A tale of two stocks: compounding, leadership vision, sticky networks

This video first appeared on Livewire on 8 October 2020

Fidelity Australia’s top stock picker Paul Taylor reflects on the common traits of two early additions to the Australian equity strategy, which he’s headed since it kicked off in 2003.

At first glance the companies bear little resemblance – one a fast food retailer, the other a jobs website. But Taylor saw a few commonalities including:

  • Forward-thinking management teams
  • A willingness to reinvest
  • Network effects.

Having bought them at around $2 each, for Taylor they perfectly illustrate the power of compounding, currently trading above $80 and $20 a share.

The fast food company ­– whose share price has grown 40-fold – is now the largest active position in the Fidelity portfolio largely because of its share price appreciation over the years. “I’m continually trimming it to make sure it doesn’t get too big in the portfolio – I’ve probably sold multiples of what we invested initially – and it’s still the active biggest position in the portfolio,” Taylor says.

The other company – whose share price has grown 10-times in almost 20 years – now dominates its category and created what Taylor dubs a “virtuous circle” in becoming almost indispensable for both job-seekers and employers.

In the following video Taylor reveals the companies and discusses what prompted him to buy them and why he believes they’ve plenty more growth ahead.