The Rules of Investing

Steve Johnson: The search for extreme dislocations

When Walter Schloss founded the funds management firm that bore his name in 1955, markets were a very different place. Schloss harnessed the power of Ben Graham's "net-nets" strategy and managed to outperform the market by more than 5% p.a. over the next 45 years. But could such a simple strategy work in today's deeply researched markets? Steve Johnson, Chief Investment Officer of Forager Funds thinks so. But why isn’t every fund manager pursuing this strategy?
“I still know people who are making exceptional returns doing that… Does it still work? Yes, it absolutely still works if you’ve got $500,000 or $1 million dollars.”
In this week’s episode of The Rules of Investing podcast, we discuss the biases that fund managers and private investors are most susceptible to, how to separate luck from skill, and his approach to properly valuing a business.

Aitken: Trade wars present ‘tremendous opportunity’

Charlie Aitken has a simple investment philosophy: Build a concentrated portfolio of the world's best companies in structural growth sectors. And for this week’s Rules of Investing podcast, I had the rare opportunity to sit down with Charlie for 46 minutes to hear how this translates into practice.
While the market grows anxious about the rapidly metastasising trade war, Charlie explained in our discussion how he sees it as a ‘tremendous opportunity’ to grow exposure to world-leading companies, and went on to nominate four such stocks right in the firing line right now.
I really enjoyed recording this podcast in which we covered a great deal of other ground, including his transition into funds management, advice to his younger self, and why it’s ‘Australia for income - and global for growth’.

Ben Griffiths: Markets are at an inflection point

Guest: Ben Griffiths, Principal and Portfolio Manager of Eley Griffiths Group.
When Isaac Newton first posited that an object in motion would stay in motion unless acted upon, he probably wasn't thinking of stock markets. But hundreds of years later, the same principle has been adapted for investors; or "the trend is your friend" as it's more commonly stated. While this rule of thumb can be pretty handy, there are rare moments in financial markets where everything can turn on a dime, and suddenly that trend doesn't look so friendly. George Soros called these times 'inflection points', and according to Ben Griffiths, Principal and Portfolio Manager at Eley Griffiths Group, we stand at one of these crossroads today.
“It is classic exhaustion price action. Bulls aren’t sure if they’re convinced anymore, and bears are in the process of giving up after that strong run-up from December. It’s what markets do best at turning point; they confound the bulls, they trip up the bears, and they generally exhaust investors.”
In this week’s episode of The Rules of Investing podcast, Ben explains why the Australian economy could be doing better than it seems, how he knew it was time to start buying shares near the bottom of the GFC, and three simple investing rules that’ve served him well.

Finding the next Macquarie Bank

Guest: Campbell Neal, co-founder, Managing Director, and Senior Portfolio Manager at K2 Asset Management.
Finding cheap stocks this late in the cycle is getting harder and harder. Index funds have bid up the prices of large cap stocks to levels not seen since the tech bubble, while mid-cap growth stocks like Afterpay and Wisetech have been bid to dizzying heights. But attractive opportunities are still out there, if you look hard enough.
This week's guest on The Rules of Investing is Campbell Neal, co-founder, Managing Director, and Senior Portfolio Manager at K2 Asset Management. In this episode, Campbell identifies one ASX small cap that's on a PE ratio of 10, yields 8%, and has all the hallmarks of a mini-Macquarie.
"I believe it's like a small Macquarie Bank. It's listed here in Australia.... The stock's done extremely well over the few years it's been listed. I think it's going to continue to grow."
Tune in to hear which stocks he plans to short (when the time is right), and why he believes large cap stocks are the most overvalued they've been for many years.

Dr Philipp Hofflin: Beware of the widest moats

Guest: Dr Philipp Hofflin, Lazard Asset Management.

Tim Toohey's macro masterclass

It’s a rare opportunity to get to sit down with an economist of the calibre of Tim Toohey from Ellerston Capital. He was formerly the Managing Director, Chief Economist, and Head of Macro Strategy for Australia and New Zealand at Goldman Sachs, where he earned a reputation as one of Australia’s best macro forecasters. In 2017, he joined Tudor Investments’ star portfolio manager, Brett Gillespie, in setting up the Global Macro Fund at Ellerston Capital. So, when offered the opportunity to talk to Tim for the best part of an hour, I made sure to cover off all the big topics concerning investors today; Australian rates and consumers, Fed policy, the turnaround in China, and of course, the possibility of a housing-driven recession in Australia. Tune in to the latest episode of The Rules of Investing podcast below to hear his take on the world today.

A century of dividends

Guest: Robert Millner, Chairman, Washington H Soul Pattinson.
In the last 117 years, Australia has seen two World Wars, the great depression, introduction of the motor car, 30 Prime Ministers, and every year, Washington H Soul Pattinson (SOL) has paid a dividend. In this week's episode of The Rules of Investing, I sit down with Robert Millner, the longstanding Chairman of SOL. While SOL started life as a pharmaceuticals business, today it's a cornerstone shareholder in TPG Telecom, Brickworks, New Hope Corporation, and dozens of smaller companies.
Over the last 40 years, total shareholder returns have compounded at a rate of 17.3%. This is a record that rivals that of some of the most well-known investors globally.
Tune in below to hear his view on the future of coal and agriculture in Australia, why he's not interested in buying banks at current levels, and what he thinks has been the key to Soul Patts' success.

Platinum and Magellan: Inside the minds of Australia’s most successful global investors

In late December of 2018, I received an email that caught me by surprise. It came from someone I’d never met with an unexpected proposition. The concept was to kick off 2019 with a constructive discussion between the Chief Investment Officers of Platinum Asset Management and Magellan Financial Group.
I say ‘unexpected’ because the two firms are often viewed as rivals in the Australian funds management industry. In reality, many investors consider the strategies as complementary, and as we learn in the first instalment of a two-part discussion, they even share some common ground on where they are investing.
Tune in as we take you inside the minds of Andrew Clifford and Hamish Douglass to explore their investment philosophies and discuss the challenges and opportunities that lie ahead.