The Rules of Investing

Christopher Joye: No margin for error for risk junkies craving rate cuts

The past six months have been golden for investors, with everything from equities to gold and even Bitcoin enjoying stellar runs. And if risk assets are not your bag, then there have been juicy yields on offer across a range of cash and fixed-income asset classes. 
Animal spirits woke from their slumber in late October 2023 when the Fed effectively claimed victory in the fight against inflation. Markets have been led to believe that rate cuts are a forgone conclusion in the year ahead, and participants have been piling into risk assets accordingly. 
Christopher Joye, portfolio manager and chief investment officer at Coolabah Capital Investments, says that markets have become so complacent that they appear to be completely ignoring a growing set of data suggesting that the path forward might not be smooth.
Most notably, the resurgent inflation data coming out of the US is causing interest rate cut expectations to be dialled back and kicked down the road. When asked what he thought investors were getting wrong about markets today, Joye was quick to call the dichotomy between what the economy is suggesting needs to happen with interest rates and market expectations.
“If this strong data keeps coming through then hold onto your hats because the world is not priced for this risk. Make no mistake, there is no margin for error in listed equities. There is no margin for error in venture capital, private equity, zero in crypto, in commercial real estate, nothing,” Joye argued.
Tune in to the latest episode of the Rules of Investing, where Livewire’s James Marlay ask Joye about his views on the outlook for both the US and Australian economies, the three risks he is watching and where he sees value in Australian residential real estate.

Why Ben Clark is taking profits on growth stocks (and where he's putting that money to work)

Quality growth stocks, those with fortress balance sheets, impressive moats, structural tailwinds and top-notch management teams, have had a stellar run recently. Take Goodman Group (ASX: GMG) for example, which has risen 66% over the past year. Or Megaport (ASX: MP1), up over 252% in 12 months alone. 
If you're like this anonymous writer, you've probably started to ponder whether it's time to trim some of your winning positions and take some profits. 
And according to TMS Capital's Ben Clark, we may have just reached that point. 
"A lot of investors are trying to chase a very small number of stocks in Australia because of the AI trade," he says. 
"And I'd just be a bit wary about that because although those companies absolutely should benefit, it's just how quickly those benefits flow through and whether the market has just got a bit ahead of itself in terms of the benefits that will come through in the medium term." 
In this episode of The Rules of Investing, Clark sits down with Livewire's Ally Selby for a conversation on all things artificial intelligence, growth investing and holy grail stocks. 
He shares where he is putting some of the firm's dry powder to work, a few reasons why investors should feel optimistic about the outlook for markets, and whether he would be buying the AI behemoths both globally and locally today despite their stellar runs over the last six months. 
Plus, Clark shares why the tables may be turning once again for out-of-love growth darling CSL (ASX: CSL). 
Note: This episode was recorded on Tuesday 9 April 2024. 
Timecodes: 
0:00 - Intro 
1:54 - Ben Clark's outlook for the remainder of 2024 
4:17 - Record cash holdings in the US and what this means for markets 
6:51 - Why Aussie investors are also holding a lot of cash 
7:39 - The most common question Ben Clark is hearing from clients 
10:01 - The takeaways from Ben's trip to SXSW in the US
12:13 - Learnings from a private meeting with a Google executive 
15:11 - The outlook for Microsoft (NASDAQ: MSFT) and Google (NASDAQ: GOOGL)
16:25 - Can the momentum continue for global AI winners like Nvidia (NASDAQ: NVDA) 
19:17 - The ASX-listed stocks that directly benefit from AI 
23:17 - Why some of these stocks' share prices may have gotten ahead of themselves
24:30 - Holy grail stocks - and why Brickworks (ASX: BKW), WiseTech (ASX: WTC), REA Group (ASX: REA) and CSL (ASX: CSL) make the cut 
29:32 - Where Ben Clark has started to take profits 
31:28 - And where he is putting that cash to work 
36:11 - One thing the market is getting wrong today 
38:03 - Lessons for growth investors from the 2022 bear market 
42:59 - A stock to buy and hold for the next five years

