The Rules of Investing
The Rules of Investing
About The Rules of Investing
Culture is not something that immediately springs to mind when assessing a company and its prospects for the future. More often than not, we investors are scouring profit and loss statements, comparing financial ratios and (if we have the time and skill) constructing valuation models. However, good culture is critical in a business; it takes a long time to build and is hard to maintain. And yet, it can take as little as one rogue employee to upset the delicate balance and ruin it completely. This is something that Qiao Ma, portfolio manager for the Munro Global Growth Small and Mid-Cap Fund, is intimately aware of. As Ma revealed, if she determines that the culture is wrong when conducting her due diligence of a company, despite everything else looking good, she is walking away. No 'ifs'. No 'buts'. She's not investing in that company. "When it’s the wrong culture, it’s 100% of the [investment] decision," she said. Culture is the ultimate forward-looking indicator of where a company is going. It does not matter, the past glory it was able to achieve. If you have the wrong culture, you have no space." In this episode of The Rules of Investing, Livewire's Chris Conway learns more about Ma’s investment philosophy, how it has developed over the years, and her outlook for growth investing – particularly in the small and mid-cap space. Ma also shares a handful of stocks she likes right now and the types of opportunities she is hunting for over the next 12 months. Timecodes: 0:00 - Intro 0:47 - How Qiao Ma's investment philosophy has developed over time 3:33 - Value versus growth 3:58 - On working at Lehman Brothers during the GFC 5:57 - The best lessons from investment legend Peter Cooper: The importance of culture 9:13 - How much culture should play into investment decision-making 10:59 - Qiao's most memorable stock picks from her career 12:49 - The biggest surprises in markets from the last two years 14:38 - The outlook on growth for the next 12-24 months 17:57 - The major risks the Munro team is spending the most time debating 23:43 - The catalyst for small and mid caps to rebound 24:25 - A stock that can fund its own growth: JD Sports (LON: JD) 28:02 - Why earnings durability is so important 29:18 - A high-conviction stock pick for the year ahead: On Holding (NYSE: ONON) 30:31 - The Rules of Investing's 3 common questions ____________________________________________________________ Disclaimer: The information provided by Munro Partners is general information only and is not intended to include, or constitute as, financial product advice. The views held by Munro Partners are current at the time of recording and are subject to change. Every effort has been made to ensure that the material contained in this document is accurate at the time of publication. Market conditions may change which may impact the information contained in this document. This information has been prepared without taking account of the objectives, financial situation or needs of individuals. You should obtain independent advice from a licenced professional adviser before making any investment decision. Information about the Munro funds, including the product disclosure statements (PDS) for the Munro Funds is available at www.munropartners.com.au. Munro Partners is a corporate authorised representative of Munro Asset Management Limited, AFSL 480509.
Qiao Ma has had an extensive career in funds management including stops in New York working for hedge fund Jericho Capital and more recently Cooper Investors in Melbourne. Earlier this year, Qiao joined Munro Partners, where it was recently announced that she would be leading the Munro Partners Global Growth and Mid-Cap Fund. On the upcoming episode of the Rules of Investing – Qiao shares what it was like starting her career during the GFC, why she likes the small and mid-cap space, as well as a few of her favourite stocks. Here's a preview of what you can expect.
From geopolitics to fiscal policy, commodities to equities, this week's featured guest on The Rules of Investing has some high-conviction views on a whole range of subjects. For more than 40 years, Donald Amstad traded his way through the highs and lows of financial markets. After completing his undergraduate studies at Oxford University, Amstad began his career at Japanese trading house Nomura. He went on to hold roles at JPMorgan, JPMorgan Asset Management, and the Bank of America before spending the last 15 years of his career at Aberdeen Standard (now, abrdn). And although he may be a fixed income specialist by trade, you would be wise to listen to Amstad's interviews on many other subjects. Long-time readers and viewers of Livewire may have already seen some of Amstad's thoughts on the markets. In 2019, Amstad was a participant in Livewire's Expert Insights series. One of his videos has garnered more than 800,000 views since it was first uploaded - the most of any Livewire video ever. In the four years since that video was recorded, so much has changed in the world. Among them are the COVID-19 pandemic, the rapidly changing geopolitical situation to the slow (and ongoing death) of quantitative easing. But even as the world has changed, Amstad's core views on some of the most pressing challenges of our time have not. In fact, they have strengthened. This week, Livewire's Hans Lee sat down with Amstad for a half-hour conversation on the big picture issues that are driving markets - and the issues that are not driving markets (yet). This is a conversation you cannot afford to miss. Note: This interview was conducted on Tuesday 7 November 2023.
