The Xero Limited (ASX: XRO) share price is edging higher on Wednesday morning.

At the time of writing, the cloud-based business and accounting platform provider’s shares are up 1% to $122.40.

This latest gain means the Xero share price is now up an impressive 25% over the last six months.

Why is the Xero share price edging higher today?

Investors have been buying Xero shares this morning after it announced its second acquisition of the year.

According to the release, the company has acquired e-invoicing infrastructure business Tickstar for up to SEK 150 million (~A$22.9 million).

This comprises an upfront payment of SEK 60 million (A$9.15 million) and earnout payments of up to SEK 90 million (A$13.7 million). The latter will be based on product development and performance milestones. Both will be settled 50% in cash and 50% in Xero shares.

Completion of the transaction is expected in the first quarter of FY 2022 (before 30 June 2021) and remains subject to satisfaction of closing conditions.

The transaction, integration, and operating costs are anticipated to have minimal impact on Xero’s FY 2022 operating earnings.

What is Tickstar?

Tickstar is a Sweden-based e-invoicing infrastructure business that allows organisations such as Xero and its customers to connect to a global e-invoicing network. This enables faster and more secure transactions.

Management notes that the acquisition aligns with Xero’s strategic priority to drive the adoption of cloud accounting around the world.

Xero’s Chief Product Officer, Anna Curzon, commented: “The acquisition of Tickstar is an important step in our strategy to help small businesses digitise more of their workflows and get paid faster using cloud-based technologies. As more governments around the world adopt e-invoicing, Tickstar’s technology will help our customers comply with existing and future legislation and realise the many benefits that e-invoicing brings.”

More reading

• 8 ASX 200 shares rated as ‘outperform’ by brokers
• Why the Xero (ASX:XRO) share price is outperforming today
• How to counter the ASX 200’s Achilles heel
• ASX 200 up 0.4%: Bank shares lower, Xero shares upgraded
• 2 exciting ASX growth shares to buy now

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Xero. 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 Santos Ltd (ASX: STO) share price is under pressure on Wednesday despite the release of a positive announcement.

At the time of writing, the energy producer’s shares are down 2% to $7.02.

What did Santos announce?

This morning Santos provided the market with an update on the Barossa joint venture. This is the company’s offshore gas and light condensate project in the Northern Territory which it owns along with ConocoPhillips and SK E&S Australia. The US$3.6 billion project aims to backfill Darwin LNG.

According to the release, the company has now awarded the project’s major contract for the construction, connection, and operation of the Floating Production, Storage and Offloading vessel (FPSO).

The FPSO services contract has been awarded to international vessel builder and operator BW Offshore (BWO).

Positively, management revealed that through extensive and intensive contract review processes, Santos has achieved a significant financial saving as well as significant energy efficiency improvements. This contract is expected to achieve an overall reduction of approximately US$1 billion in capital expenditure.

Santos’s Managing Director and Chief Executive Officer, Kevin Gallagher, commented: “The decision to proceed with an FPSO services contract maintains a low ongoing operating cost while engineering enhancements have significantly reduced the project’s carbon footprint. This reduction in capital expenditure makes Barossa one of the lowest cost of supply projects in the world for LNG and will provide new supply into a tightening LNG market.”

“At the end of last year, we announced that transport and processing agreements had been finalised for Barossa gas to be tolled through Darwin LNG and we signed a long-term LNG sales agreement with Diamond Gas International, a wholly-owned subsidiary of Japan’s Mitsubishi Corporation.”

Though, it is worth noting that despite the above, a final investment decision on the Barossa project has not been made. However, it is anticipated in the coming weeks, with the first gas targeted for the first half of 2025 if it goes ahead.

Why is the Santos share price tumbling lower?

While this announcement is good news for the company, it hasn’t been enough to stop the Santos share price from tumbling lower today.

This decline has been driven by a significant pullback in oil prices overnight amid demand concerns following lockdowns in Europe.

More reading

• 5 things to watch on the ASX 200 on Wednesday
• Why ASX 200 energy shares should outshine as inflation picks up
• Top broker issues buy alert on Santos (ASX:STO) and these ASX energy shares
• 5 things to watch on the ASX 200 on Monday
• Woodside (ASX:WPL) share price falls during investor-led climate change charge

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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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.

