Why the fundies never sell these stocks
February 2020 | BY Bill Pridham
Over the last 30 years, the average holding period for stocks on the ASX has fallen from around 6 years to less than 1 year. Despite the obvious benefits to longer holdings, like less tax, less dependence on timing, and more dividends, it seems investors are more impatient than ever. Against this backdrop, very long-term fund holdings present one good hunting ground to discover some ‘tried and true’ stock ideas.
Ellerston Global Portfolio Manager, Bill Pridham, shares his insights with Livewire on Interxion, the longest standing position in the Ellerston Global Mid Small Cap Fund & Ellerston Global Investments (ASX: EGI).
The NextDC of Europe
The longest-standing position in our portfolio is US-listed data center owner Interxion (INXN US) which we have owned for over four years. It is a position that was also owned in past endeavours since its IPO in 2011 and over the past 9 years we have built a strong understanding of the business and appreciation of its excellent management team. In a past call with the company, the head of IR commented that it has seemed like our kids have grown up together; we are proud of that.
Interxion is basically the Next DC of Europe and is the largest pure-play data center owner on the continent with exposure to >75% of European GDP with incredibly high barriers to entry.
The European data center market is typically 12-18 months behind that of the US and with the insatiable demand for data continuing (and potentially accelerating with 5G applications) we consider the long-term potential as very attractive.
While it has appreciated considerably since we bought the position, and has recently been bid for in an all-share transaction by larger data center owner Digital Realty, Interxion will continue to compound earnings at a mid-teens rate at strong incremental returns on capital deployed.
Going forward the business will be operated as a standalone inside Digital Realty; however, Interxion should benefit from greater cross-sell from Digital’s extended customer base and the lower cost of capital associated with Digital Realty’s REIT structure.
See more insights from Jordan Cvetanovski from Pengana Capital Group and Paul Mason from Paradice Investment Management in the complete Livewire article: Why the fundies never sell these stocks