The Rules of Investing

There's no supply in residential housing nor the majority of segments of the commercial real estate market. Sky-high construction costs are now too prohibitive. Bandaid solutions, like rent control, only backfire. And inconsistent state, federal and local policies are not helping either. That's according to this week's guest on The Rules of Investing, Andrew Parsons, a founder and the chief investment officer of global listed real estate manager Resolution Capital. While these factors continue to perpetuate Australia's housing problem, they are actually positive for long-term investors in real estate.  In this episode of The Rules of Investing, Parsons dives into Australia's property problem, outlines what he believes to be the solution, and shares why listed property is in for a strong three to five years ahead of us.  Note: This episode of the Rules of Investing was recorded on Wednesday 17 July 2024.  https://www.livewiremarkets.com/wires/30-year-property-veteran-australia-has-its-head-in-the-sand-on-housing    Timecodes 0:00 – Introduction 2:06 – A fascinating, under-appreciated part of the market 3:45 – What is a REIT? 5:30 – The key distinctions between REITs and physical property assets 8:45 – Which do you prefer: an investment property or listed property assets? 9:50 – Where REITs sit alongside equities and fixed income 10:55 – What you’re really paying for when you buy real estate 12:50 – Why property development is so difficult currently 13:40 – Australia’s troubling property supply shortfall 15:04 – “We don’t want urban sprawl” 16:30 – How do you solve Australia’s big property problem? 20:50 – The effect of interest rates on listed property, versus equities and bonds 23:40 – How Resolution Capital is currently positioned 33:50 – What is your best investment of all time? 38:08 – Resolution Capital’s five-year pick    

Investors are too focused on interest rates and are subsequently underweight risk assets. That’s the, albeit US-centric, view from Global X ETFs’ Head of Investment Strategy, Scott Helfstein. He elaborates by saying that the US economy is looking a lot more like mid-cycle expansion than late cycle and that “you don’t want to be sitting on the sidelines”. A fan of thematic investing, Helfstein goes on to highlight three big investment themes that he likes right now, including one offering the opportunity for true transformation, that’s available for the same price as the S&P 500. Don’t miss the latest Rules of Investing Podcast. https://www.livewiremarkets.com/wires/3-compelling-long-term-etf-ideas-for-investors-still-on-the-sidelines    Timecodes 0:00 - Intro 1:12 - A unique background for an investment professional 7:17 - The current state of geopolitics 12:00 - Australia's position in the global landscape 14:10 - The appeal of thematic investing 16:42 - Where is the puck going? 22:53 - Sectors versus themes 26:48 - The role of thematic investing in a portfolio 28:46 - Nothing but ETFs? 30:27 - Ranking the big themes 34:22 - A theme that is flying under the radar 36:40 - Risks in thematic investing 38:32 - Mama's favourite son 39:49 - What are investors getting wrong? 41:07 - One theme for the next five years

Fully franked dividends are a prized asset of the Australian market. While the lack of growth is often lamented, plenty of self-funded retirees are content to dine on the distributions of Australia's big miners and banks.  And who can blame them - high commodity prices, particularly in iron ore and lithium, resulted in record dividends from the top end of town. However, after peaking in 2021 and 2022, dividends from mining companies are steadily declining. Research from Commsec published late in 2023 showed that the 12-month forward dividend yield for the ASX200 has been below the long-run average of 4.7%, and dividend per share estimates have been cut by 14 per cent.  The good news is that Australian banks have been increasing their dividends whilst also enjoying surging share prices. There is also a long list of consistent dividend paying stocks that often fly under the radar. In this episode of the Rules of Investing, Livewire's James Marlay speaks with Plato Investment Management's Dr Don Hamson to get his diagnosis on the case of the 'disappearing dividends'. Hamson insists that diversification remains a free lunch for investors, especially for those seeking stable and consistent returns. He also emphasizes that fully franked dividends continue to stack up as the backbone of an income-generating portfolio. Timecodes: 0:00 - Introduction 1:43 - The outlook for dividends 8:27 - Dividends versus Fixed Income 10:25 - Dwindling dividends 13:08 - The dividend outlook for mining shares 17:00 - Tactics to combat declining dividends 20:07 - Australian banks - stable but expensive 22:10 - The case for diversification 25:15 - Winning by avoiding the losers 28:09 - What returns are realistic for Plato? 31:26 - A lesson from Medibank Private 34:10 - Don’t focus on the US election 36:23 - The stock most likely to be a 5-year resident in the Plato Australian Shares Income Fund

This time last year, PIMCO Portfolio Manager Adam Bowe told Livewire that there was a 50/50 chance that Australia would slip into recession. March GDP figures show that the economy grew at just 0.1 per cent, the slowest rate since December 2020. Today, Bowe says interest rates are sufficiently restrictive, and the chance of recession remains a ‘line ball’.  In this episode of The Rules of Investing, Bowe explains why interest rates in Australia don't need to go higher, why house prices have been immune to interest rate increases and where he is finding the best income opportunities right now.    

