1 00:00:05,680 --> 00:00:08,440 Speaker 1: Welcome to the Fearing Greed Business Interview. I'm sure nayelma. 2 00:00:08,600 --> 00:00:11,000 Speaker 1: As the year draws to a close, we start looking 3 00:00:11,000 --> 00:00:14,200 Speaker 1: ahead to the opportunities for investors in twenty twenty five. 4 00:00:14,600 --> 00:00:17,119 Speaker 1: Morning Star has released its twenty twenty five Outlook and 5 00:00:17,160 --> 00:00:20,480 Speaker 1: assessment of the economy and market right across the globe. 6 00:00:21,040 --> 00:00:24,040 Speaker 1: Bad news for local investors. The Australian market ranks as 7 00:00:24,040 --> 00:00:28,200 Speaker 1: one of the least favorable for investor opportunities. So where 8 00:00:28,200 --> 00:00:31,520 Speaker 1: should we be looking instead? Today we're going through morning 9 00:00:31,520 --> 00:00:34,440 Speaker 1: Stars picks for the best growth potential over the coming decade. 10 00:00:34,440 --> 00:00:37,640 Speaker 1: Remember this is general information only and you should always 11 00:00:37,640 --> 00:00:41,720 Speaker 1: seek professional advice before making investment decisions. Matt Waicher is 12 00:00:41,760 --> 00:00:45,080 Speaker 1: the Chief Investment Officer Asia Pacific at morning Star. Matt, 13 00:00:45,080 --> 00:00:46,200 Speaker 1: welcome back to Fearing Greed. 14 00:00:46,520 --> 00:00:47,600 Speaker 2: Thanks lot for having me again. 15 00:00:47,680 --> 00:00:50,479 Speaker 1: Sean, let's jump into it. But well, actually, why is 16 00:00:50,520 --> 00:00:53,360 Speaker 1: Australia solo? First off, Well, I think it's not that 17 00:00:53,479 --> 00:00:56,360 Speaker 1: it's in absolute sense. We don't think you're going to 18 00:00:56,360 --> 00:00:57,920 Speaker 1: be losing money by investing industry. 19 00:00:57,960 --> 00:01:01,240 Speaker 2: When you think that there's probably a few better opportunities 20 00:01:01,280 --> 00:01:04,440 Speaker 2: for generating you know, higher long term returns in some 21 00:01:04,520 --> 00:01:07,200 Speaker 2: of the other other regions out there, I mean US. 22 00:01:07,280 --> 00:01:10,280 Speaker 2: The US market's probably in the same boat some parts 23 00:01:10,319 --> 00:01:12,760 Speaker 2: of the market here, both here and in the US. 24 00:01:12,800 --> 00:01:16,039 Speaker 2: So you know, the valuations have got a little bit rich. 25 00:01:16,240 --> 00:01:18,800 Speaker 2: Doesn't mean we don't want to invest there, but we 26 00:01:18,840 --> 00:01:21,320 Speaker 2: think we can push a little bit overweight in some 27 00:01:21,360 --> 00:01:22,080 Speaker 2: other areas. 28 00:01:22,640 --> 00:01:28,280 Speaker 1: Okay, let's start China. The road remains bumpy, structural issues, etc. 29 00:01:29,240 --> 00:01:31,080 Speaker 1: Why do you like China? 30 00:01:31,680 --> 00:01:34,400 Speaker 2: We like China, And again it's you know, as you say, 31 00:01:34,440 --> 00:01:39,399 Speaker 2: structural issues, bumpy road, tariffs on the horizon, geopolitical issues. 