The Rules of Investing Livewire Markets

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 
 

Hello and welcome to the Rules of Investing, brought to you by Livewire Markets. This week’s guest is on a mission to truly surprise our listeners. He believes investors are underappreciating the real impact of artificial intelligence on markets and how we value stocks. In fact, he believes it’s the end of the world as we know it. 
I’m talking of course, of FNArena’s Rudi Filapek Vandyck. 
Here’s a sneak peek of what you can expect….

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 

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.