Despite all of his success, Morry Waked has remained relatively under the radar. He’s not one to boast of his achievements, and he’s very rarely fronted the media. At Livewire, we dedicate ourselves to finding the best fund managers in Australia - and in a testament to how underground Morry is, he hadn’t even popped up on our radar. Last week, however, Morry found himself thrust into the spotlight and was inducted into the Australian Fund Manager Hall of Fame - joining a now 22-name strong list of the country's most recognisable fund managers such as Kerr Neilson, Chris Cuffe, Anton Tagliaferro, Catherine Allfrey, Phil King and many more. What’s unique, is that all 21 other names on this list are fundamental investors. This is the first time that someone who employs a quantitative, or systematic approach to investing, as Morry describes it, has been added to the Hall of Fame. In this episode, Morry sits down with Livewire's Ally Selby for a look at his remarkable career, a deep dive into quantitative investing, as well as some of the insights that Morry's models have identified today. Note: This interview was recorded on Thursday 26 October 2023. https://www.livewiremarkets.com/wires/invest-in-what-you-know-avoid-what-you-don-t-lessons-from-a-hall-of-fame-fund-manager/ Timecodes: 0:00 - Intro 2:59 - Fate and purpose: How Morry fell into funds management 3:59 - On trying to educate investors on his quantitative/systematic strategy 5:45 - Morry's career journey 7:02 - The greatest lessons from Morry's career so far 8:50 - Markets and models change, but Morry's philosophy doesn't 10:35 - On using Artificial Intelligence in investing 11:16 - A beginner's guide to quantitative/systematic investing 12:58 - Common misconceptions 13:56 - The importance of remaining unemotional when investing 15:05 - Where we are in the cycle today 17:43 - Where Morry and the Vinva team see opportunity both locally and abroad 19:07 - Why these models give Vinva a leg up on the competition 22:17 - ROI's common questions: What the market is getting wrong and lessons from wins and losses from Morry's career
The times when a company is dominating headlines (for all the wrong reasons) are the best time to buy. Take Medibank Private (ASX: MPL), for example, which you may remember, was embroiled in a data breach in October 2022. On the news, the stock's share price plummeted more than 20%. And while it still hasn't retraced its steps to its prior glory, astute investors who picked up the private health insurance provider on the cheap would have since enjoyed a return of around 22%. Today, there are two businesses on the ASX that are similarly making headlines: ResMed (ASX: RMD) and Qantas (ASX: QAN). And while one of these businesses is likely to continue to face headwinds going forward, the other could just be the "most outstanding buy idea on the ASX" today. That's according to Airlie Funds Management's Emma Fisher, who believes if a company's balance sheet is intact, times of "maximum pain" are usually an investor's best indicator that a business is a buy. In this episode, Livewire's Ally Selby learns where Emma is seeing the most value on the ASX today, why the data proves it pays to be bullish on the stock market over the long term, what separates the good investors from the great ones, as well as a deep dive on why the team is still buying CSL (ASX: CSL) despite downgrading the stock. Plus, she also shares why she believes the market is focusing far too much on the macro, as well as the stock she would back if the market were to close for the next five years. Note: This episode was recorded on Wednesday 27 September 2023. Timecodes: 0:00 - Intro 1:26 - How Emma Fisher thinks about investing 4:06 - Why we need a reality check 6:45 - What keeps Emma Fisher inspired 9:42 - The biggest changes in the Airlie Australian Share Fund portfolio and key lessons from the past two years in markets 13:11 - Portfolio holdings that have been more resilient than expected: James Hardie (ASX: JHX) 14:20 - Why being bearish may sound smart, but being bullish makes money 17:01 - Times of maximum fear are the best times to make money: The Medibank (ASX: MPL) example 19:57 - Emma's analysis of Qantas (ASX: QAN) and ResMed (ASX: RMD) 27:07 - What separates the good investors from the exceptional ones - and it's not a high IQ 29:37 - The biases Emma has learnt to manage - and how you can too 32:03 - Where Emma is seeing the most value today 37:45 - Analysis of CSL and the Vifor acquisition 42:46 - One thing investors are getting wrong about markets 43:48 - A story of a big loss from Emma's career and what she learnt from it 46:12 - Why cashflow is paramount 46:35 - One stock that Emma would hold if the markets were to close for five years: ResMed (ASX: RMD)