The next 10 years in ETF growth could be dominated by this asset class

If there is any one investment product that has experienced a true boom over the last 10 years, it is exchange-traded funds (ETFs) and exchange-traded products (ETPs) more broadly. 
The number of listed products has increased by 17.5 times in Australia during the last decade alone. More than 300 products are now listed across the ASX and CBOE exchanges and two million Australians have at least one ETF in their portfolio.
And, as if you need more proof of the growth of ETPs, 2024 marked the first time that inflows outpaced those going into unlisted managed funds. 
So if we've seen this growth over the last decade, what could the next 10 years hold?
In this episode of The Rules of Investing, we put this and other questions to Tamara Haban-Beer Stats, Director and ETF/Index Investments Specialist at BlackRock Australia. BlackRock is the world's largest asset manager and its ETF arm iShares runs 49 ETPs in the Australian market.
In this episode, Tamara also discusses the key mega forces that BlackRock believes could drive markets over the long run, where they are overweight in portfolios and the asset classes they believe could see the biggest growth within ETPs over the coming years.
Note: This episode was recorded on Tuesday 19 March 2024.
Timestamps
0:00 - Intro
2:21 - BlackRock's outlook for the next 12 months
4:06 - What the new investing regime means for ETF investors
6:17 - The five "mega forces" of investing 
9:13 - Currency impacts on ETF returns
10:27 - Will the Australian Dollar rebound in late 2024?
13:45 - Should investors consider hedged ETFs?
14:55 - Opportunities in Japan and the US
16:47 - Why the AI boom won't be early 2000 all over again
18:02 - The explosion of interest and uptake in ETFs
21:31 - The asset class that could gain the lion's share of growth in the future
23:17 - Other interesting innovations in the global ETF market
25:06 - Which products are seeing the most inflows and outflows in 2024?
27:31 - The Rules of Investing's regular questions (with an ETF twist)

Warryn Robertson’s guide to picking the best infrastructure stocks on the ASX and abroad

Warryn Robertson, portfolio manager and analyst at Lazard Asset management, understands the nuances of infrastructure assets like few others in the market. His approach is to find monopoly assets with inflation protected revenues, high margins and reasonable leverage then buy them at attractive prices. 
Of the 400 listed infrastructure stocks globally only 160 have passed the four filters and typically Lazard’s Global Listed Infrastructure Fund will own just 25 to 30 of those companies. Given the attractive nature of infrastructure assets it is unsurprising that sovereign wealth funds and private equity firms are also circling these assets. Robertson estimates that of the 160 stocks that meet his criteria 25 have been taken private and delisted. 
The situation in Australia is even more challenging, of the 14 infrastructure and utility stocks on the ASX valued at more than $1 billion just four meet Warren’s criteria as being ‘preferred infrastructure’.
The good news is that Robertson is a firm believer and concentrating your capital into your best ideas. In this episode of the Rules of Investing, Warryn Robertson reviews the recent performance of that asset class through an inflationary environment, explains why US utilities look vulnerable and shares what he believes are the best opportunities in infrastructure. 
Robertson also reveals what he regards as the top infrastructure stock on the ASX and an infrastructure company with an absolutely stunning earnings outlook.

The policy overhaul Shane Oliver would make to secure Australia's fortunes

"Living Legend", "One of a kind", and "Diamond in the Rough are not terms usually bandied about when describing economists! But these are just a few of the hundreds of messages of support and appreciation that flooded a recent social media post recognising the 40-year tenure Dr Shane Oliver to AMP.
Shane has dedicated his years to educating Australians on all matters of the economy. His style tends to be glass half full, and you'll rarely hear him pushing doomsday forecasts. He also possesses an uncanny ability to make complex matters easy to understand and is usually armed with some cracking charts to drive home his points.
In this episode of the Rules of Investing, Shane explains why central banks are close to pulling off Mission Impossible and avoiding recession. He believes interest rates have peaked and will drift lower as inflation returns to the RBA's target range. The episode also touches on a range of issues, including population growth, housing affordability and Australia's exposure to the Chinese economy. 
 

