The following article was featured in Livewire on July 6, 2023.
The FIFA Women’s World Cup begins on 20 July 2023, when 32 nations will begin the final leg of their quest to be crowned world champions in Sydney a month later. It is fantastic to see participation and support of women’s football continue to grow around the world.
The recent 2022 UEFA European Women’s Football Championship was watched by an estimated total global TV audience of 365 million, with record-breaking attendances at the games of over half-a-million spectators – more than double the previous tournament in both cases.
England, as the host nation, was ultimately able to harness that support in front of a record crowd of 87,192 at Wembley Stadium to win the final and their first ‘Euros’. Australia and New Zealand as co-hosts of the 2023 World Cup will now be aiming to embrace that same home advantage to hopefully go all the way. We wish all teams good luck.
So, to celebrate the upcoming World Cup and show our support, we thought it would be fun to embrace some of that spirit and apply it to our own passion for bringing the best global companies together as a team to produce a winning investment portfolio.
While that link may at first seem a little tenuous, there are actually some similar attributes and principles at play in managing a group of players and a portfolio of companies to deliver a winning outcome. The coach, or portfolio manager, is looking to bring only their very best players to the team, to recognise not only their individual strengths and weaknesses but, most importantly, how they can blend those attributes together to form a diversified yet cohesive team.
You need only look at Paris Saint-Germain (PSG) in recent times, or Chelsea this year to see how a cohort of expensive, populist and yet individually talented players can fail to work as a team if not correctly managed in line with the philosophy and process employed by the coach. This is true for winning investment portfolios too – each company needs to be carefully scouted or researched to build knowledge, before understanding how their addition will improve or diversify the portfolio increasing the likelihood of a winning performance.
That’s the justification for this fun look at how to construct a World Cup-winning portfolio of companies. However, it is of course equally worth noting some caveats and differences in managing a real-life investment portfolio versus one designed in the spirit of a Women’s World Cup-winning team.
i) Tournament Play – While acknowledging that players develop over many years, and that nations needed to qualify to participate in the World Cup finals, the 32 qualifying squads are ultimately picked to perform over just the 30 days of the tournament and triumph in one final winner takes all game. An investment portfolio should be constructed with a much longer-term mindset and is a live entity without defined game times or a date for the final in the diary. So while all the companies in this fantasy World Cup portfolio are held in the Lakehouse Global Growth Fund as of 30 June 2023, this is a snapshot and does not reflect their journey or position in the starting eleven over time. As such none of this subset of the Fund’s holdings should be seen as individual recommendations, as neither the name of your favourite team, player or personal financial circumstances have been taken into account when writing this article.
ii) Starting line-up – Mere national football coaches are constricted to selecting players based on the nation of their citizenship. As global portfolio managers, we have been granted the right to select any player from any country – an All-Star team, if you like. While in reality, we care very little where a company is domiciled (or born) given it is often irrelevant to where they generate revenues, source supplies, service customers etc it would also seem hasty to turn down this gift to cast our eyes over the widest possible pool of talent. Before you call foul, with a nod to the spirit of the World Cup we will only select companies for our fantasy eleven that are domiciled in one of the 32 nations competing.
iii) Squad and Substitutes – Any successful football team is much more than the 11 players on the pitch at any given time. Indeed for the Women’s World Cup, each nation will have a squad of 25 players. As investors, it is also important that we don’t limit ourselves to only those holdings in the current portfolio. Portfolio Managers should also have a bench of companies, fully researched and ready to go so they can step into the action at the right moment. It is not the right time to start looking for other options only once something happens, rather it is important that you have already done the hard work and can move quickly to take advantage of a market opportunity or in the worst-case scenario limit the downside.
It is also worth noting that while we at Lakehouse are strong proponents of managing concentrated portfolios, just 11 players/companies would be a little too punchy even for ourselves. The Lakehouse Global Growth Fund typically has around 20 companies in the portfolio plus that important bench of fully researched substitutes. That’s a pretty high hurdle, but we only want our very best ideas – no room for Ali Dia in our squad. However, in order to keep this article to less than 50 pages we will confine ourselves to a starting 11 – if you haven’t already stopped reading you certainly would have by the time we got to the rationale for our third choice goalkeeper!!
iv) Formation and Tactics – Amongst our readers, I am sure there are some genuine aficionados of football (and hence we will be using the proper name football not so**er). So while we would love to indulge you and wax lyrical about the pros and cons of a pressing diamond versus a Christmas tree formation, we will spare you here. But we will acknowledge that, while formation is of relatively little relevance to this exercise, seeing as we must pick one and that at Lakehouse we are growth orientated, a slightly more attacking line-up would seem appropriate and more in the spirit of the article – as a result 3-4-3 is the relatively under-appreciated formation we will be using.
