Why this fund manager prefers Afterpay over WiseTech

Fund manager Jun Bei Liu from Tribeca investment partners said that she prefers Afterpay Touch Group Ltd (ASX: APT) to WiseTech Global Ltd (ASX: WTC).

As a reminder, Afterpay is the leading buy now, pay later business in Australia and WiseTech is a global logistics software business.

It has been a disappointing few months for Australian technology shares. Since their all-time highs in reporting season Afterpay and WiseTech are down 43% and 34% respectively.

The AFR has quoted Ms Liu, who manages around $1 billion for the Tribeca Alpha Plus fund, as saying some analysts are being too pessimistic and that it’s currently a stockpicker’s market because the right businesses will be able to deliver earnings growth.

She said she feels doesn’t feel as comfortable about WiseTech because she doesn’t get enough clarity and transparency in terms of earnings. As an aside, she also said that she likes Aristocrat Leisure Limited (ASX: ALL) for its ongoing growth, online gaming ventures, its un-demanding multiple and its US dollar earnings.

Afterpay is not the business it was a few years ago. It has since launched in the US and will soon be launching in the UK.

When Afterpay gave a business update in November 2018 it said that it had achieved more there in six months than in Australia in two years. It revealed underlying sales figure in the US of $115 million. At that point, to the end of October 2018, it had 300,000 consumers and over 900 retailers which had transacted with Afterpay.

Afterpay also said that the total gross merchandise volume (GMV) of retailers who were live at the time in the US was larger than the total online apparel market in Australia.

If Afterpay can reach the metrics in the US that it has Australia then Afterpay could be an excellent growth share from here. Some of the metrics I’m thinking of include Afterpay’s 10% market share in Australia, its gross and net transaction loss figures and its positive Australian earnings before interest, tax, depreciation and amortisation (EBITDA) number.

Foolish takeaway

Despite the major fall of the Afterpay share price, it’s still trading at 89x FY20’s estimated earnings. But, there’s a good chance that Afterpay may surprise the market positively over the next year or two, particularly if its UK expansion goes well.

But, Afterpay isn’t the the type of investment I’m looking for my portfolio. I’d rather invest in a growing business with a lower price/earnings ratio.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO and WiseTech Global. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…


The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!