Netflix Inc (NASDAQ: NFLX) started cracking down on password sharing this month, after years of passively allowing the practice. While it’s always been against Netflix’s terms to share login credentials with people outside your household, Netflix has been hesitant to enforce that rule. 

But now the problem may be too big for Netflix to ignore. Analysts estimate the company’s losing billions in revenue due to password sharing.

It’s almost weird if you don’t share passwords

One-third of all Netflix users say they share their passwords with at least one other person, according to research firm Magid. That number is likely increasing as more streaming services enter the market. The options to “trade” subscriptions — you pay for this, I’ll pay for that — with friends and family are growing.

If each of those one-third of subscribers shared their passwords with just one other person, that represents nearly 68 million freeloaders. If Netflix could get them all to sign up, that would equate to almost $9 billion in revenue based on Netflix’s average revenue per subscriber of $11.02 per month.

Of course, not every password sharer is going to sign up if Netflix manages to cut them off. Citi analyst Jason Bazinet still thinks the opportunity is greater than $6 billion for Netflix. Bloomberg Intelligence is less optimistic, but still sees a substantial benefit. The research firm thinks a crackdown will increase revenue by 10% ($2.5 billion) based on a password sharing rate of 20% to 30% in the United States.

Bank of America analyst Nat Schindler didn’t provide an estimate on revenue, but suggested the crackdown could act as a tailwind for subscriber net additions.

What could go wrong?

There’s a reason Netflix has been hesitant to cut down on password sharing. There’s no clear line to determine legitimate password sharing versus illegitimate sharers. “You have to learn to live with [it] because there’s so much legitimate password sharing,” CEO Reed Hastings said in 2016. “So there’s no bright line, and we’re doing fine as is.”

Being too heavy-handed has the potential to upset and frustrate customers. That’s something to always avoid, but with so many streaming options now available, it’s more important than ever.

What’s more, customers sharing passwords are less likely to churn or hop from one streaming service to the next. Cancelling a subscription that you share with someone requires input from multiple parties. It’s why wireless service companies love family plans and offer substantial discounts for them; they have much lower churn than single lines.

Netflix could see increased churn if password sharing is no longer an option. Some analysts see increased churn as a big risk factor in 2021.

There are billions of dollars in annual revenue on the line, though. If Netflix does this well, it could be a substantial boost to its top line. In its tests, Netflix is asking for users to verify their access to the account they’re using, and if they don’t, it offers a 30-day free trial. Netflix stopped offering free trials to the general public last year.

The best place for Netflix to test the crackdown is in the US and Canada region. Subscriber growth in the region is slowing, and it’s showing signs of having fully saturated the market. It also has a higher average revenue per subscriber. As such, curbing password sharing is likely to have the biggest effect in that region.

In markets where the media company’s still growing quickly, Netflix ought to be more tolerant of password sharing. It exposes more people to Netflix and all it has to offer, and when users are in a position where it makes sense for them to subscribe on their own, they’re more likely to. Former HBO CEO Richard Plepler once called password sharing “a terrific marketing vehicle for the next generation of viewers.” Netflix shouldn’t cut that off before it becomes a substantial opportunity cost.

While Netflix may be losing billions in revenue to password sharing, its best course of action is to try to capture that opportunity a small bit at a time. It can learn best practices and iterate, which is something the company is particularly good at.

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

More reading

• I want to double your money every 5 years: fundie
• ASX tech shares: A once-in-a-lifetime buying opportunity?
• 3 reasons to buy Netflix stock now
• The tech-heavy Nasdaq is now in a correction!
• Nasdaq slumps overnight, ASX 200 shares to open weaker

Adam Levy owns shares of Netflix. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Netflix. The Motley Fool Australia has recommended Netflix. 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.

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The GrainCorp Ltd (ASX: GNC) share price will be on watch this morning. This comes after the company provided a positive business update to investors. At yesterday’s market close, the grain exporter’s shares finished the day at $4.71.

What did GrainCorp announce?

