The Rules of Investing

Giselle Roux’s fluff-free take on the market (and where you can find opportunity today)

If you are feeling confused right now, you can rest easy knowing you are not alone. 
Since the beginning of the year, investors have been bombarded with a cacophony of conflicting market commentary on where best to invest. The indicators themselves, such as the VIX Index, the Coppock Indicator, and various sentiment surveys, also seem to be pointing in opposing directions.
For equities-focused fund managers, there’s plenty of opportunity hidden within the world’s major indices. For fixed income investors, there’s more opportunity than ever before in bonds. In the end, everyone is talking their own book. And who can blame them? How else are they meant to attract investors’ hard-earned cash?
This week's guest is different. She’s completely independent and unrestricted by any investment management firm's mandate, compliance team, or asset class. She's nothing if not completely honest. 
And let's face it. That's really what we all need right now. 
Giselle Roux has 35 years of market experience. She’s worked for the likes of Merrill Lynch, Citigroup, JBWere and Escala Partners. However, since 2019, she’s been providing independent advice to a handful of advisory groups.
In this podcast, Roux will be providing her unfettered opinion on markets, where there actually is true opportunity, as well as why she believes global growth looks challenged from here.
Note: This podcast was recorded on Thursday 22 June 2023.Timestamps:3:10 - Choose your information wisely4:30 - Credit and liquidity is key6:21 - Corporate finance is changing9:30 - Explaining the charge in US tech11:00 - The heavy burden of sovereign debt13:30 - Stock market vs economy15:30 - Future drivers of growth19:30 - Finding 10% return21:16 - Opportunities in smallcaps and midcaps25:00 - Hold cash, but not for too long27:50 - Is gold overrated?30:00 - Don't put too much weight in history32:50 - Cyber is here to stay

The dividend doctor gives his prescription for investing in 2023

Dividend-paying equities have long formed the backbone of retirees’ portfolios. And the historic stalwarts of these portfolios are well known. BHP, Telstra, and Commonwealth Bank, to name a few.
You might be mistaken for thinking that equity income portfolios are therefore set and forget propositions, made up of a limited number of dividend darlings that will pay out into perpetuity.
But you’d be wrong on both accounts, according to today’s guest.
Dr Don Hamson  is the founder and managing director of Plato Investment Management. Plato manages $11 billion in assets across three funds – an Aussie equities income fund, a global equities income fund, and a global alpha fund. Managing $11 billion in total.
Before that, he was responsible for over $10B in active and enhanced equity investments at State Street Global Advisors.
In today’s interview [in the upcoming interview], Don explains why dividend-paying equities are still the best place to generate income, what makes a dividend sustainable, how to identify dividend traps, and which sectors and stocks have the brightest dividend outlook.
He also names the dividend darlings that no longer deserve the title!
Timestamps
0:00 - START
1:45 - Dividends hold up amid inflation and rate hikes
4:15 - Dividends remain the income backbone
6:00 - The importance of franking credits
9:17 - Dividends vs the bond market
10:47 - Capital vs income
11:45 - Drawdown and sequencing risks
14:13 - Finding dividend growers
16:30 - Dividend traps
24:03 - Buying cheap stocks in hope of a dividend
26:00 - Red flags
31:40 - What makes a dividend "sustainable"?
38:00 - The best (and worst) looking sectors
41:23 - Invest with a short time horizon
43:00 - No free lunch for less than 20 stocks
50:30 - It's not all doom and gloom
58:00 - Don's bottom drawer investment

8 mega cap stocks have carried markets in 2023. Here’s what comes next

Few of us would’ve predicted that by June the S&P would not only be positive, but up over 11%. On face value, a healthy market.
But dig a little deeper, and it quickly becomes apparent that this performance has been carried by the big mega-cap tech stocks. Such is their performance, and the lack of performance by the rest of the index, that Apple, Microsoft, Alphabet and Nvidia now account for a third of the S&P500.
This all begs the question: what next?
Do these mega cap stocks sell off, does the rest of the market trade up, or will it be a bit of both?
If it’s the former, which companies will take the reigns?
These questions, and more, are answered by today’s guest – Jacob Mitchell, founder, CIO and lead Portfolio Manager at Antipodes Partners. Antipodes houses two global funds, an emerging markets fund, and an actively traded global shares ETF (ASX: AGX1). 
Before starting Antipodes, Jacob spent 14 years at Platinum Asset Management, where, as the co-CIO and lead portfolio manager of the Platinum International Fund, he oversaw $3.5 billion in assets under management.
Jacob goes to town on a lot of subjects, including:
his bear case for consumer-facing mega cap tech;
whether the AI boom is in fact a bubble;
where he’s seeing low multiples despite strong earnings growth; and
the stocks that will lead the the next cycle.
Note: This episode was recorded on Wednesday, June 5 2023
Timestamps
2:30 - Megacaps have dominated. What's next?
5:30 - Is AI a bubble?
9:10 - Slowing in the West, reopening in the East
12:00 - Market valuations and fundamentals don't line up
15:30 - Eyes on smaller companies bridging the gap
20:10 - Primed sectors
22:50 - Holding the line
27:20 - Liquidity is draining
30:20 - The secular winners of tomorrow
34:45 - Retail investors are sceptical of the energy transition
41:00 - Investment case for fossil fuels
44:00 - Hedging risk in today's market
48:00 - High conviction stocks

