Here are the lessons of two “10-bagger” investments by a fund that has doubled in value this year


Hayden Capital has had a fairly good year – returning 101.2% in the first half, according to its letter to shareholders for the second quarter.

Fred Liu, his managing partner, discussed two of his so-called “10 baggers,” which are investments that yielded 10 times the initial investment.

One was a company that everyone knows, AMZN,
which was completed in six years, and another was Sea Ltd. SE,
Singapore’s digital services company, in just two years. Amazon, he noted, has not only increased sales, but has done so in its higher-margin businesses, Amazon Web Services, and the third-party marketplace. Sea Ltd., meanwhile, successfully invested in its Shopee e-commerce platform, which it was able to do because its Garena gaming business provided the cash flow.

“It was really a ‘bet on the farm’ time for Sea Ltd – but I thought it was the right decision given the sheer size of the prize if it worked, and the ability to reduce and recover even more. value on Garena’s side if not, ”he wrote. “In short, I saw a huge opportunity, as the market saw a gaming company burn money on an e-commerce business it was not allowed to be in. This allowed us to buy the shares at a very low entry multiple. “
What do the two have in common? “The lessons from these two case studies show that in order to achieve 10x-like returns, you probably need a combination of rapid value creation, with a growing market appreciation of the company’s trajectory demonstrated by a multiple expansion, ”he said.
Finding a fast-growing business isn’t that difficult – but the nuance, he said, is that sales growth has to come from value-added activities, for example by strengthening the network effect of l business with each new customer added. The third critical point is the price.
“But the problem is, too often investors pay too much for these companies to start with because the market has already become too excited about them and has driven up prices,” he said. “The stock is constantly fighting against a headwind, looking for intrinsic value growth to overcome the degree of multiple compression.” A company whose value grows three times more in five years – but with a multiple compression of 50% – will achieve a return of 8.5% annualized, or more or less in line with the market.
He said he was looking for companies that were priced based on a low growth scenario, in which the additional growth achieved would then be free.
The buzzing
Suspected Democratic presidential candidate Joe Biden, after markets closed on Tuesday, appointed Sen. Kamala Harris as his vice president. The pair will appear in Wilmington, Del., On Wednesday to make joint remarks. Meanwhile, there are no talks yet scheduled between Congressional leaders and the White House on a fifth stimulus package.
News on the coronavirus front worsened, with new cases, the rate of positive tests and deaths rising on Tuesday, according to the COVID-19 monitoring project.
The UK reported a 20.4% drop in quarterly gross domestic product between April and June, the worst performance of any major economy during this period. The US Economic Calendar presents consumer price data for July.
Tesla TSLA,
said he approved a 5-to-1 stock split after the electric carmaker’s stock value soared.
MRNA modern,
said he had struck a deal to sell 100 million doses of his experimental COVID-19 vaccine to the US government for more than $ 1.5 billion.
Liberty Global LBTYA telecommunications company,
launched a $ 5.5 billion bid for Swiss company Sunrise Communications SRCG,
+ 26,21%.

The steps
After a 104 point drop in the DJIA industrial Dow,
Tuesday, US equity futures ES00,
+ 0,70%
+ 0,88%
+ 0,93%
were higher.
Oil CL.1,
+ 1,39%
futures have increased, while futures on GC00 gold,
continued to reverse.
The 10-year Treasury yield TMUBMUSD10Y,
edged up to 0.67%.
Random readings
Dr Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases for three decades, has expressed skepticism about Russia’s coronavirus vaccine.
FiveThirtyEight released their election model – and it gives Biden the same odds of winning as Hillary Clinton did in 2016.
A new dinosaur linked to T. rex has been discovered.
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