It will be interesting to see where the GrainCorp share price moves today following this morning’s latest release.

GrainCorp advised that it’s forecasting a $25 million boost in annualised earnings before interest, tax, depreciation and amortization (EBITDA) by 2023-24.

It stated that new operating initiatives have resulted in the business becoming more sustainable. These include expanding bulk materials for export, increasing utilisation at the Numurkah and West Footscray processing facilities, and a shift in the foods product mix to higher-value products.

In further news that could impact the GrainCorp share price, the company has revised its international operating model with the closure of its Hamburg (Germany) office. Planning and supply chain performance efficiencies are also expected to be implemented in the near future.

As a result of the company’s strategic changes, EBITDA is forecast to come in at $240 million by 2023-24.

Management commentary

GrainCorp managing director and CEO Robert Spurway touched on the company’s plans, saying:

Our priority is to increase our return on invested capital by strengthening our core businesses.

We will achieve this by utilising excess port capacity with commodities such as woodchips, fertiliser and cement. We are also continuing to drive operational efficiencies throughout our network, which will enhance our competitiveness and improve our customer offering.

Mr Spurway added:

We have taken numerous steps to reduce variability in our earnings, including network rationalisation, operational improvements, and the establishment of the Crop Production Contract. These have helped to stabilise our earnings profile and provides us with confidence to communicate a through-the-cycle view on future earnings.

GrainCorp share price summary

Over the past 12 months, the GrainCorp share price has increased by more than 50%. The company’s shares are also up 12% year to date and within a whisker of reaching their 52-week high of $4.94.

Based on the current share price, GrainCorp has a market capitalisation of around $1.07 billion, with 288 million shares outstanding.

More reading

• Risk posed to Graincorp (ASX:GNC) share price following ACCC verdict
• Will Aussie agricultural commodity prices see another record-breaking year?

Motley Fool contributor Aaron Teboneras 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 Computershare Ltd (ASX: CPU) share price won’t be going anywhere this morning.

This follows the request for a trading halt by the stock transfer company prior to the market open.

Why is the Computershare share price in a trading halt?

Computershare requested a trading halt this morning so that it could undertake a capital raising to partly fund a major new acquisition.

According to the release, the company is aiming to raise $835 million (US$634 million) via an underwritten pro-rata accelerated renounceable entitlement offer with retail rights trading. Management believes this structure will deliver fairness to all eligible shareholders.

Under the entitlement offer, eligible shareholders will be able to subscribe for 1 new Computershare share for every 8.8 shares held on the record date of 29 March 2021 at a price of $13.55 per new share. This represents a 9.6% discount to its last close price.

What is Computershare acquiring?

Computershare has entered into an agreement to acquire the assets of Wells Fargo Corporate Trust Services (CTS). It is a leading US based provider of trust and agency services to government and corporate clients.

The two parties have agreed a purchase price of US$750 million (A$983.2 million), which represents an EV/LTM EBITDA acquisition multiple of 8.9x pre synergies.

However, after including stand-up capex, regulatory capital requirements, and full run-rate synergies, it represents an EV/LTM EBITDA acquisition multiple of just 5.9x.

The company expects the acquisition to be at least 15% management earnings per share accretive on a pro forma FY 2021 basis including full run-rate synergies.

Furthermore, based on ongoing organic growth and cost savings, it believes there is a clear pathway to CTS generating 15%+ return on invested capital by FY 2025.

The acquisition remains subject to regulatory approvals and other customary closing conditions. These are expected to be obtained during the second quarter of FY 2022.

What is CTS?

The release explains that CTS has over 80 years of experience in the corporate trust sector and is currently appointed to administer corporate trust services to ~26,000 mandates across a range of securities and bond issuances. It notes that this enables the business to generate growing fee income and high quality, recurring revenue streams.

Management believes CTS is a highly strategic fit with Computershare’s existing Canadian and US corporate trust operations and its growth strategy.

The combination is expected to accelerate the company’s position in the attractive US corporate trust market to a top 4 position. In addition, with enhanced scale, the acquisition is expected to allow Computershare to have greater exposure to positive, long term structural growth trends in trust and securitisation products.

