The Rules of Investing

5 seismic shifts happening right now and how to take advantage of them - Livewire Live Mini-Series

In this episode, you’ll be hearing a panel exploring a number of big topics dominating conversations around markets right now.
From the changing macro backdrop and debate over the merits of public vs private markets to the implications of ageing populations, the energy transition and digital innovation these are Seismic Shifts and we’re going to hear about the opportunities they present for investors.
The speakers in this session are:
Matthew Haup, Lead Portfolio Manager at Wilson Asset Management
Srdjan Dangubic, Partner at Five V Capital
James Abela, Portfolio Manager at Fidelity
Andrew Lockhart, Managing Partner at Metrics Credit Partners
You moderator is Livewire’s managing editor Chris Conway
This episode is part of our special mini-series of The Rules of Investing, giving you a front-row seat to discussions from Livewire Live 2024, our flagship investor event.
Whether you’re after big-picture market insights or actionable investment strategies, this series offers exclusive insights to help shape your investment decisions.
We hope you enjoy this special 7-part series. We’ll return to our regular programming with the next episode of The Rules of Investing.
________________
This series is proudly sponsored by Bell Direct Advantage.
Bell Direct Advantage is a premium trading platform designed for active and sophisticated investors. Offering access to Bell Potter research, exclusive IPOs, and advanced trading tools, it’s built to give you a competitive edge. Whether you’re a frequent trader or a high-net-worth individual trading shares, options, or warrants, Bell Direct Advantage delivers tailored solutions and superior service to sharpen your investing edge. [Find out more here]

In Conversation with Apollo Global Management's Scott Kleinman - Livewire Live Mini-Series

In this episode, you’ll hear from Scott Kleinman, the co-president of Apollo Global Management, as he sits down with Livewire’s James Marlay. Kleinman shares his views on why he believes markets are getting ahead of themselves with rate cut expectations, where he sees value across various sectors, and how Apollo is positioning to take advantage of mega trends such as digital transformation, the energy transition, and ageing populations.
This episode is part of our special mini-series of The Rules of Investing, giving you a front-row seat to discussions from Livewire Live 2024, our flagship investor event.
Whether you’re after big-picture market insights or actionable investment strategies, this series offers exclusive insights to help shape your investment decisions.
We hope you enjoy this special 7-part series. We’ll return to our regular programming with the next episode of The Rules of Investing.
________________
This series is proudly sponsored by Bell Direct Advantage.
Bell Direct Advantage is a premium trading platform designed for active and sophisticated investors. Offering access to Bell Potter research, exclusive IPOs, and advanced trading tools, it’s built to give you a competitive edge. Whether you’re a frequent trader or a high-net-worth individual trading shares, options, or warrants, Bell Direct Advantage delivers tailored solutions and superior service to sharpen your investing edge. [Find out more here]