32 00:01:40,680 --> 00:01:43,600 Speaker 2: It's made China very cheap or as particular, parts of 33 00:01:43,640 --> 00:01:46,120 Speaker 2: the market very cheap. And yeah, we're not going to 34 00:01:46,160 --> 00:01:49,200 Speaker 2: be diving into Chinese property stocks, but we do like 35 00:01:49,360 --> 00:01:52,400 Speaker 2: some of the some of the large cap tech names 36 00:01:52,440 --> 00:01:54,640 Speaker 2: you know, you know who you're investing alongside very high 37 00:01:54,680 --> 00:01:58,080 Speaker 2: quality businesses, lots of cash on the balance sheet, can 38 00:01:58,400 --> 00:02:02,960 Speaker 2: undertake buybacks and can control costs very well, and all 39 00:02:03,000 --> 00:02:06,080 Speaker 2: at very low valuations. So I guess the way and 40 00:02:06,080 --> 00:02:08,600 Speaker 2: probably a few of the opportunities we talk about today, 41 00:02:09,080 --> 00:02:11,760 Speaker 2: the way that we think about investing is not so 42 00:02:11,880 --> 00:02:14,840 Speaker 2: much that we need an asset like Chinese equities to 43 00:02:14,880 --> 00:02:18,960 Speaker 2: go from being terrible to fantastic. We just need to 44 00:02:19,000 --> 00:02:21,880 Speaker 2: go them to go from looking you know, terrible from 45 00:02:21,919 --> 00:02:25,800 Speaker 2: a sentiment perspective to looking okay. And we think we 46 00:02:25,840 --> 00:02:28,120 Speaker 2: can generate some pretty good returns out of China by 47 00:02:28,160 --> 00:02:30,760 Speaker 2: that happening and a few other opportunities. But you know, 48 00:02:30,840 --> 00:02:34,840 Speaker 2: we think that the economy there is seems to be 49 00:02:34,880 --> 00:02:37,120 Speaker 2: bottoming out a little bit, and I think, you know, 50 00:02:37,360 --> 00:02:40,960 Speaker 2: stimulus is certainly coming, has come, and we think that 51 00:02:40,960 --> 00:02:43,040 Speaker 2: they're on that path. They know that they do need 52 00:02:43,080 --> 00:02:46,040 Speaker 2: to stimulate how quickly that comes. You know, we're a 53 00:02:46,080 --> 00:02:48,360 Speaker 2: little bit indifferent too, because we think we're getting some 54 00:02:48,400 --> 00:02:52,000 Speaker 2: of the assets really cheap valuations. A stock like Ali 55 00:02:52,080 --> 00:02:55,840 Speaker 2: barber or ten cent Ali Barbera in particular, you know, 56 00:02:55,960 --> 00:02:57,799 Speaker 2: not not much has to go right for that, and 57 00:02:57,919 --> 00:03:02,000 Speaker 2: it's because it's only trading on forward pe of nine times, 58 00:03:02,040 --> 00:03:05,000 Speaker 2: which is pretty good value in this kind of market globally. 59 00:03:05,400 --> 00:03:09,480 Speaker 1: Yeah, so consumer discretionary stocks generally in China, Oh. 60 00:03:09,520 --> 00:03:14,200 Speaker 2: Yeah, consumer discretionary it where there's high quality. Yeah, slash 61 00:03:14,240 --> 00:03:18,240 Speaker 2: tech is really you know, those they're very high quality businesses, 62 00:03:18,280 --> 00:03:20,480 Speaker 2: you know, I mean, apart from the fact that they're 63 00:03:20,480 --> 00:03:24,080 Speaker 2: in China very comparable to the US tech companies in 64 00:03:24,160 --> 00:03:26,920 Speaker 2: what they do, and you know the quality of the business. 