“Delighted”

Computershare’s CEO, Stuart Irving, revealed that the company is delighted with the acquisition.

He said: “We are delighted to announce the acquisition of Wells Fargo Corporate Trust Services. It is a clear fit with our successful Canadian corporate trust operations and existing US operations. CTS provides scale with a top four market position, a platform for ongoing growth and increased leverage to long term growth trends and interest rates.”

“The Acquisition allows us to integrate CTS’ deep client relationships and market expertise to deliver additional recurring fee revenue. We also see the potential for improved returns and margin expansion through new product development and innovative technologies, Computershare’s core competencies. We welcome the proven and experienced CTS team to Computershare, and we look forward to working with them as we deliver on our growth strategy.”

More reading

• ASX share market on watch: Goldman Sachs shares thoughts on inflation and interest rates
• Why ASX 200 tech shares could be in for another wild session
• ASX 200 Weekly Wrap: ASX finishes higher, despite tech selloff
• These were the best performing ASX 200 shares last week
• Thursday’s top performing ASX 200 shares at the end of the session

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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Serko Ltd (ASX: SKO) shares are on watch this morning after the company announced an update to its partnership with Booking.com. The Serko share price closed at $5.77 yesterday after a day of poor trade.

The travel technology company stated Booking.com will be transitioning customers of its business service to Serko’s Zeno platform. 

Let’s look further into the announcement the company made this morning.  

Booking.com to upgrade to Zeno 

The Serko share price will be in focus this morning after the company announced that Booking.com’s upgrade to Zeno is an important milestone in the partnership between the companies.  

Zeno is a travel booking platform for corporate travel. It will initially offer a large selection of accommodation options, as well as flights and transport in selected regions.

Serko plans to phase in more regions and languages in time. The majority of Booking.com for Business users are expected to be upgraded to Zeno within 2 to 3 months of its launch.

Serko CEO Darrin Grafton said the company doesn’t expect to see today’s news impact its revenue until the 2022 financial year.

Commentary from management

Mr Grafton commented on the upgrade:

This is an important milestone, not only launching a highly scalable platform that caters to existing Booking.com for Business customers worldwide but marking the start of our vision to bring the connected trip experience to business travelers globally.

The Serko and Booking.com teams have achieved this together under what could be considered one of the most trying years in the history of our industry and to make this happen faster than expected is a credit to the amazing teamwork on both sides.

Serko share price snapshot

The Serko share price has had a volatile week so far. It shot up by nearly 8% on Monday but dropped by 4.63% yesterday.

At the time of writing, the company’s shares are still up 2.85% over the course of this week.

Serko has a market capitalisation of around $622 million, with approximately 107 million shares outstanding.

More reading

• Why the Serko (ASX:SKO) share price is racing 5% higher today
• 2 ASX shares rated as buys by brokers right now

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Serko Ltd. The Motley Fool Australia has recommended Serko Ltd. 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 Transurban Group (ASX: TCL) share price is one to watch after a pre-market capital raising announcement from the Aussie infrastructure group.

Why is the Transurban share price on watch?

Transurban provided an update on financing arrangements for the financing vehicle of WestConnex Group. Transurban owns a 25.5% interest in WestConnex Group alongside others including the New South Wales Government and UniSuper.

WestConnex Finance Company Pty Limited will raise A$650 million via a 10-year, senior secured A$ medium-term note. Pricing was completed on 23 March 2021 with settlement expected on 31 March 2021.

The Transurban share price is one to watch this morning following the price-sensitive announcement on the ASX. Proceeds from the raise will be used for general corporate purposes and to partially refinance an existing A$1.2 billion, 2-year bridge facility.

Transurban interim CFO Tom McKay said, “We are pleased with the strong reception that [WestConnex Group] received in the domestic bond market.” He added, “The success of the issuance demonstrates the underlying strength of the [WestConnex Group] business”. 

The transaction represents WestConnex Group’s first bond issuance. Securing flexible financing and extending the group’s debt maturity profile is a positive for WestConnex Group.

