Hearts and Minds Investments Limited (HM1) saw its profit after tax drop 57% to $46.4 million for FY26, amid a portfolio return slowdown to 5.2%. The company declared a 10-cent fully franked final dividend and maintained its $11.4 million commitment to Australian medical research.
- Profit after tax down 57% to $46.4 million
- Investment portfolio returns slow to 5.2% pre-tax
- Final fully franked dividend increased to 10 cents per share
- Donations to medical research total $11.4 million
- Portfolio concentrated in global equities with AI sector exposure
Profit Halves on Portfolio Volatility
Hearts and Minds Investments Limited (ASX:HM1) reported a stark pullback in profitability for the year ended 30 June 2026, with profit after tax plunging 57% to $46.4 million. Total comprehensive income tumbled 76% to $29.6 million, reflecting a significant slowdown in investment returns compared to the prior year’s stellar 25.5% pre-tax portfolio gain, which collapsed to 5.2% this financial year.
The company’s net tangible assets (NTA) per share edged down slightly to $3.38 post-tax from $3.44, while the share price slipped from $3.04 to $2.95, widening the discount to NTA from 11.8% to 12.7%. Despite the softer performance, HM1’s compound annual pre-tax return since inception in 2018 remains a respectable 10.7%.
Dividend Boost Amid Mixed Portfolio
In a nod to shareholder returns, HM1 declared a final fully franked dividend of 10.0 cents per share payable in October 2026, raising the total dividends for FY26 to 28.5 cents per share. The board reaffirmed its commitment to fully franked dividends, contingent on cash reserves and franking credits.
The investment portfolio, split between Core and Conference segments, delivered mixed results. The Conference Portfolio saw notable winners such as ACM Research, which surged 283%, alongside strong performances from Brookdale Senior Living and Steel Dynamics. Conversely, the Core Portfolio experienced volatility with gains in Taiwan Semiconductor and Nvidia offset by steep declines in Zillow, Microsoft, and SAP.
HM1’s exposure to the so-called “Saaspocalypse”; a market reassessment of Software-as-a-Service companies amid generative AI disruption; contributed to portfolio swings. The company marked its holding in Corporate Travel Management to zero following its trading suspension, a significant detractor for the year.
Philanthropic Commitments Continue
True to its dual mission, HM1 maintained its philanthropic focus by donating $11.4 million to leading Australian medical research organisations during FY26, consistent with its policy of contributing 1.5% of NTA annually. The company increased its accrual for future donations slightly to $8.3 million. Since inception, HM1 and the Sohn Hearts & Minds Conference have collectively donated over $96 million to pioneering research tackling cardiovascular disease, neurodegeneration, diabetes, cancer, and more.
The company’s medical research beneficiaries include prominent institutes such as the Victor Chang Cardiac Research Institute, Murdoch Children’s Research Institute, and the Peter MacCallum Cancer Centre, supporting projects ranging from genetic muscle disease therapies to brain cancer breakthroughs.
Governance and Risk Management Enhancements
HM1’s governance remains robust, with a board and investment committee comprising seasoned industry veterans who continue to serve pro bono. The company is enhancing its risk management framework by collaborating with Plato Asset Management to adopt a proprietary red flag system aimed at identifying stocks with governance or accounting concerns, a move prompted by recent portfolio volatility and the Corporate Travel Management write-down.
HM1’s concentrated portfolio of 20 to 25 global equities reflects high conviction stock picks from selected fund managers, including new offshore manager Prusik Investment Management, which contributed positively in its inaugural year. The portfolio’s sector exposure is tilted towards AI infrastructure and semiconductor stocks, consistent with broader market trends.
Looking Ahead to International Expansion
Marking a decade since its founding, HM1 is taking the Sohn Hearts & Minds Conference international for the first time, hosting the 2026 event in Queenstown, New Zealand. This milestone underscores the company’s ambition to blend investment insight with philanthropic impact on a global stage.
While the company navigates the challenges of a volatile market and concentrated portfolio risks, its commitment to delivering shareholder returns alongside funding critical medical research remains clear. How HM1 balances these dual objectives amid evolving market dynamics will be a key theme for investors to watch.
Bottom Line?
HM1 faces a pivotal year balancing portfolio volatility and philanthropic commitments while seeking to narrow its share price discount.
Questions in the middle?
- How will HM1’s new risk management framework impact future portfolio volatility?
- Can the Conference Portfolio continue to offset Core Portfolio headwinds amid AI sector shifts?
- What investor appetite exists for HM1’s dual investment and philanthropic model in a choppy market?