65 00:03:27,440 --> 00:03:30,720 Speaker 1: Okay, Another country you picked out, which admittedly was more 66 00:03:30,760 --> 00:03:32,360 Speaker 1: than a week ago I think when you did the research, 67 00:03:32,639 --> 00:03:35,520 Speaker 1: was Korea. Now, plenty went on in Korea last week, 68 00:03:35,680 --> 00:03:39,400 Speaker 1: but Samsung an incredible company over many years. Do you 69 00:03:39,400 --> 00:03:43,000 Speaker 1: think that's a good pick. Just explain that one, and 70 00:03:43,080 --> 00:03:45,920 Speaker 1: particularly you know how you think about sovereign risk. 71 00:03:46,520 --> 00:03:49,320 Speaker 2: Yeah, and I mean China as well. Lots of sovereign 72 00:03:49,400 --> 00:03:52,000 Speaker 2: risks there. It's all so we'll do with the sovereign 73 00:03:52,080 --> 00:03:54,640 Speaker 2: risk first. You know, there's lots of things that we 74 00:03:54,680 --> 00:03:57,760 Speaker 2: can't control in any investment. We couldn't control who was 75 00:03:57,800 --> 00:04:01,160 Speaker 2: going to win the US election. Similarly, we can't control that. 76 00:04:01,120 --> 00:04:04,640 Speaker 2: These are things that are potentially knowable. But you know, 77 00:04:05,000 --> 00:04:07,720 Speaker 2: really we manage that in the sizing of the positions 78 00:04:07,720 --> 00:04:09,840 Speaker 2: in our portfolio. We don't want to take too much 79 00:04:10,440 --> 00:04:13,480 Speaker 2: risk with our client's capital, but we do want to, 80 00:04:13,560 --> 00:04:16,240 Speaker 2: we do. Investing is all about taking some risk, and 81 00:04:16,279 --> 00:04:18,920 Speaker 2: so we want to really make sure that the valuations 82 00:04:18,920 --> 00:04:21,000 Speaker 2: are compelling enough when we're going to take on that 83 00:04:21,120 --> 00:04:23,640 Speaker 2: sovereign risk as well. So there you know, obviously a 84 00:04:23,640 --> 00:04:28,920 Speaker 2: few issues last week in Korea, and we think over 85 00:04:28,960 --> 00:04:33,360 Speaker 2: the longer term they'll be sorted out and things will normalize. 86 00:04:33,920 --> 00:04:37,040 Speaker 2: That that's the base case. You know, there's always a 87 00:04:37,040 --> 00:04:41,000 Speaker 2: margin of error there, and but the probabilities are over 88 00:04:41,040 --> 00:04:45,760 Speaker 2: the longer term they'll normalize. Now, when you can combine 89 00:04:45,800 --> 00:04:49,760 Speaker 2: that normalization of things in the macro or the geopolitical 90 00:04:50,160 --> 00:04:53,760 Speaker 2: with a really compelling valuation opportunity like Samsung, we think 91 00:04:53,760 --> 00:04:57,360 Speaker 2: the really interesting opportunity at this point in time, then 92 00:04:57,440 --> 00:05:00,080 Speaker 2: we think we've got a compelling kind of investment on 93 00:05:00,120 --> 00:05:03,239 Speaker 2: our hands, and so you get gain. It's really valuation driven. 94 00:05:03,279 --> 00:05:06,920 Speaker 2: We think, you know, memory prices are bottoming out, supporting 95 00:05:06,960 --> 00:05:09,719 Speaker 2: you know, really a profit margin recovery for a stock 96 00:05:09,839 --> 00:05:13,280 Speaker 2: like Samsung, and it's a leading global memory supplier and 97 00:05:13,279 --> 00:05:17,000 Speaker 2: in our view it's trading at one time's price to book, 98 00:05:17,440 --> 00:05:21,520 Speaker 2: but it's been really penalized because of the competition around 99 00:05:21,600 --> 00:05:25,719 Speaker 2: you advanced memory chips for AI and any progress on 100 00:05:25,880 --> 00:05:28,000 Speaker 2: catching up in that sector, which we think, you know, 101 00:05:28,240 --> 00:05:31,080 Speaker 2: a good company like Samsung can do is going to 102 00:05:31,080 --> 00:05:34,200 Speaker 2: be a real valuation rerating. And so that's kind of 103 00:05:34,200 --> 00:05:36,839 Speaker 2: the thesis. But we see you know, given what's happened 104 00:05:36,880 --> 00:05:40,560 Speaker 2: to Samsung, given some of the geopolitical issues we see, 105 00:05:40,560 --> 00:05:45,560 Speaker 2: Samsung really from this point offers a really asymmetric upside 106 00:05:45,640 --> 00:05:47,720 Speaker 2: versus limited downside. 