Inside Macquarie's unique approach to consistent alpha

Behavioural economics explains why we make such stupid decisions with our money. Unfortunately, the study has found that behavioural biases are very hard to control and, even if you are aware of them, no one is immune from poor decision-making when it comes to both life and our finances. 
This is where quantitative or systematic investing comes in - a realm of investing typically reserved for institutional investors like super funds and the ultra-wealthy. 
Quantitative investing removes emotion and behavioural biases from investing. Instead, it relies on some of the smartest people in the world to put together hundreds to thousands of signals and data points for a large language model to make decisions. Humans are involved but just for oversight, in case the model does not truly understand a situation. For example, it may not understand that airlines were not a fantastic short-term opportunity amid a significant sell-off during the COVID-19 crash. 
This is a far cry from fundamental investing, which relies on a fund manager or investor analysing macroeconomic and stock-specific factors, meeting with management teams, trying out products and services and reviewing a business's balance sheet before making an investment decision of their own. 
The gains from quantitative strategies are typically small, but they're consistent over time. You are not going to have years of 10-20% plus outperformance over an index, but equally, you shouldn't experience huge drawdowns either. And over the long term, this small amount of alpha adds up.  
Interestingly, Macquarie Asset Management was one of the few firms that saw its funds achieve 100 batting averages - for both the large-cap and small-cap categories - over a 10-year period. This means that these funds, which are all quantitative strategies*, have outperformed the benchmark 100% of the time in every three-year rolling period over the past decade. 
So, to learn more about quantitative investing, quantitative ETFs and the major trends shaping ETF markets, Livewire's Ally Selby was joined by Blair Hannon, ETF Strategist at Macquarie Asset Management. 
We discuss some common misconceptions surrounding quantitative investing, the signals that have worked over the last few years, and the magic of compounding over the long term. 
Plus, Hannon also shares why he strongly believes that passive investing is not creating a bubble in markets - despite what some of the world's most famous investors (like The Big Short's Michael Burry) would have you think. 
Note: This interview was recorded on Tuesday 24 September 2024. 
Timecodes 
0:00 - Intro 
1:54 - Difference between fundamental and quantitative investing 
5:28 - Removing the emotion from investing 
6:55 - Signals that are used to avoid behavioural biases 
8:56 - Do we need human touch on quant funds
10:31 - Common misconceptions of quant investing 
14:44 - The signal that has been working over the last year 
18:20 - Turnover of stocks in the portfolio
20:10 - The signal that has worked over the long term 
21:32 - Why 1% alpha is attractive over the long term 
24:38 - Macquarie's batting average scores over 10 and 5 years 
27:37 - Why ETF popularity will continue to soar 
29:57 - Why active fund managers need to innovate on ETFs
32:50 - Innovation in the US - and what we can expect in Australia 
35:08 - Why ETFs aren't the death of managed funds 
37:10 - Why passive investment isn't creating a bubble in markets
39:07 - Something that worries Blair about the direction of ETF markets 
41:21 - One ETF to hold for the next 5 years if markets were to close
Disclaimer: 
Product Disclosure Statements and Target Market Determinations for Macquarie ETFs can be found at etf.macquarie.com and should be read before making a decision to invest. 
*The Macquarie Australian Shares Fund, Macquarie Australian Equities Fund and the Macquarie Australian Small Companies Fund’s investment strategies changed effective 18 December 2017. Until 17 December 2017, the strategies were managed with a fundamental approach. From 18 December 2017, the strategies were restructured such that they are managed with a quantitative, systematic investment approach.

The secret to finding stocks you can hold for 20+ years

While Warren Buffett's favourite holding time may be forever, the average holding period for a typical investor is now just 5.5 months. In a world where news, analysis and investment ideas are readily available at our fingertips, investors have quickly forgotten the benefits of long-term compounding and instead are focused on the next great stock, driven likely by their fear of missing out.
 
We've all succumbed to it, there's no point denying it. How many of us jumped on the buy-now-pay-later trend, the lithium trend, the uranium trend, and now, the AI trend, as stocks soared to stratospheric heights? How many of us have attempted to hold on for dear life (HODL) as some of these companies crashed back to Earth?
 
So, how can you identify the companies that continue to win over the long term? And by long term, I don't mean five-plus years, but 20.
 
In this episode of The Rules of Investing, Janus Henderson's Josh Cummings outlines what makes a winning long-term stock - a process that has helped the team top the league tables for their consistent outperformance over the last five and 10 years - and provides a few examples.We also take a deep dive into artificial intelligence - and why Cummings believes AI will become even larger, more pervasive, and more impactful on our lives than we could ever conceive of today.
 
https://www.livewiremarkets.com/wires/the-secret-to-finding-stocks-you-can-hold-for-20-years
 
Timecodes0:00 - Intro2:16 - The secret to consistent long-term outperformance3:30 - What the team got right and wrong over the last 12 months4:38 - The impact of AI on mega-cap tech companies7:19 - Is there too much "faith" in the AI theme?9:48 - Is this the death of value investing?11:58 - What it's like on the ground in the US right now15:14 - Impact of cumulative inflation on businesses18:13 - Nvidia's antitrust charges20:42 - Factors that can help investors identify consistent winners22:58 - Celebrity CEOs and red flags25:20 - Should you really HODL?26:58 - Smaller companies employing disruptive innovation31:13 - Lessons from the team's meeting with OpenAI CEO Sam Altman33:49 - Innovation is a scale game - why the big are only going to get bigger35:01 - What could go wrong with AI (i.e. are we in for an iRobot scenario)40:22 - Two things investors are getting wrong today42:36 - Why you should invest in what you know (and trust your gut)46:45 - One stock Josh Cummings would own if the market closed for 5 years