The Transurban share price has had a volatile start to 2021 and remains down 7.1% since the start of the year. Shares in the Aussie toll road operator were smashed in the March 2020 bear market before rebounding strongly. In fact, shares in the infrastructure group are up 14.0% in the last 12 months.

However, that means the Transurban share price has underperformed the S&P/ASX 200 Index (ASX: XJO). The benchmark Aussie index is up 42.4% in the last year after a strong rebound subsequent to the coronavirus pandemic.

Foolish takeaway

The Transurban share price is one to watch after the latest financing announcement for WestConnex Group. Shares in the toll road operator have been under pressure in 2021 after a soft start to the year.

Transurban boasted a $34.9 billion market capitalisation with a 2.4% dividend yield as at Tuesday’s close.

More reading

• 3 ways to help protect your ASX share portfolio against inflation
• 2 quality ASX dividend shares to buy this month
• ASX 200 Weekly Wrap: Inflation fears hold ASX down
• ASX 200 Weekly Wrap: Calm restored to the ASX 200
• ASX 200 Weekly Wrap: ASX finishes higher, despite tech selloff

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Transurban Group. 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 Qantas Airways Limited (ASX: QAN) share price has been a strong performer over the last six months.

During this time, Australia’s flag carrier airline’s shares have stormed 35% higher.

Can the Qantas share price go higher?

Although the Qantas share price has been soaring in recent months, one leading broker believes it can ascend even higher.

This morning Goldman Sachs reiterated its buy rating and $6.38 price target on the company’s shares.

Based on the latest Qantas share price of $5.21, this price target implies potential upside of 22% over the next 12 months.

What did Goldman Sachs say?

Goldman Sachs has been looking into the airline industry following the release of data from the Bureau of Infrastructure, Transport and Regional Economics (BITRE).

According to the note, domestic airfare data for the month of March reveals that ‘best discount’ fares declined by 23% year on year and ‘Restricted Economy’ fares declined by 18% year on year.

While meaningful discounting is never good for airlines, Goldman isn’t overly concerned at this stage, particularly given the improvement in fares financial year to date (FYTD).

It explained: “Volatility of fares has remained a key characteristic over the past 6 months as airlines continue to dynamically adjust fares to fill scheduled capacity (i.e. maximise load factors) in an environment characterised by unpredictable and sudden state border closures.”

“Through the past 6 months, airlines have been relatively proactive in restricting capacity to accommodate lower demand for travel, and reducing discounts on airfares to manage profitability. On a FYTD basis, the prices remain up +1.9% yoy. Notably on a FYTD basis, we highlight increases on the Canberra-Melbourne (up 63% yoy); Melbourne-Perth (up 54% yoy) and Perth-Sydney (up 41% yoy), highlighting the inelasticity of government and resources sector led demand.”

Why is the Qantas share price in the buy zone?

Goldman explained that it believes Qantas is a good COVID-recovery investment option for investors.

It concluded: “We reiterate our Buy rating on QAN.AX with our 12-month TP of A$6.38. While average ticket prices are falling, we note that a greater proportion of this travel is being taken on leisure routes and for QAN we expect greater penetration of the low-cost Jetstar brand.”

“QAN represents a strong recovery investment with Qantas/Jetstar brands forecasting capacity to return to c.80%/c.100% of pre-covid levels during the upcoming April holiday period. In our view, the combination of: (i) recent federal government support package; and (ii) if the Australian COVID-19 vaccination program has the effect of reducing community transmission of the virus and limits the need for domestic border closures, we think it likely that they will achieve this target.”

More reading

• 5 things to watch on the ASX 200 on Wednesday
• ASX 200 dips, travel shares drop, Pushpay soars
• Why BrainChip, Crown, Qantas, & Quickstep shares are tumbling lower
• Qantas (ASX:QAN) share price dips after dismissed legal defection case
• Top brokers name 3 ASX shares to buy next week

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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Inflation has been a topic of hot discussion in the investing community of late. The Reserve Bank of Australia (RBA) and other central banks around the world are insisting that rising prices won’t be a problem in the near future.

Despite that, bond markets have started to price in inflation fears, together with the interest rate hikes that normally follow. Rising bond yields have essentially been behind the volatility we have seen in the tech space over the past month or two.