107 00:05:47,760 --> 00:05:51,239 Speaker 1: From here, just before we leave emerging markets, Latin America 108 00:05:51,520 --> 00:05:55,400 Speaker 1: and Mexico, Brazil, those sorts of countries, what's attractive about them? 109 00:05:55,880 --> 00:05:59,240 Speaker 2: Well, again, there's there's some really high quality parts of 110 00:05:59,279 --> 00:06:02,320 Speaker 2: the market there. You know, some very high quality banks 111 00:06:02,320 --> 00:06:06,640 Speaker 2: in Brazil and Mexico, very high quality consumer staples companies 112 00:06:06,640 --> 00:06:10,320 Speaker 2: in Mexico that do great business. I think that both 113 00:06:10,400 --> 00:06:14,360 Speaker 2: those markets have been penalized for having leftist governments from 114 00:06:14,400 --> 00:06:18,280 Speaker 2: a market's perspective. You know, this is kind of anecdotal bit, 115 00:06:18,320 --> 00:06:21,200 Speaker 2: but certainly, you know, there've been the baby's been thrown 116 00:06:21,240 --> 00:06:22,840 Speaker 2: out a little bit out with the bath water over 117 00:06:22,839 --> 00:06:25,320 Speaker 2: the last six to eighteen months, and we think, you know, 118 00:06:25,400 --> 00:06:28,559 Speaker 2: as things normalize, as you know, some of the heat 119 00:06:28,600 --> 00:06:33,240 Speaker 2: of the Trump tariff negotiations come out of the market 120 00:06:33,279 --> 00:06:36,240 Speaker 2: for Mexico and we see that actually things are going 121 00:06:36,320 --> 00:06:40,440 Speaker 2: to be okay, and it's certainly okay relative to other markets. 122 00:06:40,440 --> 00:06:43,039 Speaker 2: That again that these countries can re rate and do 123 00:06:43,120 --> 00:06:45,240 Speaker 2: pretty well. But you know, we don't want to have 124 00:06:45,279 --> 00:06:47,839 Speaker 2: all our eggs in the emerging markets baskets. There there's 125 00:06:47,880 --> 00:06:49,200 Speaker 2: other opportunities out there. 126 00:06:49,800 --> 00:06:52,400 Speaker 1: Okay, So that's the emerging companies. In a moment, we'll 127 00:06:52,400 --> 00:06:55,160 Speaker 1: be back with Matt Waicher, chief investment Officer of Asia 128 00:06:55,200 --> 00:07:06,479 Speaker 1: Pacificate morning Star, to talk about Europe and AI investing. Okay, 129 00:07:06,480 --> 00:07:08,960 Speaker 1: so let's jump into Europe then of the developed market. 130 00:07:08,960 --> 00:07:11,800 Speaker 1: So I'm sure some of those big economies in Europe, 131 00:07:11,840 --> 00:07:13,840 Speaker 1: and we're going to include the UK in that they've 132 00:07:14,000 --> 00:07:18,080 Speaker 1: they've been belted more than many other markets. Well, I mean, 133 00:07:18,120 --> 00:07:21,120 Speaker 1: we're a bounce in Europe and included UK and Europe. 134 00:07:21,720 --> 00:07:24,640 Speaker 2: Do you like we? I mean, the UK is a 135 00:07:24,680 --> 00:07:27,880 Speaker 2: really interesting one. It's got some interesting tailwinds at this 136 00:07:27,920 --> 00:07:30,760 Speaker 2: point in time in aggregate as a market, we think that, 137 00:07:31,000 --> 00:07:34,640 Speaker 2: you know, macro, it's got a few macro tailwinds coming through. 