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The Sizzle of Sezzle

August 26, 2020
Warrick Lace

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The Sizzle of Sezzle

It doesn’t get much “hotter” for investors than the burgeoning Buy Now Pay Later (BNPL) sector. Share prices have run hard in the past few months, with the likes of Afterpay (APT) attracting the lion’s share of attention with a scorching run from under $10 to nearly $100 from March to August this year.

It doesn’t get much “hotter” for investors than the burgeoning Buy Now Pay Later (BNPL) sector. Share prices have run hard in the past few months, with the likes of Afterpay (APT) attracting the lion’s share of attention with a scorching run from under $10 to nearly $100 from March to August this year.

But Ron Shamgar, the head of Australian Equities at Tamim Asset Management remains bullish on the long term outlook for the BNPL sector. He says instalment payments are here to stay and will replace large parts of the massive credit card industry, faster than many expect.

He says this is particularly driven by the Generation Y consumers forcing their way into the market.

 

For Shamgar, it is all about the global opportunity set, as a few Australian companies have emerged as the clear global leaders in this space. And, it is also about barriers to entry, as they have so far proven to be difficult to compete with.

While share prices have run hard this year, Shamgar says growth rates will continue to rise as the opportunity globally is still in its infancy.

A key consideration is his view that sector consolidation is inevitable and Shamgar’s top pick is Sezzle (ASX: SZL), where he believes it is the fastest growing pure play company in the North American market. Like Afterpay, Sezzle has plenty of sizzle with its share price rocketing more than 10 times this year from the dip in March. Shamgar says it is worth well north of $12 in the next couple of years.

Ron Shamgar was Reach Markets’ ‘Meet the Fund Manager’ guest on Friday 28 August. Click here to view a recording.

From a macro perspective, Shamgar expects volatility to continue as investors react to mixed economic data, further virus outbreaks and an uncertain US election outcome. Short term he expects and would even welcome some consolidation or a pullback. 

But in the medium to long term he is extremely bullish on equities. With the zero interest rate environment here to stay for years to come he says investors will eventually look for better returns than cash, and equities are the only available option as property might struggle as consumer credit remains tight.

 


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