Tyndall's Wintle: Three US mid-caps that will be the Amazons of the next decade
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Docusign, Teladoc and Zoom are among some of the US stocks that could experience similar levels of growth to Amazon over the next ten years, according to Tyndall’s Felix Wintle, who said this point in the market cycle is the best time to buy future market leaders.
Wintle, whose VT Tyndall North American fund has recently surpassed its three-year track record, said there have been a number of changes made across the portfolio during the throes of the pandemic, with a majority of its top ten holdings new entries over recent months.
"The positions have changed quite a bit, but our tech weighting hasn't hugely," he said. "Technology has been a big overweight for most of that time, as has consumer discretionary and healthcare.
"One of the advantages of having a smaller fund is you can go further down the cap spectrum because liquidity is less of a problem. It means we can differentiate the portfolio and as such we hold a number of mid-cap tech stocks that we think will be the FAANGs of tomorrow."
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As such, the manager does not hold any FAANGs in the top ten list of holdings. The only mega cap in the list is Microsoft, which is the portfolio's single largest position at 4.6%, but Wintle said this has been a large weighting in the portfolio for "quite some time".
As part of his investment process, which adopts a top-down focus on market cycle positioning and long-term themes, he has recently added Docusign to his list of largest holdings, which currently accounts for 3.3% of the portfolio.
"It is a company that has been around for a while, but not many people have used it until now - at least, not in a corporate sense," Wintle explained. "It has become an overnight sensation because it is not just a leader in terms of online signatures, but also in what they call the agreement cloud. People can use it to create agreements and contracts online, which can be made on a bespoke basis."
He added: "In a post Covid world, signing paper documents and getting them witnessed will just seem archaic. At the end of 2019, it had 2 million users. By the end of April, it had more than 200 million users."
Another relatively new holding in the portfolio is Teladoc which, while a mid cap in size, is the largest telemedicine provider in the US.
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"You may ask - why not use Zoom? The reason is the complicated nature of the US medical system, both in terms of how doctors get paid and how people get reimbursed for drug costs and medical costs," he explained.
"Right now, their usage rate is high because people are scared to catch coronavirus. But over the longer term, people will realise that this is more convenient.
"Research shows that most people visit the doctors for ear, nose and throat complaints, which do not require a 'hands on' approach - a lot can be done remotely, especially if it is prescriptions for antibiotics."
A third holding that was introduced into the fund four months ago is Zoom which, year to date, has seen its share price almost quadruple, according to data from Google Finance.
While Wintle said its growth will "definitely moderate at some point", he pointed out that the high-paying corporate customer base is now starting to grow exponentially.
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