138 00:07:34,680 --> 00:07:37,480 Speaker 2: Rates are coming down, inflations kind of under control. The 139 00:07:37,680 --> 00:07:39,320 Speaker 2: you know, like everywhere, it's had a little bit of 140 00:07:39,360 --> 00:07:41,840 Speaker 2: a blip here and there, but certainly come down a 141 00:07:41,840 --> 00:07:46,600 Speaker 2: lot and the economy is not looking too bad there now. 142 00:07:46,680 --> 00:07:50,520 Speaker 2: So you know, if you dig down into into the UK, 143 00:07:51,400 --> 00:07:54,120 Speaker 2: there's a few home builders you know, the home building 144 00:07:54,120 --> 00:07:57,760 Speaker 2: sectors are really interesting ones, some very cheap assets, some 145 00:07:58,000 --> 00:08:00,760 Speaker 2: what we call four or five star stop from our 146 00:08:01,160 --> 00:08:04,000 Speaker 2: morning So equity research team that are going to take 147 00:08:04,040 --> 00:08:07,160 Speaker 2: advantage of those macrotail winds and be able to do 148 00:08:07,280 --> 00:08:10,680 Speaker 2: very well. You know, it's much more cyclical play there 149 00:08:10,680 --> 00:08:13,320 Speaker 2: in Europe more generally, I think that that there's been 150 00:08:13,600 --> 00:08:16,160 Speaker 2: you know, if we look at the sectors there, you know, 151 00:08:16,320 --> 00:08:18,800 Speaker 2: all of Europe has been beaten up a little bit 152 00:08:19,080 --> 00:08:20,960 Speaker 2: over the last few years, over the last ten years 153 00:08:20,960 --> 00:08:25,000 Speaker 2: in fact, and certainly relative to the US. But there's 154 00:08:25,040 --> 00:08:28,040 Speaker 2: still some high quality companies. And one of the areas 155 00:08:28,040 --> 00:08:30,559 Speaker 2: that we think there's a few good stocks is probably 156 00:08:30,600 --> 00:08:35,080 Speaker 2: in the auto makers, you know, the Daimler's, the BMW's, 157 00:08:35,120 --> 00:08:39,400 Speaker 2: et cetera. Where you know, again with competition from China 158 00:08:39,480 --> 00:08:42,600 Speaker 2: certainly coming into the market, we think that the valuations 159 00:08:42,600 --> 00:08:44,480 Speaker 2: that you can own some of these car companies that 160 00:08:44,840 --> 00:08:47,880 Speaker 2: are all very high quality businesses or be it a 161 00:08:47,960 --> 00:08:51,040 Speaker 2: bit cyclical, we think that they can do you know, 162 00:08:51,040 --> 00:08:54,120 Speaker 2: pretty well over the over the medium to long term horizon. 163 00:08:55,080 --> 00:08:57,120 Speaker 1: Another thing that you talk about in the report is 164 00:08:57,160 --> 00:09:01,480 Speaker 1: AI investing, and obviously most investors think about AI and 165 00:09:01,480 --> 00:09:04,319 Speaker 1: would like to jump on the bandwagon, notwithstanding probably in 166 00:09:04,400 --> 00:09:06,000 Speaker 1: videos about the only company that seems to be making 167 00:09:06,040 --> 00:09:07,400 Speaker 1: a lot of money out of it at the moment. 