Matthew Kidman is a well-known entity to readers of Livewire, as host of Success and More Interesting Stuff, Buy Hold Sell, and most recently, Livewire Live. Finally, we got him in the hot seat to run us through his own journey into funds management, his approach to investing, and the way he’s thinking about markets today. From hard truths on a squash court to starting his own shop, Centennial Asset Management, Matt’s story is one of happenstance. It’s also a story about the importance of mentors and networks. To steal a line from Top Gun, the list is long but distinguished. Geoff Wilson, John Sevior, Anton Tagliaferro and Peter Morgan, to name but a few. Their influence can be seen in the way Matt runs Centennial Asset Management and its Level 18 Fund. While it focuses on value and small caps, it’s got a highly flexible mandate that lets it ride momentum when the market is on, go short when it’s not, and preserve capital when crises hit. We cover all these topics, and more, in this bumper episode. Note: this episode was recorded on September 20, 2023. Timestamps 0:00 - START 2:16 - Hard truths on a squash court 5:50 - Getting a start in journalism 6:30 - Landing book deals with Geoff Wilson 16:30 - 13 years at Wilson Asset Management 20:30 - Taking time off to do a PhD 22:30 - Mentors in finance 26:20 - Bottoms don't have to be V-shaped 29:50 - Key lead indicators 33:40 - From hard landing, to soft landing, to no landing 36:30 - China's in the hurt locker 41:00 - Buying growth 43:50 - Financials 45:30 - A flexible mandate 47:40 - Hiding in large caps 51:30 - Riding a market bounce with smalls 54:20 - Moving into quality 58:30 - Is lithium crowded? 01:01:27 - Watch rates 01:06:16 - Bottom drawer stock WANT ACCESS TO STOCK IDEAS? You told us you’re looking for an edge in investing. As the principal sponsor of Livewire Live 2023, Bell Direct is giving you exclusive access to 3 Bell Potter stock reports each week PLUS the chance win a share of 3 million Velocity Frequent Flyer Points. Get your reports and enter the Velocity competition now. Competition ends 31 October 2023. Entry conditions and eligibility criteria apply. NSW Authority No. TP/02866, SA Permit No. T23/123, ACT Permit No. TP 23/01592 Get my 3 Bell Potter stock reports now.
Short sellers have had a tough time of it over the past decade. The era of free money lifted all boats, including companies that would perhaps otherwise be candidates for short selling. Today's market is radically different. Central banks have lifted rates in a desperate attempt to control inflation. Global equity markets have performed well, but much of that performance can be attributed to the tech titans of the Nasdaq. Consumers have less money to spend, while costs are up and top line revenue is down. This is fertile hunting ground for short sellers. Short selling is risky, and beyond the capacity of most normal investors. But that doesn't mean that normal investors can't take on board short seller's methods and positions, and steer clear of certain companies accordingly. I speak to a lot of hedge fund managers about their methods, however most aren't willing or able to expose their actual short positions. Dr David Allen, who manages Plato's Global Alpha Fund, has no such qualms. In this episode of The Rules of Investing, hosted by David Thornton, Allen explains his red flag system for identifying shorts and some of the companies it's identified. He also discusses his his long process, which draws on elements of growth, value and quality. And it wouldn't be an episode of ROI without Allen naming some of the companies he has conviction in right now. Note: This episode was recorded on Tuesday September 19, 2023. Timestamps 0:00 - START 2:00 - Life as a professional athlete 3:20 - JP Morgan (and surviving the GFC) 8:00 - Combining growth, value and quality 16:00 - A red flag system for finding shorts 20:40 - The most common red flag in today's market 21:55 - Two high conviction shorts on the ASX 26:00 - Access to the C-suite isn't what it used to be 27:00 - Is Qantas (ASX: QAN) a bargain or value trap? 34:55 - Does nVidia deserve its valuation? 37:57 - You don't need to be concentrated to generate returns 39:17 - A humbling experience 43:30 - This drug will change the face of healthcare WANT ACCESS TO STOCK IDEAS? You told us you’re looking for an edge in investing. As the principal sponsor of Livewire Live 2023, Bell Direct is giving you exclusive access to 3 Bell Potter stock reports each week PLUS the chance win a share of 3 million Velocity Frequent Flyer Points. Get your reports and enter the Velocity competition now. Competition ends 31 October 2023. Entry conditions and eligibility criteria apply. NSW Authority No. TP/02866, SA Permit No. T23/123, ACT Permit No. TP 23/01592 Get my 3 Bell Potter stock reports now.