A flexible formation that allows for a small compact defensive back 3 when markets are providing opportunities to score, while also allowing for the midfield wing backs to drop and add their defensive prowess to a defensive back 5 when markets are a little less accommodating.
This is a neat segway to very briefly mention tactics – coaches can change formation and players during the game and often will frequently as the game progresses through the 2nd half. Similarly, good active managers need to be constantly evaluating and making appropriate tactical changes, they too should have a subs bench but more commonly at Lakehouse we will be tweaking positioning and topping up and top slicing as market conditions and valuations change. That said, given our long-term patient approach, we will seek to stick to our pre-game plan (philosophy and process) rather than ringing in wholesale changes at half-time or throwing on Big Tony up front for the last 5 minutes. For, unlike football coaches, time is our friend rather than a finite resource.
Ok – with all the formalities and pre-match build-up complete let’s head pitch-side to take a closer look at the Lakehouse Women’s World Cup starting eleven
Goalkeeper (GK) – LVMH (France)
Goalkeeper is not a position for youthful exuberance and rushes of blood to the head. Here you want an experienced and safe pair of hands, and you don’t get any more experienced than Louis Vuitton Moet Hennessy or LVMH as they are known to their teammates. The oldest brand in the LVMH portfolio (wine producer Château d’Yquem) dates back to 1593 and while 430 years may be a bit too old even for a goalkeeper, it’s a testament to the brand’s staying power and timelessness.
LVMH also possesses Tiffany & Co, Givenchy, Stella Macartney, TAG Heuer and Bulgari among many others within their 70-plus portfolio of prestigious brands. A huge name in their native France and with significant global experience with over 2,500 stores worldwide, LVMH brings a proven track record and provides quality in every sense to a foundational position in any team or portfolio.
Defender (CB) – CoStar Group (USA)
In the modern game, the expectation is increasingly for defenders to play out from the back and carry the ball forward – that marriage of forward-thinking coupled with old-school strong defensive skills is not easy to come by. CoStar displays all those attributes. On one hand, it keeps it refreshingly simple, with its incredibly dominant core business of providing commercial real estate information and analytics, which has basically become a cost of doing business in the industry.
Like many great defenders, it is highly dependable and the mission-critical nature of its solutions makes for a very sticky customer base – reflected in consistent client retention rates of 90%-plus. On the flip side that strong foundation and early mover advantage has given CoStar the confidence to look forward, acquiring and scaling platforms such as Apartments.com and LoopNet, which today represent the number one multifamily and commercial real estate platforms in the United States.
Defender (CB) – Adyen (Netherlands)
Sometimes you want a player who just quietly goes about their business. Often flying under the radar of casual supporters, true connoisseurs of the game will appreciate the contribution and value they add to the team. Adyen is one such example, relatively unknown compared to their flashier teammates, Adyen is critical to the success of the team and their clients. Adyen provides enterprises with a unified payments platform that supports e-commerce, mobile, and point-of-sale payments in multiple countries using various payment schemes and methodologies. Having key partnerships with a number of the world’s largest companies (inc, Microsoft, Spotify, Mcdonalds, Uber, Ebay and EasyJet) provides the defensive attributes with their tireless work rate generating $767bn in transactions during 2022. Meanwhile, a growing customer and geographical footprint allows them to get forward and continue to grow and develop. At only 17 years old they have already achieved so much and richly deserve their place in the team.
Defender (CB) – Monster Beverages (USA)
Ok, so if CoStar and Adyen are your relatively quiet achievers, Monster brings confidence, bravado and high energy to the team. Literally not everyone’s cup of tea, Monster is the world’s second-largest energy drinks manufacturer in a global market worth c.$90 billion per annum. Its potential was spotted early by Coca Cola, which has mentored Monster through a strategic stake and bottling partnerships worldwide.
With vast experience on the global stage (distributing in 157 countries) and a well-known brand targeting a younger demographic, Monster has good defensive characteristics and a personality that continues to drive them into the big time. A strong character in the market and the dressing room, Monster deserves its place in this starting 11, given has has enjoyed 30 years of consecutive sales growth.
Midfielder (WB) – Spotify (Sweden)
If midfield is all about distribution and pace then Spotify is the company for your team. You want your wingback to have the speed to transition from attack to defence and you don’t get much faster than Spotify. Whether it be growing paying users from 1 million in 2011 to 210 million in March 2023, or moving from one market to over 180 today, Spotify has continued to grow as a player at an impressive rate since exploding on the scene in 2006. Increasingly people’s audio platform of choice, Spotify is equally a key player in our team distributing over 60 million tracks and 5 million podcasts. Having built a strong subscriber base through music streaming, it continues to develop new skills adding podcasts, audiobooks and live events to keep new and old fans enthralled.
