’s a closer look at the social-network company’s stellar start to 2021.

Surging revenue and soaring profits

Facebook’s total revenue climbed 48% year over year to $26.2 billion. Analysts, on average, were expecting the company to grow its revenue by 33.5% year over year to $23.7 billion.

The main driver of this growth, of course, was Facebook’s advertising business. Total advertising revenue grew 46% year over year to $25.4 billion. The company’s ad business was driven by a 30% year-over-year increase in average price per ad served on its platform and a 12% increase in ad impressions.

But investors shouldn’t count out the social network’s “other” revenue, which soared 146% year over year to $732 million. The small but notable segment includes sales from virtual-reality equipment, e-commerce integrations, and more.

Combining Facebook’s strong top-line performance with its scalable business model led to outsized gains in profitability during the quarter. Facebook’s net income skyrocketed 94% year over year, increasing from $4.9 billion in the year-ago quarter to $9.5 billion. Helping this earnings growth was Facebook’s expanding operating margin, which increased from 33% in the first quarter of 2020 to 43% in the first quarter of 2021.

Expect more of the same in Q2

Looking ahead to the current quarter, Facebook CFO David Wehner said investors should expect its year-over-year revenue growth rate for the period “to remain stable or modestly accelerate relative to the growth rate in the first quarter of 2021 as we lap slower growth related to the pandemic during the second quarter of 2020.”

Facebook is, indeed, up against some easy comparisons in Q2. The company’s revenue in the second quarter of 2020 only increased 11% year over year, as many marketers paused their ad campaigns or reduced ad spend. Nevertheless, Facebook’s guidance for 48% revenue growth or greater in Q2 is ahead of the consensus analyst estimate for 45.9% growth during the period. 

Management reaffirmed its previous outlook for revenue growth rates to decelerate in the third and fourth quarter of this year as Facebook laps tougher comparisons.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Daniel Sparks has no position in any of the stocks mentioned. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Facebook. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), and Facebook. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Newcrest Mining Ltd (ASX: NCM) share price is one to watch today after the Aussie gold miner’s latest quarterly report.

Why are Newcrest shares in focus?

Newcrest this morning provided its latest report for the period ended 31 March 2021 (Q3 2021). Notably, gold production was down 4% on the prior period to 512,424 ounces after planned shutdowns at its Cadia and Lihir sites. A 6% increase in production at the Telfer site helped offset some of these shutdowns.

The company reported an improved all-in sustaining cost (AISC) of $891 per ounce. That represented a $72 per ounce improvement on December 2020 quarter figures.

Newcrest managing director and CEO Sandeep Biswas was bullish on the quarter’s performance. Mr Biswas said, “Our world-class Cadia asset set a new record during the March quarter, reporting its lowest ever quarterly All-In Sustaining Cost of negative $160 per ounce”. Those Cadia numbers helped reduce the overall AISC margin by 7% to $854 per ounce.

The Newcrest Mining share price will be in focus as the Aussie miner remains on track to hit FY2021 guidance figures. Newcrest is targeting group production of 1,950,000 to 2,150,000 ounces of gold for the full year. For reference, Newcrest has now produced 1,550,990 ounces on a financial year-to-date basis.

Group copper production totalled 35,034 during the quarter, up marginally on December quarter numbers. The company is targeting full-year guidance of 135,000 to 155,000 tonnes of copper with 104,354 tonnes produced year to date.

The Newcrest Mining share price will be one ASX 200 share worth watching in early trade. Newcrest reported no “material disruption” to production or operations as a result of COVID-19. However, the company is still working to further strengthen controls as a precaution.

“We are very well positioned to fund our organic growth opportunities with a strong balance sheet and long-dated debt maturity profile”, Mr Biswas said.

More reading

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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Investors need to pull out of Australian shares and shift their focus onto overseas opportunities.

That’s the advice from Nucleus Wealth chief strategist David Llewellyn-Smith, who said the global recovery out of COVID-19 is completely different from the global financial crisis and the dot-com bust.

“Those two crashes were led by the US and the recoveries led by China. This time around, the crisis was led by China and the recovery will be led by the US.”

The distinction is very important to investment returns in the coming cycle, according to Llewellyn-Smith.