We're constantly told that diversification is the only free lunch in finance. Yet most of the world's top investors choose not to eat it. Warren Buffett, Charlie Munger, John Maynard Keynes, Lou Simpson, George Soros. All run concentrated portfolios. Today's guest on the Rules of Investing is similarly esteemed, with a similarly concentrated portfolio. Claremont's Bob Desmond runs a portfolio of just 10-15 "quality growth" stocks. And many of the stocks he owned during the 'free money' period of high liquidity and high growth are the same stocks he owns today. In today's episode, Bob explains why quality growth is the best strategy in all markets, why investors shouldn't react to "bear porn" headlines, why nVidia might not be overpriced despite its recent run, and the one stock he would love to own "forever". Note: This episode was recorded on Monday September 11, 2023. Timestamps 0:00 - START 1:46 - Surprises and uncertainty 2:46 - Is nVidia overvalued? 8:14 - Predicting the future is a mug's game 9:40 - Trouble at Apple 12:09 - Markets change, so pick companies that [mostly] stay the same 15:40 - Forever stocks 17:41 - High conviction bias 21:50 - When's the right time to sell? 26:50 - Don't get sucked in to "bear porn" headlines 28:30 - Do investors sell out of growth too soon? 34:10 - Sidestepping the GFC 35:30 - Quality is armageddon armour 41:01 - A bullet proof business model Want access to stock ideas? You told us you’re looking for an edge in investing. As the principal sponsor of Livewire Live 2023, Bell Direct is giving you exclusive access to 3 Bell Potter stock reports each week PLUS the chance win a share of 3 million Velocity Frequent Flyer Points. Get your reports and enter the Velocity competition now. Competition ends 31 October 2023. Entry conditions and eligibility criteria apply. NSW Authority No. TP/02866, SA Permit No. T23/123, ACT Permit No. TP 23/01592 Get my 3 Bell Potter stock reports now.
We're constantly told that diversification is the only free lunch in finance. Yet most of the world's top investors choose not to eat it. Warren Buffett, Charlie Munger, John Maynard Keynes, Lou Simpson, George Soros. All run concentrated portfolios. The guest on this week’s episode of the Rules of Investing is similarly esteemed, with a similarly concentrated portfolio. Claremont Global's Bob Desmond runs a portfolio of just 10-15 "quality growth" stocks. What's more of the stocks he owned during the 'free money' period of high liquidity and high growth are the same stocks he owns today. In today's episode, Bob explains why quality growth is the best strategy in all markets, why investors shouldn't react to the news cycle, why nVidia might not be overpriced despite its enormous run, and the one stock he would love to own "forever". Here's a preview of what you can expect.
Ten years ago, investing was an easy game. Thanks to rates near zero and reckless fiscal spending, markets were drunk on liquidity. There was multiple expansion across the board, and winning was relatively easy. Pick an index, sit back and let multiple expansion take care of the rest. Today’s reality is far different. Volatility is high, correlations are weak, and the once reliable 60/40 portfolio is, well, not so reliable. In today’s episode of The Rules of Investing, I sit down with Frances Lim, Managing Director and Head of Asia Pacific Macro at KKR. Francis strikes a refreshingly positive tone on the market today, pointing out that wages, nominal GDP and earnings are all above trend. Frances gives us a full macro appraisal of US and Asian markets, the state of China, how she views investing in 2023, and where she’s finding value in the market. Thanks again to Bell Direct for their support of this podcast. And remember, for a limited time, you can get 3 current Bell Potter stock reports each week. It’s the kind of exclusive research that can give investors an edge. So go to Bell Direct and look for the Livewire logo to get your Bell Potter stock reports now. Note: This interview was recorded on August 22, 2023. Timestamps 0:00 - START 1:50 - Soft landing? 4:20 - A great setup for companies 7:17 - The health of corporate America 10:17 - What's happening in China? 14:00 - China's trickle-down economics 19:00 - Correlations in trouble 23:10 - Time for a 40/30/30 portfolio 24:27 - The best risk-adjusted return 27:40 - Is passive investing enough? 29:40 - The role of thematic investing 31:30 - How active should active investors be? 32:40 - The best opportunities in Asia right now