Australia has all the ingredients to become a superpower in this space

Nowadays, it’s quite easy to get swept up in the negativity around our economic plight. Living costs are a very real concern, as are increasingly unaffordable house prices. But, as Australians, we’re also quite fortunate.
Our economy has enjoyed an unprecedented run of growth, we’re highly educated, we’re resource-rich, and we have opportunities – one of which lies in energy creation.
As Darren Brown, Co-Managing Director, Renewables Australia at Octopus Investments tells it, there is “a really unique opportunity for Australia to become a superpower in renewable energy”.
The conversation highlights the transformative changes in the energy sector, the strategic initiatives underway, and the opportunities for investors in the renewable energy market in Australia.
Brown's unique perspective, gained from his experience in both fossil fuels and renewables, provides valuable insights into the industry's evolution and the potential for long-term growth in the renewable energy space.
Note: This episode was recorded on 29 August 2024. 

What happened to that recession we were promised?

In 1990, then-Treasurer Paul Keating famously said that the country's economic downturn was the “recession that Australia had to have.”
Although Keating was responding to a poor GDP print and doing his best to control the narrative, at the start of the rate hiking cycle in mid-2022 most in the market spoke of an impending recession with almost as much certainty. As it stands today, said recession is yet to materialise.
So, what happened? And perhaps more importantly, what does it mean for investors?
In explaining why a recession hasn’t occurred, Sebastian Mullins, Head of Multi-Asset, Australia at Schroders points out that both the Australian and US governments pumped money into their respective economies—something we hadn't seen in a long time.
“During the GFC, you had targeted programs to bail out banks and stimulate the economy, but on average, you had a very, very loose monetary policy and very tight fiscal policy to preserve balance sheets – i.e. improve the fundamentals of both corporate and government balance sheets”, says Mullins.
“This time around, it's the reverse. We're hiking rates but the government's stimulating aggressively. So that has offset quite a bit of it”, says Mullins.
Regarding America, where most of the recession indicators have been flashing red, Mullins adds that the US went into the current downturn un-levered – at least compared to previous episodes.
“If you think about what the pillars of the economy are, you have the consumer, you have corporates, and you have the government”, notes Mullins.
The US consumer de-levered after the GFC, reducing their amount of debt to GDP, as did corporations. “You'd expect higher interest rates to crack corporates”, says Mullins, but that hasn’t happened.
And while the government has been hurt by higher rates due to the bigger interest payments on its debt pile, “If the two pillars of the private economy are fine and the corporates are all fine, then there's no recession”, says Mullins.
Great, no recession. What about inflation?
For Mullins, the inflation conversation depends on how far into the future you look. “So in the short term, inflation's definitely coming down,” says Mullins.
As for the next five years and beyond, Mullins believes there are structural forces that will mean inflation could stay above the long-term targets of central banks – although that doesn’t have to be a bad thing.
“There are more inflationary forces in the system now than they were over the past decade” notes Mullins, adding that “things like fiscal stimulus that's here to stay”.
“You're seeing more populous governments come in around the world. You're talking about the election in the US, they're both going to spend. 
"It doesn't matter who wins, it just depends on who they spend on. But there's no tea party candidate or fiscal conservative”, says Mullins.
Mullins points to other inflationary factors, including de-globalisation, on-shoring, and increased security spending—whether that means military, food, mineral, or cybersecurity.
“So all that is to say, we're not saying we're going to 1970-style inflation, but if in the US 2% was the ceiling of inflation for the past decade, we think it's going to become a floor. So, it might be between two to three, maybe two to four [percent]”, says Mullins.
So, how are you investing?
A potentially higher floor for longer-term inflation seems like a small price to pay following the most aggressive rate-hiking cycle in living memory.
If someone offered the current economic and investing scenario back in late 2022 and early 2023 – with equity markets near all-time highs, bonds providing a decent yield, and an absence of recession – we’d all likely take it in a heartbeat.
So, as a multi-asset strategist, how is Mullins shaping portfolios in light of macro developments and a seemingly benign backdrop? Find out in this edition of The Rules of Investing, presented by James Marlay.
Mullins provides a view on Australian, US, Chinese and Japanese equities, bonds, and Australian vs. US credit. Finally, he outlines the bull case moving forward as well as the biggest risk to the outlook. 
Note: This episode was recorded on 27 August 2024. 
https://www.livewiremarkets.com/wires/what-happened-to-that-recession-we-were-promised