While "survival of the fittest" certainly applies to the Earth's abundance of flora and fauna, it may be time for investors to take a page out of Darwin's book.   That's according to FNArena's Rudi Filapek-Vandyck, who believes the market has irreversibly changed since 2014 - as has the way investors should value stocks.   In this episode, Rudi outlines why he believes technological innovation will transform the market as we know it. He also discusses some of his favourite ASX-listed stocks to play the AI theme, the importance of quality companies in today's markets, and what it takes for a company to be an all-weather stock.   Note: This episode was recorded on Wednesday 29 May 2024. Note #2: Ally was today years old when she learnt what R.E.M. is, she apologises for any harm her ignorance may have caused hardcore fans. If it's any excuse, the song was released seven years before she was born.    https://www.livewiremarkets.com/wires/rudi-ai-is-the-end-of-investing-as-we-know-it   

There seems to be no stopping Australia's ultra-wealthy, with the number of billionaires down under growing by 14.4% over the past 12 months, to a record 159 people. For some context, in 2020, this number was 117, according to The Australian.  While it's wonderful to daydream about what you would buy or do with a few billion dollars, the true secret success of the ultra-wealthy is their ability to stay that way. After all, how many stories have you read of lottery winners squandering their newfound wealth just a few short years later?  So, how do the other half continue to grow their wealth?  To find out, Livewire sat down with MRB House's Peter Magee and Walsh Capital's Louise Walsh for their insights into how Australia's ultra-wealthy invest as part of Livewire's Undiscovered Funds Series.  They share their tips and tricks for identifying "exceptional" funds, outline the factors that are important to their processes, share what to do when a fund isn't performing as expected, and name one recently launched fund that has impressed in recent years.  Note: This interview was recorded on Wednesday 15 May 2024.  https://www.livewiremarkets.com/wires/the-investment-secrets-of-australia-s-billionaires 

In investing, just as in love, trust is everything - and without it, you really don't have anything at all.  It's for this reason that the Wilson Asset Management global equities team meets with more than 700 management teams across the world each year - including in the US, Japan, and Europe. In addition, they also meet with competitors and suppliers, as well as talk to current and past employees and industry experts.  According to WAM Global (ASX: WGB) lead portfolio manager Catriona Burns, the team does this because trust in a company's management team is paramount.  "Have they hit their targets? Have they done what they said? If we have any doubts on that trust factor, for us, that's completely a non-negotiable and we won't invest," she says.  Burns is reading between the lines, and looking beneath the surface for red flags. And while management teams selling stock, poor track records and value-destructive deals can certainly be warning signs, she argues that alignment - and the lack thereof - can often be far more telling for the future direction of a company's share price.  "Incentives drive outcomes... I can't tell you how many times I have seen incentives for management based on earnings per share growth," she says.   "Companies just chase acquisitions to meet earnings growth without thinking about the returns that are being generated on the dollars spent. That happens time and time again and is a massive red flag."  In this episode of The Rules of Investing, Burns takes listeners through some of the companies that have managed to pass her filters, as well as why catalysts are so important for investors with a penchant for value.  She also outlines why the listed investment company's growing annual yields won't be slowing over the next five years, what it's actually like on the ground in the US right now, as well as what the US election at the end of the year could mean for markets.  Note: This interview was recorded on Tuesday 14 May 2024.  https://www.livewiremarkets.com/wires/700-meetings-each-year-how-wam-global-uncovers-under-the-radar-stocks  0:00 - Intro  1:21 - What it is actually like on the ground in the US  2:14 - Catriona Burns' outlook on rates and inflation  3:26 - The WAM Global (ASX: WGB) investment process (and the importance of trust)  8:09 - Alignment is everything + why CTS Eventim (ETR: EVD) is a good example  9:35 - Artificial intelligence and where Catriona is invested here  13:38 - On not owning NVIDIA (NASDAQ: NVDA)  14:41 - Why she's overweight financials and healthcare  16:47 - Picks + shovels approach versus drug developers in healthcare  18:18 - Stock with major catalysts on the horizon: CTS Eventim (ETR: EVD) and Quanta Services (NYSE: PWR)  20:01 - Why catalysts are so important  21:27 - The sustainability of WAM Global's yields + franking credits  22:46 - How to think about performance  24:33 - Why Catriona is bullish on the outlook for global small and mid caps  25:42 - One thing investors are getting wrong about today's markets  26:51 - US politics + what a Trump win would mean for markets  29:10 - A story of a loss from Catriona's career and what she has learnt from this  31:19 - One stock that Catriona would buy and hold if the market were to close for the next five years: Intercontinental Exchange (NYSE: ICE)

Time flies when you’re having fun! While the last five years have had plenty of ups and downs, they haven’t dented the enthusiasm and passion of small-cap fund manager Chris Stott from 1851 Capital. Stott launched 1851 Capital in 2020, just before COVID-19 hit, wreaking havoc on the market and his portfolio. Since then, Stott has comfortably beaten his small-cap benchmark, growing the fund’s initial capital of $80 million to almost $500 million through a combination of inflows and capital growth. Whilst there was some exuberance after the initial shock of the pandemic, the past few years have been far more challenging for small-caps investors. “Over the past four and half years, the small-cap index has returned 3% per annum. If you look at the 30 years before we launched the fund, it was 10% per annum. So quite a significant underperformance, quite dismal in fact,” Stott says.  However, late October 2023 marked a turning point and the small-cap index has recently entered a technical bull market, having rallied more than 20%.  So where to from here and which companies does Stott believe can sustain the early track record that 1851 Capital has established? In this episode of The Rules of Investing, Stott shares his lessons from starting a new fund, why he believes the bull run in small caps can continue and five of the stocks he is backing to deliver market-beating returns. For those of you with a good memory, Stott was last on the podcast in June 2020, when he tipped NextDC (ASX: NXT) as the one stock he would hold if markets were to close for the next five years. Shares in NextDC have gained more than 75% over that time, and the company is now in the ASX100, forcing Stott to exit his position. Naturally, we’ve asked him for a fresh idea. Note: This episode was recorded on Wednesday 8 May 2024.  https://www.livewiremarkets.com/wires/chris-stott-s-5-high-conviction-stock-ideas-for-the-new-bull-market   

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.

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