There are a select few stocks on the ASX that boast true market darling status. Whereas other stocks sell off at the hint of bad news, market darlings seem to emit an aura effect on markets that itself attracts investment. Biotech company CSL is arguably the Aussie market’s preeminent market darling, having returned 5,741% since inception. For a while, it seemed like CSL could do no wrong. But even royalty can be dethroned... Today’s guest is Ray David, Portfolio Manager and Partner at Blackwattle Investment Partners. Alongside Joseph Koh, Ray runs Blackwattle’s brand new Long-Short Quality Fund. Ray has a red flag system for identifying his short and underweight positions. He put CSL through the ringer, and as you’ll learn today, it spat out a sea of red flags. He also discusses the Ponzi scheme that sparked his interest in investment finance, why he’s bullish BHP irrespective of the commodity cycle, his overweight positions in industrials, and the media company with the best suite of assets on the ASX. Thanks again to Bell Direct for their support of this podcast. And remember, for a limited time, you can get 3 current Bell Potter stock reports each week. It’s the kind of exclusive research that can give investors an edge. So go to Bell Direct and look for the Livewire logo to get your Bell Potter stock reports now. Note: this interview was recorded on August 15, 2023 Timstamps 0:00 - START 1:56 - A ponzi introduction to finance 5:30 - Lessons from the the Buy and Sell sides of the industry 10:00 - Have risk assets beaten central banks? 11:46 - The bear case for banks 14:00 - Defining 'quality' 18:00 - A new era for short selling 22:54 - Red flags for CSL 27:00 - Overweight industrials 29:10 - The best asset book on the ASX 30:26 - Reporting season buys 34:40 - Mining needs explosives 37:37 - Franchising done right
Hello and welcome to the Rules of Investing, brought to you by Livewire Markets, I’m your host David Thornton. On the upcoming episode I sit down with Ray David, Portfolio Manager and Partner at Blackwattle Investment Partners. Alongside Joseph Koh, Ray runs Blackwattle’s brand new Long-Short Quality Fund. Ray has a red flag system for identifying his short and underweight positions. He put CSL through the ringer, and as you’ll learn, it spat out a sea of red flags. He also discusses the Ponzi scheme that sparked his interest in investment finance, why he’s bullish BHP irrespective of the commodity cycle, and the media company with the best suite of assets on the ASX. Here’s a preview of what you can expect. --- A quick note to our loyal listeners. This is the first episode in our long-standing series that has been supported by a trusted partner of Livewire, Bell Direct. Research shows that experienced investors are looking for an edge. As the first-ever sponsor of Livewire’s “Rules of Investing” podcast, Bell Direct is offering exclusive access to 3 current Bell Potter stock reports every week for a limited time. To claim, hit up belldirect.com.au and look for the Livewire logo.
Livewire Live is an investor event like no other where Australia’s most experienced investors will debate the critical topics in markets right now. It is set to be an unmissable event with an exceptional lineup of speakers and innovative formats. Tickets will sell out, secure your spot here. Speakers We will be announcing additional speakers in the coming weeks. Robert Millner, Chairman, Washington H Soul Pattinson Bobby Yazdani, Founder & Partner, Cota Capital Andrew Clifford, Co-founder, Co-Chief Investment Officer & CEO, Platinum Asset Management Martin Conlon, Head of Australian Equities, Schroders Nick Griffin, Chief Investment Officer, Munro Partners Mark Landau, Joint Managing Director & Chief Investment Officer, L1 Capital Christopher Joye, Portfolio Manager & Chief Investment Officer, Coolabah Capital Matt Williams, Head of Australian Equities, Airlie Funds Management Mary Manning, Portfolio Manager, Alphinity Investment Management Phil King, Chief Investment Officer, Regal Funds Management Tim Carleton, Principal & Portfolio Manager, Auscap Asset Management Jacob Mitchell, Chief Investment Officer, Antipodes Partners David Allen, Head of Long Short Strategies, Plato Investment Management Casey McLean, Portfolio Manager, Fidelity International Andrew McKie, Portfolio Manager Elston Investment Management Alexandre Ventelon, Head of Research and Investment Strategy, Morgan Stanley Wealth Management Dania Zinurova - Portfolio Manager, Wilson Asset Management Marcus Burns - Portfolio Manager, Spheria Asset Management Diana Mousina - Senior Economist, AMP
