Gareth Campbell, Global Equity Analyst 30 July 2019
When choosing companies for the HL Select Global Growth fund we look for very specific characteristics.
We believe businesses with exceptional products and services can create a virtuous circle of customer loyalty, pricing power and financial strength that allows them to prosper and grow whichever way the economic winds are blowing.
Although remember all investments rise as well as fall in value, so you could get back less than you invest. Past performance is not a guide to the future.
Last week we added the world’s largest concert promoter and the world’s biggest ticketing business to the fund. Live Nation Entertainment owns both companies following their merger in 2010. And we believe it’s a great example of what we look for, to target long-term growth, in the HL Select Funds.
This article isn’t personal advice. If you’re not sure if an investment is right for you please ask us for advice.
Attractive industry dynamics
The live music industry is an attractive area for investment. It’s grown at 8% a year for almost 20 years, and benefits from barriers to entry because technology can’t replicate the experience of going to see your favourite singer or band play live. That’s unique within the consumer business sector, where existing businesses are fighting to stay relevant amidst the onslaught of tech disruption and competition.
The industry has also benefited from a change in how artists are paid. Historically they used to make money from album sales and royalties but now over 80% of their income comes from touring, where there’s big money to be made. Ed Sheeran’s 2018 tour, for example, grossed $432m.
Unsurprisingly, these sums ensure there’s a constant stream of artists who want to go on tour, so you can stop wondering why Rod Stewart, at 75 years young, will be performing at 20 venues across the UK in 2019.
Live Nation’s strong position
Live Nation’s events attract four times as many fans as their nearest competitor, meaning artists call Live Nation first when they want to tour or promote a show. By attracting superstars, who sell the most tickets, Live Nation can afford to invest in cutting edge technology to create the best experience for fans, which leaves them wanting more from artists who, in turn, ask Live Nation to set up more shows.
And demand for live music looks set to stay. In fact, this year’s Glastonbury sold out in just 36 minutes. As consumer spending continues to shift from ‘things’ to experiences, supply of concerts and events can’t keep up with demand. Which suggests the number of fans attending Live Nation events should at least grow in line with what we’ve seen over the years to this point. Although there are, of course, no guarantees.
And importantly for us, we believe the profit per fan will increase as Live Nation adds new ways to improve their merchandising and advertising business.
Not just the ticket
Ticketmaster is the largest ticketing platform in the world with 30% global market share. Over the last 8 years they’ve expanded from 15 to 25 countries and have consistently increased market share thanks to their best in class product and services.
At times ticketing businesses have been criticised because of their role in enabling ticket touts to inflate prices and take large fees in the secondary market. We believe Ticketmaster will be seen as the solution to this problem as digital ticketing makes it easier to link a ticket to the individual who bought it, limiting the ability of touts to fleece fans. Because Ticketmaster receive servicing fees every time a ticket is bought or sold, this change is good for both consumer and Ticketmaster.
Scope for growth
Live Nation has a huge advantage versus other consumer businesses looking to expand into international markets as the local demand for their product already exists. They don’t need to promote the Rolling Stones or Madonna or Drake, they just need to organise the event and bring the artist.
Once they have enough events in one country they can lease a venue, acquire local suppliers, bring in their own ticketing operations and begin to recreate their business model at a local scale. No other competitor can replicate this currently. That’s why we see Live Nation as a long term winner in this industry.
The HL Select difference
Every stock in the HL Select Global Growth fund has its own story. And potential investors can find out exactly why it’s held, before choosing to invest in the fund.
Very few companies make the grade, but once we find them, we aim to keep holding them, for as long as they meet our criteria. If we do decide to sell, we’ll let investors know, and tell them why.
We’ also keep investors up to date with our views in the market, and how the stocks in the portfolio have been performing.
After all, it’s your money, you deserve to know what we’re doing with it.
This fund can fall as well as rise in value so you could get back less than you invest, especially over the short term. Information provided about individual companies is our view as managers of the fund. It is not a personal recommendation to invest. If you are at all unsure of an investment’s suitability for you please seek personal advice. The HL Select Funds are managed by our sister company HL Fund Managers Ltd.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research disclosure for more information.