Emma Wall: Hello and welcome to this U.S. special. I’m Emma Wall and here with me today to give his three favorite stocks is Felix Wintle, manager of the Neptune U.S. Opportunities Fund. Hello, Felix.
Felix Wintle: Hello, Emma.
Wall: So what’s your first favorite stock?
Wintle: My first favorite stock is Las Vegas Sands (LCR). Las Vegas Sands is a casino operator, with a very small presence now in Las Vegas, but a major presence in Asia, particularly Macau, Singapore. Here is a stock which has just so much cash flow, it really struggles to know quite what to do with it. But what it does do that is large stock buybacks, very big dividends, and special dividends. Also the owner is a 52% stakeholder. I met him the other day and he is a legend of the industry. But the real story is about Macau and the Chinese propensity to gamble. They’ve recently expanded in Macau, got a fantastic property or so in Singapore. If one is a believer that the Chinese like to gamble, then it’s a fantastic stock to own. We’ve owned it before for quite a long while, sold it, and we’ve recently bought back in.
Wall: You said that they’ve expanded in Macau. Anyone who doesn’t know about Macau should know that it’s quite a small island, so there is obviously going to be a restriction on that. Is Singapore and other Asian countries the future then?
Wintle: It’s a good question. So actually you’re right to bring up that capacity issue, because that’s a key constraint. Just briefly on Macau, they have just opened a new property on the Cotai Strip, and what’s interesting about that is that over the new few years a great deal of infrastructure is going to be built; bridges and new access routes to Cotai and Macau. But on Singapore, actually Las Vegas Sands and one other operator have the sole licenses to run casinos in Singapore till 2020. So actually they’re very restricted there too, so that’s another plus point.
Wall: What’s your second stock?
Wintle: My second stock is Facebook (FB). Everyone knows Facebook. Facebook’s an interesting story though, because obviously since the IPO it hasn’t really been a good stock until recently. What changed was two quarters ago they showed investors they could monetize their mobile platform, so just monetizing using Facebook on your mobile, which was always the big bear case.
They did that very successfully. That quarter they had about $650 million in revenue; analysts were expecting about $400 million. We think it’s going to go from strength to strength; 1.2 billion users globally and with plenty of room to increase. I mean, obviously, Facebook is not allowed in China, so if the Chinese decide to relax that, that’s a huge opportunity.
But also, yes, it is the social network and I think people who use it, it’s – one of the sort of pushbacks of Facebook is what about competition, what about the next things, and we’re obviously always ready with constantly monitoring that, because clearly tech does come in and out of fashion. But if you’ve got a user base of 1.2 billion people, that’s a lot of people. What we found is that sometimes users do take a break from Facebook, but ultimately come back, because everything that is there, the whole network, all the contacts, all the photos, all the friends are there around the world. So we think that user base is going to be very, very sticky.
Wall: Sounds slightly sinister when you say it like that, but it is…
Wintle: It does, isn’t it.
Wall: Everywhere.
Wintle: But it is, yeah.
Wall: What’s your third stock?
Wintle: My third stock is something a little bit different. It’s a biotech stock. We love biotech at Neptune. We’ve owned biotech in the fund for a long time and this one is called Gilead Sciences (GILD). Gilead Sciences is a very successful biotechnology company. It’s now a mega-cap at $110 billion market cap, so that makes it – what is that – about 2.5 times AstraZeneca, something like that, 2 times AstraZeneca. So it’s a big company, and really with two franchises; one in HIV drugs, one in hepatitis C.
The HIV market has been one where they completely dominate. They have total market share pretty much, about 95% market share and their drugs really work. HIV treatment these days is really one pill a day. So it’s come a long way from 20 years ago, and because of that great efficacy, as I say, they really tied up the whole market. So that’s a fantastic franchise and they take pricing every year.
The next big franchise is hepatitis C, which again – well, it perhaps strikes one as not a massive market, but it is very big, particularly in the States. They reckon – well, no one is quite sure how big the market is, but to diagnose patients, our estimate says it’s about $10 billion opportunity. Then for the people who haven’t been diagnosed, that’s probably another $10 billion opportunity on top of that. Then you’ve got the rest of the world.
Wall: Looking biotech as a whole, though, I used Morningstar tools the other day, biotech has been the single most successful sector so far this year. Can that continue?
Wintle: Yeah, it’s a good point, it has been. Again, that’s something that we’re very aware of and they won’t go on forever and at some point there will be a time to take profits. We actually took a little bit of profit in some of our holdings last week. But I think we’re – for hepatitis C is – the drug is actually going to launch early 2014, so we want to be in the stock for the launch and see how that goes. But, you’re right, I mean, at some time it’s not going to go on forever, but it’s been a great run thus far over my 18 months and we’re going to continue to ride it until such time as we think we’ve had enough.
Wall: Thank you very much.
