How instos pitch stocks: Insights from Sohn Hearts & Minds

I was in Adelaide last Friday for the Sohn Hearts & Minds event, which was an amazing experience. Hat tip to Paul, Maggie and Jess for an amazing conference.

For those who don’t know what the Sohn Hearts and Minds conference is, imagine a mixture between an investor conference and a music festival. It is a high production event where tickets cost thousands of dollars, are limited, and it is filled with the “who’s who” of the institutional world.

Hearts & Minds (ASX:HM1) is a $700m listed investment company that donates their profits to medical research, and 35% of the portfolio is invested based on the picks from the conference. For disclosure, they are also an InvestorHub client.

This isn’t your typical conference: there isn’t an MD on stage pitching their own company to a half-full room of HNWs. Instead, global fund managers fly in to pitch their best stock picks for the next 12 months. It is high stakes, as these investors are leading with their chin to put their best pick forward and risk their future reputation (and speaking spot). As such, the presentations are sharp and the conviction from the presenters is palpable.

What was my big take away from the event? 

How insto’s talk about stocks to other instos.

The stock standard investor presentation goes something like this: over a period of 10-20 slides, the MD takes the audience through a history of the company, projects, and history in the attempt to justify the current valuation and attract more investors.

Insto’s still do this, to a degree, but their goal is different: it isn’t to justify current share price, but to try to convince the audience why their pick is going to be worth more in the future than it is today.

Every investor took a much longer-term view than what most MDs take, and were presenting 5-to-10 year charts. 

They also heavily leveraged management as a selling point - either clear leaders with existing chops, or a new, high-caliber turnaround team that were a point of inflection. This supports our own data that highlights the importance of your people to the market.

And of course, these people are not looking for quick wins, but are chasing after long-term compounders. Here, consistent performance over time is important: customer growth, revenue growth, and growth in core KPIs being common examples.

Contrary to common belief, these investors are not looking for short-term growth and impact, but rather solid companies that can show long term returns!

Which is super exciting. 

So what can you take away from this? 

Well, now you know what insto’s care about, and you can optimise your own message to cater to their goals and needs. 

First, show your numbers, and then tell them how you will be doing more this year than last. If you’re drilling, show meters drilled. If you’re Biotech, show progress through the phases. If you’re selling a product, show revenue. Then, no matter who you are, you should follow that up with a story of growth and/or compounding.

But here’s the trap to avoid: don’t focus on next month or even next quarter. Instead, show a long term view that sells what the next one-to-five years look like. Simply doing this will imply that you will be worth more than you are now! And that is your goal, to tell a story and show compelling evidence that you are a growing company.

So why should you care about insto’s after I’ve spent the past three years talking about retail? Well, as we head into 2025, we are seeing the beginnings of a great revival of the small and micro cap market. After a bottoming out in August, the market for small caps has been up in September and October, driven by a revival in investor interest, successful IPOs and a run of M&A activity.

November has been a little shaky, with a slight drop again for micro and nano caps, but the recovery trend line remains positive and I personally can see this trend continuing. This means that, in my opinion, 2025 is going to be a great year all around for those outside of the ASX 100. I can’t be sure what will happen up the top end of town, but I see smaller companies come back in vogue, raises get away, and a generally “up” market.

So my advice here is: Don’t stop! It has been a hard couple of years, and you have got through the worst of it. Now with things ticking up, it is time to reap the rewards and get your story out there so tha,t when insto’s come knocking, you already know how to speak to them. 

As the market moves, showing your growth will give you the momentum to rebuild lost shareholder value and add more on top. There is a lot ahead of you now, so get prepared to take advantage of it!