There is a good reason why Australia’s sovereign wealth fund, the Future Fund, maintains a 16% allocation to private equity. Returns, returns, returns. Private equity, and the lucrative returns it offers, has traditionally been the restricted domain of institutional investors and off limits to retail investors. Ellerston Capital's JAADE Private Assets Fund bucks that trend by offering retail investors exposure to unlisted Australian growth companies. Like private equity, JAADE’s managers act as a partner with the companies it invests in by holding a space on their respective boards. It’s a model that clearly works. As of June this year, the retail fund has returned 14.48% pa over three years and almost 18% per annum since inception. In today’s episode, Livewire's David Thornton sits down with Jayne Shaw, Investment Director at Ellerston Capital and analyst for the JAADE fund. Jayne didn’t take the typical road into funds management. Initially trained as a nurse, she went on to take a number of roles in leadership positions in healthcare organisations. This appropriately explains why Jayne looks after the healthcare allocation within the JAADE fund. She also explains why the “carpark indicator” is a great way to know when the deals are on in private equity. Topics include: the evolution of private equity over the last few years, today’s deal flow, the first order principles that guide Jayne’s process; and the investment case for Mable and Prospection – two companies that are shaking things up in the healthcare space. Timestamps 0:00 - START 2:30 - An uncommon journey 5:03 - Private equity has changed 10:17 - Dry powder 12:16 - Counting cars 14:00 - JAADE 16:00 - It all comes down to the people 19:58 - Hard conversations 21:30 - Earnings runway 22:25 - Mable 25:40 - Prospection 32:39 - Why healthcare companies are good investments 37:07 - Don't put too much weight in the past 42:00 - A company for the bottom drawer
If there is one request that we repeatedly receive from our audience, it’s that you want more content on the wonderful, often under-covered world of microcaps. It makes cents (literally). These stocks usually fly under the radar of the masses, providing diligent investors with the opportunity to invest in mispriced stocks and generate capital growth over the long term. However, investing in this area of the market comes with its risks. In 2022, the S&P/ASX Emerging Companies Index suffered a brutal blow (it fell 24%), with one Livewire contributor describing it as a "killing field". This year, however, the Index has lifted around 3%, but it hasn't been a tide that has lifted all boats. So in today's episode, we're joined by microcap expert Jessica Farr-Jones, the portfolio manager of the Regal Emerging Companies Strategy*. She shares why she is feeling bullish about the opportunity in small and micro caps, some of the stocks that have her excited, as well as a deep dive into what small and microcap investors can expect this reporting season. And yes, if the last name sounds familiar, she’s the daughter of Wallabies great Nick Farr-Jones, who now also works in funds management as a mining specialist. *Note: This strategy is only available to wholesale investors. However, around 25% of the Regal listed investment trust (ASX: RF1) is exposed to the Emerging Companies Strategy, which investors can access on the ASX.
In the upcoming episode of The Rules of Investing, we're joined by microcap expert Jessica Farr-Jones, the portfolio manager of the Regal Emerging Companies Strategy*. She shares why she is feeling bullish about the opportunity in small and micro caps, some of the stocks that have her excited, as well as a deep dive into what small and microcap investors can expect this reporting season. Here's a preview of what you can expect.
