The Rules of Investing

Move over Big Tech, these are the new flag bearers of growth investing

Growth investing has ruled the roost for the last decade. If you wanted astronomical gains, Big Tech was the train you needed to be on. Didn't matter which carriage, they were all coupled together.   
But that all went belly up this year, with the growth-focused Nasdaq losing roughly a third of its value thanks to inflation, rates and slowing output.  
If 2022 has taught us anything, it's that a regime change in markets has arrived with a bang.
In the latest episode of The Rules of Investing, Livewire's David Thornton sits down with Sam Ruiz, a Portfolio Specialist in the Equity Division at T. Rowe Price. Sam hasn't lost any enthusiasm for growth investing. Instead, he acknowledges that the rulebook that worked so well through the 2010s should be put back on the shelf.
Among many other key insights, Sam believes that the choice between growth and value is not the binary choice many make it out to be. The growth stocks that will excel in this market, and there are many, will share many many attributes with their value-focused cousins.  
Topics discussed include the muscle memory plaguing markets, the changing face of growth, and the importance of capital. He also goes deep on a widely dismissed traditional sector that he believed could grow 2x in the coming years!
Note: this episode was recorded on Monday November 28, 2022. 
Timestamps
1:30 - Will the multiple mindset continue?
4:30 - Dark days for speculative growth
5:55 - Prices follow returns and narratives follow price
8:20 - Pitfalls of total addressable market
10:10 - Growth companies fed off multiples
16:30 - Dispersions = opportunities
18:40 - Don't count out cyclicals
21:20 - False dichotomy of growth vs value 
22:15 - Importance of cash balances
28:00 - Hunting for idiosyncratic companies
29:00 - Opportunities in emerging markets
23:40 - A contrarian view on a dismissed sector
32:00 - Fight for money has changed the game
33:40 - A Big Tech stock worth its weight
36:30 - A Brazilian bank for the bottom drawer
 

Luke Smith: This commodity will grow 10x in 10 years

It’s been a crazy year for virtually every asset class. Commodities have been particularly interesting, though, because earlier this year, when most everything was selling off, commodities went on a bull run! 
It’s a highly volatile sector, exposed to just about every macroeconomic variable there is, so investing in it takes a unique skill set. But as you'll learn, it's a first-order beneficiary of the big trends that will define markets over the coming decades. And that means massive returns. 
In today's episode of The Rules of Investing, Livewire's David Thornton is joined by Luke Smith from Ausbil Investment Management. Luke runs Ausbil’s Global Resources Fund. The fund invests in natural resources companies using a top down and bottom up approach. It also goes short to help manage risk.  
Luke explains why he's so bullish on battery metals, how the decarbonisation supercycle will pull commodities along for the ride, the mismatch between the nearish micro narrative surrounding China and what he's seeing at the micro level, and how he finds companies with relative value. 
Note: this episode was recorded on Thursday November 11, 2022. 
Timestamps
1:20 - Ausbil Global Resources Fund
4:10 - High demand, low supply in battery metals
9:30 - Falling demand in the West, accelerating demand in the East
10:15 - Macro fears distracting from micro strength
11:50 - Positioning through the commodities bull market
12:40 - Lacking investment in new supply
13:30 - Lithium spodumene price goes 25x
16:00 - Lithium, Cobalt and Copper are key for electrification
18:30 - Energy was on a tear before Russia-Ukraine
19:00 - Don't write off fossil fuels
20:50 - Separating signals from noise
24:00 - Don't be negative in a negative market
30:00 - Don't equate Aussie EV penetration with demand for electrification
32:00 - As relative value shifts, so should your exposures
37:00 - Commodities fundamentals are stronger than the macro narrative
41:08 - Betting against the market in 2020
43:10 - A Decarb stock for the bottom drawer

Bob Desmond: We’re finding value everywhere

When I ask most fund managers about today's operating environment, they almost invariably respond with words like 'difficult', 'complex', or 'bearish'. 
And you can't blame them. The age of cheap money and growth at any cost is over. They're not defeatist, by any means, but it's safe to say they've had easier days at the office. 
So it was a breath of fresh air to sit down with Bob Desmond from Claremont Global to record this latest episode of The Rules of Investing. Bob's optimistic, and he's "finding value everywhere."  
Claremont Global run a high conviction global fund of just 10-15 stocks. Being that concentrated would send shivers down the spine of many investors at a time like this. But while it's true that diversification is the only free lunch in finance, it's also no coincidence that the vast majority of the world's top investors pass on the free lunch and choose to be concentrated.
Bob takes comfort in knowing a few companies well. You could say that the quality growth companies Bob invests in are made for the moment. That is to say - indispensable large cap companies with lots of cash and big moats.  
In today's episode we cover the kind of big tech stocks Bob likes, the stock he's just bought after waiting years for the right price, how he manages investor expectations during a bear market, and much more!
Note: this episode was recorded on Monday October 10, 2022. 

Chris Watling’s portfolio preparation guide for a 2023 global recession

Last week, London-based economist and founder of Longview Economics Chris Watling walked into a pub and ordered three pints of beer. The barman poured the pints and promptly asked Watling for £30. There was a pause, as the two made eye contact before eventually acknowledging the extreme prices for beer. 
But it's not just beer and bars that are going through a rough time. The other B - the Bank of England - is in a policy tussle with the new UK government, and that's led traders to question the economic credibility of the country.
In this special edition of The Rules of Investing, Watling sits down with Livewire's Hans Lee for a discussion on the state of the UK, his current global market strategy, and what he feels are the next big risks on the horizon. We also dig deep into the changes he's made to Longview's model portfolios - and there are many to get through.