The goldilocks buying opportunity is *almost* here in fixed income

Fixed income has always served a defensive role within investor portfolios. Normally, when growth is down and risk assets underperform, fixed income outperforms.
That’s under normal circumstances, though. In 2022, the Bloomberg aggregate bond index lost 13%. Why?
Introduce inflation, and the higher rates employed to combat it. When this happens, risk assets and fixed income fall in lockstep.
But those dark days seem to be behind us.
We’re now at or near the peak in interest rates. So with bond yields set to stabilise and fall, the value of fixed income assets look poised to rebound.
Today’s guest on The Rules of Investing is Jay Sivapalan - Head of Australian Fixed Interest at Janus Henderson Investors. Jay manages Janus Henderson’s Aussie fixed income portfolios, and holds ultimate responsibility for formulating interest rate and sector strategies.
We discuss:
The macro backdrop that’s shaping fixed income
The best times to buy fixed income, and how; and
where Jay sees the best risk-reward right now. 
Transcript
2:10 - Where are we in the cycle?
5:50 - How will fixed income respond during a recession?
19:10 - The best risk adjusted return right now
12:40 - Chasing yield has a time and place
14:00 - Why fixed income over term deposits?
15:10 - The dangers of passive management
17:25 - Qantas (ASX: QAN) still has wings
18:40 - A contrarian call on commercial real estate
21:00 - Semis vs treasuries
22:15 - Don't fall for the consensus view
 28:06 - A fixed-income security for the bottom drawer

Jun Bei Liu: Top stocks for today’s markets

Earlier this month, the Reserve Bank of Australia was forced to cough up internal documents under Freedom of Information laws. This included an internal modelling exercise from September 2022, which revealed the risk of an Australian recession could be as high as 80% by September 2024.
Meanwhile, a recent Bloomberg survey of 14 economists saw the probability of a recession in Australia climb from 35% to 38% in April. 
Investors themselves, through their positioning, seem to be suggesting the same. Shares in classic defensive names such as Transurban (up 14%), Woolworths (up 15%), Wesfarmers (up 9%), Coles (up 15%), Telstra (up 10%), Origin Energy (up 9%) and AGL (up 11%) have continued to tick higher since the beginning of the year. 
And yet, Tribeca Investment Partners' Jun Bei Liu is unflinchingly bullish. She doesn't believe the Australian economy will nosedive into a hard landing in the next few months or years. Instead, she argues the noise in markets has created extraordinary investment opportunities today. 
In this episode, Liu shares: 
Three rules for investors to live by. 
Her macro outlook for the years ahead. 
Why there is still fuel left in the tank when it comes to the China reopening. 
Her top long and short positions right now. 
Note: This episode was recorded on Wednesday, May 24, 2023
Timestamps 
0:00 - Intro 
1:25 - Three rules investors should live by
4:58 - Jun Bei's North Star for volatile markets 
7:34 - Jun Bei's base case: Why she doesn't believe Australia will experience a recession 
12:38 - The China re-opening theme isn't over yet (and the stocks' Jun Bei is backing)
19:53 - Jun Bei's earnings outlook for the ASX 
21:55 - Companies facing margin pressure over the months ahead 
23:11 - Why Jun Bei is shorting Super Retail Group (ASX: SUL)
26:20 - And why she's backing A2 Milk (ASX: A2M), NEXTDC (ASX: NXT), Macquarie Group (ASX: MQG), REA Group (ASX: REA), Xero (ASX: XRO), TechnologyOne (ASX: TNE), Pilbara Minerals (ASX: PLS) and Treasury Wine Estates (ASX: TWE). 
28:55 - The unloved stocks Jun Bei is loving right now
32:26 - The importance of emotional intelligence when it comes to investing 
36:49 - The best CEO and management teams in Australia 
39:30 - The Rules of Investing's three favourite questions (what investors are getting wrong, a big win and loss, and a stock Jun Bei would back for the next 5 years)