Why AI will have a bigger impact on the world than the invention of electricity

In this episode of The Rules of Investing, Livewire's Ally Selby learns about some of the companies that meet these criteria, why Rizzo believes AI will be far more transformative than investors currently think, as well as why he believes that investors are likely to do more harm waiting for a correction in some of these tech winners than a correction itself. 
Plus, he shares what he is seeing on the ground in the US right now in terms of economic weakness, the stocks he believes are worth paying up for right now, and how he takes advantage of sell-offs when he holds very little cash. 
Note: This episode of The Rules of Investing was recorded on Wednesday 14 August 2024. 
https://www.livewiremarkets.com/wires/why-ai-will-have-a-bigger-impact-on-the-world-than-the-invention-of-electricity
Timecodes: 
0:00 - Intro 
2:10 - Making sense of the volatility in tech stocks 
3:11 - This is a healthy bull market correction 
4:44 - The true transformational nature of AI 
8:11 - Spotting the imposters from the real AI winners
11:06 - There are risks but we are starting to see business acceleration from AI
13:27 - Should you take advantage of sell-offs in AI companies? 
15:08 - What Dom is seeing on the ground in the US in terms of economic stability
17:08 - How to identify winning tech stocks 
19:53 - How Dom thinks about risk 
22:01 - Dom's wishlist of stocks he would own at a cheaper price 
24:15 - Stocks it is worth paying up for right now 
26:32 - A deep dive into semiconductor stocks and cycles 
30:20 - NVIDIA at the point of deceleration and what this means for investors
31:16 - How to take advantage of sell-offs with very little cash 
34:19 - One thing investors are getting wrong about markets 
34:53 - Biggest lessons Dom has learnt during his career 
39:06 - One stock Dom would hold if the market closed for 5 years.

Why trying to time small caps is a "big waste of time"

Much has been made of the “Great Rotation” of late and the move away from highly concentrated large caps into small-cap equities, particularly in the US.
Greg Dean, founder of Langdon Equity Partners, is having none of it. When quizzed about whether the rotation was impacting how Dean and his team invest, the short answer was ‘no’.
Late last year, amid widespread commentary about 2024 being the ‘year for small caps’, Langdon wrote about the time and energy people spend talking about timing in small caps and called it a “big waste of time”. Dean feels a similar way about the rotation.
“The reality is if you wait for the perfect time, you've probably missed out on a lot of opportunity during that period when fewer people were interested”, says Dean.
Dean founded Langdon in 2021 on the concept of a “clean sheet of paper” – i.e. not being beholden to anyone but investors.
His philosophy is built on deep research and holding management to account, allowing him to ‘trust but verify’. He adds that speaking with management is a delicate balance that is often “executed poorly”.
“You think you have to be aggressive and definitive or you have to be a “yes” person and agree with everything that they're telling you, and neither of those is optimal”, says Dean.
In the following episode of The Rules of Investing, Dean delves deeper into small-cap investing, explains why he and his team take more than 300 individual company meetings each year, talks through the current portfolio tilt, and shares why the fund favours Europe over the US.
He also upacks two global small-cap stock ideas that highlight Langdon’s approach. 
Note: This episode was recorded on 31 July 2024. You can watch the video or listen to the podcast below. 
https://www.livewiremarkets.com/wires/why-trying-to-time-small-caps-is-a-big-waste-of-time-and-2-long-term-stock-ideas
Timecodes
0:00 - Intro1:36 - Investment background and founding Langdon5:05 - Biggest influences over the journey and why small caps?8:39 - Investment philosophy origin story11:01 - When is enough, enough?12:45 - The Great Rotation and current market conditions15:31 - Company meetings how the best stand out20:09 - Honing the craft23:42 - Current portfolio: underweight US, overweight Europe26:58 - Why cashflow is Landon's North Star28:07 - Other non-negotiables29:12 - Testing beliefs30:40 - Navigating patience as a small-cap investor32:57 - Small-cap stock ideas37:52 - What are investors getting wrong about today's markets?49:27 - Courage of conviction41:29 - The five-year stock