Value investing is all about buying stocks that are trading below their intrinsic value. In practical terms, that often involves investing in companies and sectors that have been shunned by the market due to particular macro headwinds. "It should be no surprise as to where the pockets of opportunity are," says Tim Carleton, Auscap Asset Management CIO and today's guest on the Rules of Investing. "They're in the more cyclical sectors that people are most concerned about from an earnings perspective." In today's interview with Livewire's David Thornton, Tim runs through two retail stocks in the Auscap Long Short Australian Equities Fund that fit this profile. I won't give them away, but one is the only stock on the ASX with a return on equity above 50%, while the other is a long-term compounder poised to take market share. He also discusses why he's avoided the tech and energy sectors, what he expects from earnings season, why he doesn't put much weight in earnings beats and misses, and why lithium is a crowded trade (yet remains invested in it). Note: This episode was recorded on July 26, 2023. Timestamps 0:00 - START 1:30 - Have we avoided a hard landing? 3:30 - Australian base case 4:30 - Reporting season 10:00 - Stock prices follow earnings 12:30 - A checklist for finding value 14:20 - Consumer discretionary in 2023 17:55 - Two COVID beneficiaries primed for growth 20:50 - Avoiding tech and energy 23:00 - Lithium is crowded, but does that matter? 29:20 - Look past the market's time horizon 44:00 - Bottom drawer retail stock
A year ago I sat down with Oscar Oberg, lead portfolio manager at Wilson Asset Management. His thesis then was that small caps were beaten down and due some mean reversion. Alas, small caps haven’t done much since then, with the Small Ords returning 3.91%. Yet Oscar’s thesis also remains unchanged. In fact, it’s gotten stronger! Not only is he positioning for a rebound in smalls and microcaps, he’s doing it with overweight exposure to consumer discretionary, a sector that has been tarred and feathered by today’s macroeconomic landscape of high inflation and high rates. As Oscar puts it, “there’s no mean reversion without consumer discretionary.” In today’s episode, Oscar lays out this thesis and the companies that make it up. He also discusses: the relationship between the tech rally and small caps; generating return with short-term tactical trades; and how he deals with low liquidity, and the primed aged care stock under takeover. Note: This episode was recorded on Tuesday July 20, 2023. Timestamps 0:00 - START 1:50 - When will small caps bottom? 4:30 - No small cap rally without consumer discretionary 6:30 - Profit taking 7:30 - Why large cap tech matters to small caps 10:14 - 30-40% rally is not out of the question 14:30 - Harvey Norman's (ASX: HVN) property backstop 16:00 - Wearing the volatility 17:00 - Industrials 20:20 - Going tactical 24:15 - Mermaid Marine 26:30 - Body language matters 27:30 - City Chic (ASX: CCX) was a mistake 29:20 - Managing liquidity in small caps 32:45 - Takeover target 34:50 - Balance sheets look good 36:55 - Going public too early 40:25 - The classifieds company for the bottom drawer
Hello and welcome to the rules of investing, brought to you by Livewire Markets. I’m your host David Thornton. A year ago I sat down with Oscar Oberg, lead portfolio manager at Wilson Asset Management. His thesis then was that small caps were beaten down and due some mean reversion. Alas, small caps haven’t done much since then, with the Small Ords returning 3.91%. Yet Oscar’s thesis also remains unchanged. In fact, it’s gotten stronger! Not only is he positioning for a rebound in smalls and microcaps, he’s doing it with overweight exposure to consumer discretionary, a sector that has been tarred and feathered by today’s macroeconomic landscape of high inflation and high rates. As Oscar puts it, “there’s no mean reversion without consumer discretionary.” In the upcoming episode, Oscar lays out this thesis and the companies that make it up. He also discusses the relationship between the tech rally and small caps, generating return with short-term tactical trades, how he deals with low liquidity, and the primed aged care stock currently under takeover. Here’s a taste of what you can expect.
Last month, Fidelity marked the 20 year anniversary of its Australian Equities Fund. The fund has consistently outperformed its benchmark, the ASX 200 Accumulation Index, netting over 11% per annum. Paul Taylor, Head of Investments at Fidelity International, has captained that ship from inception to now. The fund's generated 11% per annum over the two decades, through some of the worst crises markets have dealt with. The Global Financial Crisis, the European sovereign debt crisis, COVID-19, and the Russo-Ukrainian war. The list goes on. How's he done it? Well, he turns down the noise. When I speak to fund managers, I often get a general response about how to do that. Usually something about focusing on fundamentals. In today’s episode of The Rules of Investing, Paul gives an actionable step by step process that all investors can follow to turn down that noise. He also goes deep explaining his process for finding what he terms the “holy grail” of investing – long-term compounders, identifies the market’s next buying window, the need to view stocks and their upside potential within the context of portfolio construction, and the next thing to break if rates keep rising. And as a little kicker at the end, he provides a [hypothetical] 3-stock portfolio for the bottom drawer. Note: This interview was recorded on July 11, 2023. Timestamps 0:00 - START 2:00 - 20 years of volatile markets 4:00 - 4-step process for blocking out noise 8:00 - Making moves during the GFC 16:00 - Second order affects 18:50 - The next buying window 20:30 - Banks in the firing line 22:50 - Preserving capital 25:40 - Don't pick stocks in isolation 28:50 - Finding long-term compounders 32:50 - The secular tech rally 36:30 - Glass half full 39:40 - Buying WiseTech Global (ASX: WTC) early 42:50 - A 3-stock portfolio for the bottom drawer