This fundie found Afterpay at $6. Now he’s found his next opportunity

Investing hasn’t been easy these past few years amid a pandemic, soaring inflation and monetary tightening. The ASX200 did 1.4% in 2020, 17% in 2021 and then -1% last year. Hugely volatile. 
But it's in times like this when the cream rises to the top. As most fund managers struggle to match the benchmark, Datt Capital’s Absolute Return fund has returned an enormous 25% per annum over the last three years. It's a staggering performance that most fund managers would give their left arm to get.
In this week's episode of The Rules of Investing, Livewire's David Thornton speaks to Emanuel Datt, founder of Datt Capital. Datt’s modest demeanour belies the rockstar performance he’s generated.
Not one to rest on his laurels, though, he’s about to launch a new small-cap fund that seeks to outperform the Small Ordinaries Index by 5% per annum. While the fund may be new, Datt's experience with small cap stocks certainly isn't - he bought market darling Afterpay at $6, long before it became Australia's largest ever takeover at a cool $39 billion. 
Datt discusses:
the processes and investments that netted the absolute fund such stellar numbers;
how he found Afterpay;
why he believes now is the time to get into small caps; and
the investment opportunity he sees in rare earths. 
Note: this episode was recorded on Tuesday May 16, 2023
Timestamps
1:50 - The man behind Datt Capital3:20 - Opening up shop4:30 - Achieving 25% p.a.7:30 - Rare earths12:00 - The opportunity in small caps19:00 - The sectors leading small caps21:00 - Spotting Afterpay24:00 - Red flags27:00 - Finding sustainable companies30:10 - Inflation can't be understated31:20 - Winning big with Adriatic Metals (ASX: ADT)

Is this the least crowded opportunity in the market today?

In the world of investing, listed markets dominate the airwaves due to their ease of access, broker coverage and liquidity. For that reason, unlisted shares can often take a back seat.
But companies aren’t born on the listed markets. Many of the best opportunities exist in the unlisted, pre-IPO space.
Today’s guest is Dane Roberts – a portfolio manager at Fifth Estate Asset Management. Fifth Estate invest in pre-IPO, IPO, unlisted and listed microcap and small cap companies. Its first fund was launched in 2021, delivering 13.29% since then – impressive considering the extreme volatility of that period. That fund’s closed to new investment, but they’re about launch their second fund with much the same strategy.
In today’s episode, we discuss what it takes to invest in unlisted companies, how they compare to their listed peers, the outlook for unlisted stocks, and why now could be the perfect time to invest at the pre-IPO stage. 
Note: This interview was recorded on Friday May 5, 2023. 
Timestamps
1:49 - Birds-eye view of pre-IPO and IPO
4:00 - Liquidity in unlisted markets
6:00 - Debt vs equity
10:30 - The perfect time to put money to work
12:45 - Finding and filtering unlisted companies
15:30 - How unlisted assets are priced
18:40 - When should a company list?
22:20 - A company storming towards IPO
27:20 - Fund 2
30:24 - In it for the long haul
33:00 - Monetary policy on the street
35:40 - The comeback kid (ASX: NXT)
38:45 - An infrastructure company surrounded by moats

No lithium, no worries for this outperforming small cap manager

When volatility rattles markets, micro caps and small caps typically suffer the biggest drawdowns. But markets have a reliable habit of reverting to the mean sooner or later. That’s very good news if you’re investing in small caps, arguably, now!
This week’s guest is Matthew Booker, portfolio manager and co-founder at Spheria Asset Management. Matt’s managed small company portfolios for over 15 years, consistently outperforming the index.
The Spheria Australian Microcap Fund has outperformed the S&P/ASX Small Ordinaries Accumulation Index by over 7% per annum since inception, while the Smaller Companies fund has outperformed that same index by over 3% per annum. Just as importantly, they’ve managed to preserve capital and outperform the benchmark through the volatility of the past year. And he's done it without lithium stocks!
We discuss:
where we are in the small cap cycle;
the opportunities Spheria are targeting;
capital preservation; and
the former market darling that’s back in business. 
Timestamps
1:50 - Where we are in the small cap cycle
3:30 - Lessons from the past year
5:30 - Preserving capital
6:50 - Outperforming without lithium
10:00 - The best is ahead for small caps and microcaps
11:00 - Filtering down an enormous universe of stocks
12:40 - "Inverse broker" indicator
14:00 - Investing in "legitimate growth"
16:55 - Red flags
21:20 - Takeovers
23:00 - Outlook for M&A
28:00 - Return of an unloved market darling?
35:30 - A bottom-drawer stock (from New Zealand)
Note: This interview was recorded on Wednesday April 19, 2023.