Where Soul Patts is investing for long term growth and dividends

If you’re looking for the future blue chips of the ASX then Washington H Soul Pattinson might be worth a closer look. The company has been around for more than a century, has never missed a dividend payment but, for the most part, has flown under investor radars.
That is starting to change following the tie up with Milton Corporation in 2021, which has helped to propel Soul Patts’s market cap over $12 bn and into the S&P/ASX 50. Soul Patts now sits alongside popular names including Mineral Resources, Car Group, ASX Ltd and Ramsay Healthcare. 
Blue chip stocks are known to be large, reliable, profitable and consistent dividend payers. Soul Patts ticks most of these boxes with the exception of size perhaps.
The merger with Milton brought an experienced investment team led by CEO and CIO Brendan O’Dea, 30,000 new shareholders and a $3.7bn large cap portfolio.
O’Dea is now the Chief Investment Officer at Soul Patts and says the merger gives Soul Patts the platform required to build the next generation of investments that will sustain Soul Patts enviable track record of shareholder returns.
“There’s a real desire on our part to seed the strategic assets of the future and a lot of that is going to come out of that private portfolio.”
In this episode of The Rules of Investing, Brendan O’Dea takes Livewire’s James Marlay on a tour of the Soul Patts investment portfolio covering their large cap, emerging and strategic equity portfolios.
 O’Dea also shares Soul Patts’ unique approach to capital allocation, the asset classes commanding their attention and why you should expect to see more big strategic investments in the years ahead.

How Hyperion unearths rare but exceptional growth companies (plus two that pass their filters)

The structural forces that saw growth investing rise to the top after the GFC remain. Covid created a blip, but the world is returning to slow growth, low inflation and lower interest rates. That's the perspective of Jason Orthman, the Deputy Chief Investment Officer of Brisbane-based Hyperion Asset Management. 
Orthman says that neither you, me, nor our grandchildren are likely to experience an environment like 2022, where rapid interest rate hikes rocked long-duration assets such as government bonds and growth equities. 
"2022 was an incredibly unusual period. We've looked at markets over the last 250 years, and you haven't seen interest rates at the long end move quickly to that level over 250 years of data. We believe it's a one-in-250-year event," says Orthman.
Structural forces, including ageing populations and the rise of automation, will continue to create a disinflationary and low-growth world in the decades to come. This backdrop means that those rare companies that can grow at rates well ahead of GDP can provide investors with exceptional returns. 
Orthman and the Hyperion team have a disciplined approach to finding these rare gems, starting with twelve structural growth trends, such as productivity, the shift towards artificial intelligence (AI), and banking and payments. These parts of the economy are likely to grow and present fertile ground for finding future blue-chip companies. 
In this episode of the Rules of Investing, Ortham speaks with Livewire's James Marlay about Hyperion's approach to growth investing, the wild ride of 2022 and the long-term opportunities the firm has identified. 
Orthman also shares what he describes as 'one of the most important investments' the firm has ever made, what investors are missing about the Tesla story and two companies he believes are poised for significant revenue growth over the next decade.

How to invest $1 million in 2024

Each year, Barron's releases a list of Australia's Top 100 Financial Advisers. Pitcher Partners' Charlie Viola and Lipman and Burgon Partners' Paul Burgon have featured high on this list over the years, and both ranked in the top 10 in 2023.
As part of Livewire's Outlook Series for 2024, Livewire's James Marlay hosted an in-depth panel discussion exploring how these two investing gurus are allocating capital on behalf of their clients in 2024. Whilst there is no 'one size fits all' when it comes to investing, there are nuggets of insight from this session that can help all investors.
Click here to access the charts discussed in this episode and a summary of the discussion 
Timecodes
0:00 - Introducing the experts
0:49 - Charlie Viola’s top three factors influencing asset allocation in 2024
3:20 - Paul Burgon’s top three factors influencing asset allocation in 2024
6:15 - Asset classes where Paul and Charlie are overweight or underweight
9:53 - Why Private Markets will play a bigger role in portfolios in 2024 and beyond
12:40 - Charlie Viola’s Asset Allocation framework for 2024
16:33 - Paul’s Strategic and Tactical Asset Allocation frameworks for 2024
22:26 - How these advisers are innovating in 2024
25:50 - Four investing traps to avoid in 2024