So what if the RBA is wrong, and inflation does come to our economic shores sooner than anticipated? Here are three ways you can help protect your portfolio.

Plan ahead

Have a think about which ASX shares will perform in an inflationary environment. For example, miners might do well since commodity prices tend to rise with inflation. The ASX has many of these companies, including BHP Group Ltd (ASX: BHP) and South32 Ltd (ASX: S32). Banks are also effective hedges against inflation as they tend to benefit when interest rates rise.

Another factor to keep in mind is pricing power. If a company can raise the prices of its goods or services in line with inflation without losing customers, it’s more likely to be a winner.

Be prepared to rethink ASX dividend shares

ASX dividend shares have been a very popular asset over the last few years as interest rates have fallen. But, what falls can also rise. If interest rates start to inch up again, we could see a movement out of dividend-paying shares.

That’s because safer cash alternatives like savings accounts and term deposits will become more attractive. If an investor has a choice between a dividend share with a 3% yield, and a term deposit with a 3% yield, many will choose the term deposit.

Diversify into inflation-resistant assets

When it comes to inflation, there are some asset classes that are known to perform well. Adding some of these to your ASX share portfolio could offset some inflationary pressure. Gold is often touted as a good investment during times of inflation due to its scarce supply. Arguably, the same could be said of Bitcoin (CRYPTO: BTC), although that is far less verifiable at this stage.

But there are other options too. Many real estate investment trusts (REITs) hold properties with contractual inflation-linked rental increases built in. Infrastructure providers like toll road company Transurban Group (ASX: TCL) also offer similar inflationary protection. And there is always inflation-linked government bonds, like those held in the iShares Government Inflation ETF (ASX: ILB).

Foolish takeaway

Like most things, it’s better to have a plan and not need it, rather than need a plan and not have it. There are warnings that inflation may be on the horizon. Even if it doesn’t come to pass, the mere threat might be enough to justify an action plan today.

More reading

• 2 quality ASX dividend shares to buy this month
• How to counter the ASX 200’s Achilles heel
• Where to invest your BHP (ASX:BHP) dividends
• 5 things to watch on the ASX 200 on Tuesday
• Two ASX 200 banking and mining shares to own as inflation lurks

Sebastian Bowen owns shares of Bitcoin. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Bitcoin. The Motley Fool Australia owns shares of Transurban Group. 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

The Motley Fool chats with fund managers so that you can get an insight into how the professionals think. In part 1 of our interview, Spaceship portfolio manager Jason Sedawie tells how he aims to double his clients’ money every 5 years.

Investment style

The Motley Fool: What’s your fund’s philosophy?

JS: The fund we run here [within] the flagship Voyager fund is Spaceship Universe. So that was launched nearly 3 years ago and so we have this approach we call Where The World Is Going, WWG. 

In that approach, we try to anticipate trends and think about what products and services are getting more relevant in the future. We’re also focused on the moat, barriers to entry for potential competition — so that’s the philosophy in how we think about investing.

MF: What’s the typical investment horizon?

JS: So we tell our investors 7 years and when we’re investing ourselves, I guess we’re looking at a 5-year time horizon for the shares. We try to look over a 5-year period for the shares to double over that time. That works out to be 15% per annum, so that’s what we’re looking for.

MF: How has the fund performed in the past year?

JS: It ended up being a good year for the portfolio because the way we think about things is we talk about trying to anticipate trends and what products will be more relevant in the future. 

So we’re very focused on companies that are solving problems. A lot of these problems really came to light or they were just brought forward since people really needed to have an e-commerce solution or go online. A lot of our companies did really well. For the Universe fund, it was 54.96% for [the year to] February.

MF: What’s the proportion between Australian and foreign shares?

JS: It’s around 80% global and 20% Australian.

MF: Is the global portion dominated by the US?

JS: Yeah, a bit over half US.

MF: To give our readers an idea, what are your two biggest holdings?

JS: Good question. We run it equally weighted, so for me to say what are the two biggest holdings, it can fluctuate quite a lot. 