Midfielder (CM) – Visa (USA)
If you are looking for someone to connect the team, a real box-to-box midfielder, then look no further than Visa. Capable of defending on the edge of the box, as a classic pick and shovel approach or driving growth across new networks and markets. Visa is often the visible and invisible partner in facilitating financial transactions across the world. Teams often look for a playmaker in midfield, someone they can play the ball through linking all the players into one cohesive, seamless team helping to make the beautiful game look effortless. Visa plays that role, connecting 3.3 billion cardholders and 46 million merchants across their network in over 200 countries and territories, there is little doubt it is a real team player.
Midfielder (CM) – Constellation Software (Canada)
The Swiss army knife of midfielders, Constellation brings many specialised and unique skills across multiple disciplines to the heart of midfield. In simple terms, Constellation seeks to identify young talent that they can acquire and add to their diversified and growing portfolio of software businesses. A big proponent of culture and discipline that provides the ability to open up and change the game, both for the team and for its clients, whom it can offer market-leading, mission-critical vertical software solutions. A well-balanced midfielder with vision, and the skills to deliver something a little different while supporting and mentoring other members of the team.
Midfielder (WB) – Sansan (Japan)
Sometimes it is nice to have a name in the team your competitors are less familiar with, a little bit of an unknown quantity that will intrigue and keep them guessing. Having played almost entirely in their own domestic market, Sansan is that player. Having said that, they are here on their own merit and like all the best players they have more than one string to their bow. The core of their business revolves around contact management software which is complimented by their ‘Eight’ professional social network with over 3m users. This network-based model helps drive efficient and value-add connections which are vital to businesses and pacey wingers looking to connect defence and attack, providing valuable opportunities to score and deliver results.
Attacker (RW) – Amazon (USA)
An often miss understood player, is it a tech company? A retailer? Perhaps a logistics business is the best description? The reality is that Amazon has a kit bag full of skills to take on and beat almost any competition. Like any good logistics business, it certainly handles the incoming ball well, processes the information and then delivers it with pinpoint accuracy into the box.
While retail and tech are core to the business perhaps it is Amazon’s mastery of logistics that sets it apart. Having started with a relatively simple business model, an online bookstore, many wrote the company off early as it failed to produce a profit for its efforts. However, it has worked hard, and adapted its game to become the world’s largest e-commerce platform and cloud infrastructure provider.
Over 2 billion visitors to Amazon’s websites every month tells you it is doing something right. While now one of the more experienced and biggest names in the team, it continues to offer not only a strong core business but is continually looking to leverage those core attributes to deliver yet more goods, services and solutions for new and old fans alike.
Attacker (CF) – Alphabet (USA)
A player who needs relatively little introduction. A stalwart of the team, our Sam Kerr – a name you can turn to for consistency even on the biggest stage. That being said, no one has a right to be in the team and Alphabet needs to continually prove themselves against disruptors and new players entering the market. With a solid track record of scoring goals across multiple tournaments, it gets the nod here. A player capable of scoring with both feet and their head, they possess a ray of enviable skills and have always led from the front. The fact that they now have 9 products with over 1 billion users says it all (Search, YouTube, Cloud, Gmail, Chrome, Android, Google Play, Maps, Photos). An intelligent player, artificial or otherwise, it brings a strong track record while continuing to evolve and adapt to ensure it remains on top of its game.
Attacker (LW) – Mercado Libre (Argentina)
What would any World Cup be without representation from Latin America? Latin America has been home to some of the world’s most passionate, skilful and successful players. Mercado Libre fits that mould, from humble local beginnings they are now taking on and beating the world’s best players in their home markets. Commentators often talk about players being the complete package. With the region’s leading e-commerce platform, logistics, advertising and payments, Mercado Libre is on the cusp, having a presence across the value chain to deliver a seamless experience for the team and their customers. As the dominant player in various nascent and fast-growing markets, the future is very bright for this rising star if it can continue to develop and deliver for the team at this tournament and beyond.
Nick Thomson is the Portfolio Manager of the Lakehouse Global Growth Fund and holds units in the Fund, which owns shares in LVMH, CoStar, Adyen, Monster Beverages, Spotify, Visa, Constellation Software, Sansan, Amazon, Alphabet and MercadoLibre. This article contains general investment information only (under AFSL 526842) and has been prepared without taking into account the reader’s financial situation.
Nick Thomson is the Portfolio Manager of the Lakehouse Global Growth Fund and leads a highly experienced global team of investment analysts based in Sydney, Australia. When Nick joined Lakehouse, he led the firm’s investment research efforts for its ‘Loyalty’ fascination and was pivotal in being actively involved in the portfolio management process given his depth of experience both locally and abroad. Previously, Nick worked at Dakota Capital as an investment analyst focused on private and public investments. He was responsible for the raising, deployment and management of multiple investment funds and was based both in Sydney and New York.