“Moreover, these cyclical forces will further be buffeted by epochal shifts in structural forces shaping the global economy which have, if anything, changed even more dramatically in the past few years,” he said on a Nucleus blog post.

“What this means is that now is the time for investors to abandon Australia for global assets.”

Australia could have another ‘lost decade’

Llewellyn-Smith reckons punters need to stop worrying about the Reserve Bank increasing interest rates.

“Forget rate hikes, the RBA is more likely to have to cut,” he said.

“The major reason is China. Its accelerated cyclical slowing is focused upon steel-intensive growth. Iron ore prices will fall a long way as demand fades while supply returns… Normalisation and new supply from every corner of the earth will arrive, owing to the extreme price signal today.”

Falling commodity prices will have a domino effect on the Australian economy and its share markets.

“As iron ore tumbles, house prices stall, and the immigration drivers of growth in the last cycle fail to rematerialise, the Australian dollar will fall a long way,” said Llewellyn-Smith.

“If the RBA cuts, we could head into a circumstance akin to the late 1990s when Australian yields lagged the US by so far that the AUD fell below 50 cents.”

The strategist then fears that the country will have another “lost decade”.

“And it won’t end until the AUD falls much further and stays down for years to trigger a rebuild in long-forgotten tradable sectors.”

Flee Down Under for better growth

Aside from shares relating to renewable energy, the outlook is bleak for local companies.

“Once we get past the policy supports of the pandemic, most Australian assets have little growth underpinning to drive them forward,” said Llewellyn-Smith.

“Only bonds appear to have value because global markets have not yet differentiated our yields to match this gloomy outlook.”

But the growth forecast for some other developed nations is “very good in the short and medium-term”. 

“[Those nations will be] led by a revitalised progressive American liberalism with years ahead of exceptional growth,” Llewellyn-Smith said.

“The conclusion for investors is that offshore assets beckon with better returns and greater structural tailwinds. Further, the risks are also lower. Intermittent crises invariably result in a falling AUD, which cushions the downside from falling stock markets.”

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Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Ask A Fund Manager

In part 1 of our interview, Platinum Asset Management portfolio manager Dr Bianca Ogden took us through her journey from working in healthcare to finance. Now in part 2, she uses that insider knowledge to pick 2 underrated stocks plus 2 others that will continue to bathe in sunshine.

Overrated and underrated shares

The Motley Fool: What’s your most underrated healthcare share at the moment?

Dr Bianca Ogden: I’ve got several of them. So, there’s always some. 

There is a company in the US called Coherus Biosciences Inc. 

It’s a company that works in the biosimilar space. It has an approved product for a biosimilar that basically is taking share from one of the branded products that has come off patent. 

And it’s got sales, it’s got profits – it’s doing quite well. But people get a bit bored and just say, ‘Well, there’s price competition. And they will kind of lose out in the end’. But what this company has done is build a pipeline. 

It’s got a very interesting deal with a Chinese company called Junshi Bio. Essentially Coherus is the US arm now for Junshi. And I think over time, this company will have nice growth ahead of it.

But at the moment, the market doesn’t find that very interesting. It’s not a genomics company, it’s not a gene therapy company or proteomics company. It’s just a normal company that has built great commercial infrastructure. And it’s going to plug in different products now to utilise that commercial infrastructure.

I’ve got another one in China. There’s a company called CStone Pharmaceuticals. While other biotechs in China have done quite well, this one is kind of lagging – but it has a lot of interesting products to launch. Pfizer has a stake in it. So I kind of like it as it’s off people’s radar screen.

MF: What do you think is the most overrated stock at the moment?

BO: I tend not to have overrated stocks.

MF: Not even all the companies that are involved in COVID-19 vaccines – you wouldn’t say they’re overrated now?

BO: I own several of them. And to be honest, I think with mRNA, I think there is a different story to it as well. Yeah, I think there is a bit of excitement in that, but in the end, it’s long term… Although we have sold out of Moderna Inc (NASDAQ: MRNA), we still have BioNTech SE (NASDAQ: BNTX) and others in there.

So, no, I wouldn’t totally characterise that they’re [too] hot because in the end, we will all have to have at some stage in our life, mRNA vaccines.

MF: Is it fair to say that the COVID-19 vaccines really put mRNA technology into the mainstream consciousness?