Mark Landau: Why it’s time to put down the last decade’s playbook

The old adage that "past performance is not an indicator of future returns" is possibly more relevant in today's market than it's ever been. 
When the market is driven by momentum, as it has been through the past decade, piling onto winners has paid off. And why wouldn't it? Earnings have been easy to fuel when debt costs next to nothing, in a market where the shareholders reward the pursuit of market share - no matter how it's achieved.
In today’s episode of The Rules of Investing, David Thornton sits down with Mark Landau – Co-Founder and Chief Investment Officer at L1 Capital. 
Mark started L1 in 2007, alongside Raphael Lamm. Their flagship long-short strategy has returned a whopping 18.7% per annum since inception, and was ranked in an HSBC survey as the ‘Best Performing Hedge Fund Globally’ in 2015 and ‘Top 20 Hedge Fund Globally’ in 2016, 2017 and 2021. 
The episode covers an enormous amount of ground. We discuss everything from the uniqueness of today's market, where L1 is deploying capital, what makes earnings sustainable, the importance of balance sheets. Mark also tells us why the investing playbook of the last decade should be put back on the shelf. 
Timestamps
1:15 - Origins of L1 Capital
3:20 - Lessons from the GFC
5:30 - The problem with long-only investing
6:00 - Quality value strategy
8:10 - Today's unprecedented market cycle
10:00 - No quick fix for inflation
19:55 - How macro informs a bottom-up approach
22:30 - Where L1 is deploying capital
24:30 - Expensive defensives 
28:00 - Sustainable P/E ratios
30:30 - Importance of under-geared balance sheets
31:10 - Pricing power
32:00 - Management teams on notice
35:30 - What makes a good short
42:50 - 3 favourite questions

How this Hall of Fame bear is buying the dip

It's not a stretch to call the last twelve months in markets a regime change. Inflation, rates, valuations, liquidity; everything has been turned on its head. 
While today's conditions may be unique in makeup, they're not new in isolation. Each of the trends we see today have visited markets before. 
So who better to get on the Rules of Investing than someone who has seen it all: Hall of Fame fund manager Chris Kourtis from Ellerston Capital. Chris has served as a Director and Portfolio Manager of Ellerston since 2005, and has over 36 years investment experience.
Before Ellerston, Chris co-founded the Melbourne based Investment Management firm Portfolio Partners in 1994, where he served as Director, Senior Investment Manager and Head of Equities. 
As you'll hear, Chris is extremely bearish on markets - but that doesn't mean he's packed his bags. Quite the opposite, he's bought the dip!
TOPICS DISCUSSED:
the parallels between today and the dot-com crash
how to gain exposure to the resource sector without being a slave to commodity prices 
the problem with banks
what he liked about Xero compared to other tech plays
the importance of dividends
why 'old-school' investing principles are so important in today's market
He also gives us double value for money by naming two stocks he'd put in the bottom drawer.

Why the stock market’s bubble hasn’t really burst yet

When markets crash sharply, as they did earlier this year, it can be a mistake to assume that as soon as the falls peter out, the market will then naturally recover. 
Sure, this sometimes happens. The crash of 87, the global financial crisis, and COVID are all examples where the market went into freefall fall once, more or less, before recovering. 
But here's the thing. Just because the market has sold off and since recovered some, that's no guarantee the market is in recovery mode. Markets, sectors and individual stocks can go down, stabilise, then go down again.
While picking the bottom might be a mug's game, you're not going to go into high gear and invest if you think there's further broad based losses on the way. 
This is where today's guest comes in. Dr Philipp Hofflin, Portfolio Manager at Lazard Asset Management, is an expert in market bubbles and what happens after them. And it's not as cut and dry as you might think.   
In this episode, Phil discusses: 
his learnings from Jackson Hole and where we are in the rate cycle;
the difference between Australia and the US when it comes to interest rate sensitivity;
why some stocks are now attractive while others have further to fall;
how he values the energy sector, and 
what sectors and stocks are attractively priced.  

We’re in ’Tech Wreck 2.0”, and some big names won’t make it

The world is opening, but not to calm and stability. 
Rather, COVID has left a trail of destruction. And I'm not talking about the health implications. The pandemic has left economies and markets rattled by supply chain problems, inflation, and rate hikes. 
Big tech has been hit the hardest as investors flee long-duration stocks. 
However, despite sharing an acronym, the big tech stocks have been split down the middle. Some companies are awash with cash and trading at extremely attractive multiples. Others look like emperors with no clothes.  
This is one of the topics Livewire's David Thornton tackles with Mary Manning from Alphinity Investment Management. Mary is a Portfolio Manager for the Alphinity Global Fund and Alphinity Global Sustainable Fund. She's been investing in global markets for over 20 years with stints working for Ellerston Capital, Oaktree Capital and Soros Fund Management.
We also go deep on US-China relations and compare the two starkly different markets, as well as Mary's interesting take on the ESG challenges brought about by Artificial Intelligence. 
Timestamps
1:00 - Back on the road and takeaways
2:00 - low-end vs high end-consumer
3:30 - Diverging FAANGS
8:20 - Big tech profitability
13:20 - US-China hostilities
16:00 - Operating in China
19:00 - Weaponised trade
25:30 - Investing in China
29:00 - Sustainability and AI
37:00 - 3 favourite questions