But the largest holding at the moment, just given the market movements, is Rakuten Inc (TYO: 4755), which is an e-commerce player in Japan. So that’s risen lately because Japan Post Holdings Co Ltd (TYO: 6178) just bought into the company and Tencent Holdings Ltd (HKG: 0700) have bought into the company. 

They’re obviously very large companies. You’ve got Japan Post on your side for delivery integration. Obviously Tencent’s background as a super app is really interesting. 

That will be our biggest at the moment, but it does change because we run it as an equally weighted portfolio.

MF: It sounds like Spaceship isn’t afraid of Japanese equities, which many investors have shied away from for many decades.

JS: It’s such a boom over there, [but] it’s still down what, 20-25% from 30 years ago. So they’ve seen a lot of equity destruction over there. We only have two companies in Japan, Rakuten and SoftBank Group Corp (TYO: 9984). 

It’s a very modern economy but it’s quite strange in some ways — the level of cash adoption is still quite high. There’s still a lot of stamp usage and faxes, and so it’s interesting for such a modern economy just to see some of the trends over there. But they’re changing as well over time.

Buying and selling 

MF: What do you look at closely when considering buying a stock?

JS: Probably like everyone else, we look for a couple of things. We have that Where The World Is Going approach — so to implement them we look at new habits being built, new solutions for problems or better ways to start doing things. 

Secondly, a moat. Are they building a moat? Just some scalable plan that will have a network effect there? 

Thirdly, management — do they understand if they are building a moat [and] how that fits with these trends. 

And finally the fourth one is the expected return rate on the company doubling every 5 years.

MF: What triggers you to sell a share?

JS: Deterioration of moat, I’d say, is the first one. So some sort of event where they lose market share or some scale is at risk. 

The second one [is] just a better competing product, some sort of disruption that might make the reason we own the stock change. 

And then finally, a pretty common one is just we find a better opportunity… we just think there’s something better out there with the capital.

MF: Have you ever had to sell a share because it fell out of that Where The World Is Going criteria?

JS: Yeah, it can happen quite a bit. With Netflix Inc (NASDAQ: NFLX) we just worried about the moat and the competition, and so we sold it just before COVID. And then obviously they benefited from COVID, but we just got concerned with the pricing power they had with [rivals like] Disney Plus and all the other services. 

So yeah, it’s not bulletproof but it’s a process that works over time. You know, you just got to stick to that process if you think that price is deteriorating a little bit — really reconsider the reason for owning it.

What’s coming up?

MF: Where do you think the world is heading at the moment?

JS: COVID has really accelerated changes in habits. 

Thankfully all these vaccines were put together in record time for COVID and I think that’s really interesting what’s happening in healthcare. 

If I step back as a fund manager I look at some of the largest companies in the world — companies like Alphabet Inc (NASDAQ: GOOGL) (NASDAQ: GOOG), Facebook Inc (NASDAQ: FB), Snap Inc (NYSE: SNAP), Twitter Inc (NYSE: TWTR) and TikTok — they’ve all grown up on a small percentage of GDP: advertising. 

Advertising is only a bit over 1% of the US GDP. And half of that is online, so let’s say 0.5% of GDP has created massive companies that we all know about. So I’m really interested just to see the change in healthcare. Healthcare has historically been an inefficient industry, around 7% to 8% of the US GDP.

You see things like mRNA vaccines and all this tele-health, I think it’s a very interesting time in healthcare. And we’re just seeing these changes sort of happen across a lot of other industries as well. 

So for me personally it’s a very interesting time as a stock picker, because a lot of these problems are getting solved in a better way. If we can find the companies that provide the solutions, that could be a really good opportunity for us and our investors. 

Tomorrow: part 2 of our interview, where Sedawie reveals his most underrated and overrated stocks.

More reading

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• Why it’s a great time for ASX investors to buy US shares
• When dividends can be a bad thing for an ASX share
• ASX tech shares: A once-in-a-lifetime buying opportunity?
• We’re betting on ASX growth shares: global fund

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. Tony Yoo owns shares of Alphabet (A shares). The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Facebook, Netflix, Twitter, and Walt Disney. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Facebook, Netflix, and Walt Disney. 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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