BO: We’ve been owners of this technology for quite some time, for a couple of years. But yeah, I think in the mainstream it’s there [now].

I think we’re probably now trying to work out how big can this class be and where can it go? There’s a bit of work to go into it until we twiddle that all out. But yeah, I think it definitely is something that it has put itself on the map now as a modality, which is great.

MF: If the market closed tomorrow for 5 years, which stock would you want to hold?

BO: I would hold onto a company called Recursion Pharmaceuticals Inc. Recently listed. We have known this company for a little while.

That’s a company that really is trying to industrialise drug discovery. And for me, in the next 5 years that will be an interesting one to hold. They have their work cut out, but I think they’ve done quite an interesting job of putting automation into drug discovery.

MF: Did you manage to buy some during the initial public offering?

BO: Yes, we did. So, we kind of know the team there. [The IPO price] was $18.

I think if this company sets out what they want to do, the sky’s the limit. It is really to try to industrialise drug discovery, which we’re seeing gradually.

Looking back

MF: Which stock are you most proud of from a past purchase?

BO: Look, I think most proud of, I think is probably mRNA. Did I ever suspect it would happen that way? No. But it’s a classic example of how Platinum or how I do my work is I go where others don’t really want to go. 

I remember me telling someone how I was excited about mRNA [during] Moderna’s IPO and about BioNTech’s in 2018, 2019. They looked at me and thought I was absolutely nuts. 

But look, we always try and get to know the management. What do they do? And how has it evolved over time? What mistakes have they made? What have they learned? And we did exactly that. And these guys have absolutely come through with the goods.

That is quite exciting to see. And it gives you confidence because you just think that, ‘Well no, this is right how we do it’ – and ignore the crowds. 

MF: In pre-pandemic days, would you fly to the US often to meet with management?

BO: I like to go and see the scientists in their habitat… Often biotechs are quite small, where you go and make your coffee or tea with the CEO, and you chat and you get to know them.

What I find fascinating is when they make mistakes – things fail often in this industry – how do you motivate your scientists to keep going and to just dust yourself off to do the next thing? 

I think you only get to know that when you spend a bit of time and see what the office looks like. Do they have vampires when you walk in? Do they make their own tea? 

MF: Is there a move that you regret from the past? For example, a missed opportunity or buying a stock at the wrong timing or price.

BO: I think in this field, there are always missed opportunities… There’s so many great things happening.

MF: Yeah, you can’t buy everything, can you?

BO: No. And you have to put that past you. But one of the biggest regrets I have is that you never have enough [invested], never invested or backed yourself fully. Because as a human, you always have some doubts. So you always try to plan. 

I think one of the big things is biotechs can blow up. So you always are probably more cautious. But I think one of the things that I’ve learned over the years is, you’ve got to back yourself and you’ve just got to keep getting better at it. You can’t beat yourself up. 

For example, Daiichi Sankyo Co Ltd, we picked very early. Their division in oncology [was] really changing. We sold out too early, because we thought, ‘Look, we doubled our money. That’d be fine’.

Same with AstraZeneca plc (LON: AZN). So, over time you get better at it, but the big thing is you got to learn from it and you got to assess it and just work on it.

MF: To a lot of retail investors, they would see the biotech or even the healthcare sector as ‘high risk, high reward’. Is that a fair characterisation?

BO: I think if you don’t invest for the long-term, yeah, you can look at it that way. [Some] of my best investments have also been companies that had a setback.

Given my experience… I kind of know when to go back in and when to say, ‘Okay, they have a great R&D engine’. They can come up with the next [thing] – and it wasn’t their fault, it was just a normal setback during clinical trials. That’s what happens’.

And then you make your 300%, 400% return. So yeah, I can see that from the outside, but to me, no, I don’t really see the volatility. 

It’s never nice when something falls… But in the end, if there is a good foundation, good people and a plan B, these companies come good very quickly again.

More reading

• Why the CSL (ASX:CSL) share price has rebounded 13% since March
• Wesfarmers’ (ASX:WES) Bunnings open to hosting COVID vaccine hubs
• CSL (ASX:CSL) share price dips on latest AstraZeneca news
• CSL (ASX:CSL) share price wobbles on COVID vaccine news

Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Moderna Inc. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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