168 00:09:07,640 --> 00:09:08,839 Speaker 1: How do you invest in AI? 169 00:09:09,520 --> 00:09:13,040 Speaker 2: Well, yeah, this is the trickiest question, and yeah, I 170 00:09:13,080 --> 00:09:14,920 Speaker 2: guess how you invest in it would have been investing 171 00:09:14,920 --> 00:09:20,439 Speaker 2: in Navidia three or four years ago, and hindsight's twenty twenty. Hindsight, 172 00:09:20,440 --> 00:09:22,640 Speaker 2: it's a very easy thing to do. But I guess 173 00:09:23,440 --> 00:09:26,440 Speaker 2: you know, really what we're looking to do now is 174 00:09:26,480 --> 00:09:29,280 Speaker 2: go Okay, Well, the Navidias of the world, the enablers 175 00:09:29,320 --> 00:09:32,280 Speaker 2: of the AI, even some of the big tech names 176 00:09:32,280 --> 00:09:34,720 Speaker 2: that have got the data warehouses and those sorts of things. 177 00:09:34,880 --> 00:09:38,480 Speaker 2: You know, they've started to enable other companies to take 178 00:09:38,480 --> 00:09:41,520 Speaker 2: advantage of this and on the revenue side, but also 179 00:09:41,880 --> 00:09:45,600 Speaker 2: the productivity and cost cutting side, the efficiency side as well, 180 00:09:45,840 --> 00:09:49,480 Speaker 2: and so that's where we're looking for opportunities. And it's 181 00:09:49,520 --> 00:09:52,280 Speaker 2: not so even so we still like a company like 182 00:09:52,360 --> 00:09:54,840 Speaker 2: Microsoft that that you know, has a big cloud business 183 00:09:54,880 --> 00:09:59,400 Speaker 2: that can enable AI as well. But you know there's 184 00:09:59,440 --> 00:10:03,840 Speaker 2: companies like service Now, which is a really even in 185 00:10:03,880 --> 00:10:06,400 Speaker 2: our company of mornings, we use service Now. It's really 186 00:10:06,520 --> 00:10:10,960 Speaker 2: enables end digitalization of workflows and those sorts of things. 187 00:10:11,040 --> 00:10:14,640 Speaker 2: It's a really interesting company and that it can generate 188 00:10:14,679 --> 00:10:18,040 Speaker 2: a lot of revenue from helping other companies become much 189 00:10:18,080 --> 00:10:21,439 Speaker 2: more efficient. And so that's a company that's very interesting 190 00:10:21,440 --> 00:10:23,880 Speaker 2: in the AI space and companies like it. And then 191 00:10:23,920 --> 00:10:27,319 Speaker 2: on the other I mean even consumer staple stocks such 192 00:10:27,360 --> 00:10:31,720 Speaker 2: as Walmart or retailers or consultants can take advantage of 193 00:10:32,040 --> 00:10:34,600 Speaker 2: those sorts of companies like Service Now to make their 194 00:10:34,640 --> 00:10:38,080 Speaker 2: businesses much much more efficient. I think that's the next 195 00:10:38,120 --> 00:10:40,120 Speaker 2: wave of what we're going to see. I think, well, 196 00:10:40,360 --> 00:10:43,440 Speaker 2: you know, the enablers than the videos, etc. It's not 197 00:10:43,480 --> 00:10:44,880 Speaker 2: to say that they're not going to do well, but 198 00:10:44,920 --> 00:10:47,040 Speaker 2: it's kind of like the high jump. Even the best 199 00:10:47,120 --> 00:10:49,320 Speaker 2: high jumpers knock off the bar at some stage it 200 00:10:49,440 --> 00:10:52,000 Speaker 2: just gets too high, and we're probably approaching that for 201 00:10:52,080 --> 00:10:54,640 Speaker 2: some of those big tech names, but there's certainly lots 202 00:10:54,640 --> 00:10:56,679 Speaker 2: of other stocks that can get over the bar when 203 00:10:56,720 --> 00:10:57,440 Speaker 2: it's a bit lower. 204 00:10:58,080 --> 00:10:59,640 Speaker 1: Matt, thank you for talking to Fearing Green. 205 00:11:00,040 --> 00:11:01,000 Speaker 2: Thanks love for having me. 206 00:11:01,320 --> 00:11:04,280 Speaker 1: That was Matt Waycher, Chief Investment Officer Asia Pacific at 207 00:11:04,320 --> 00:11:06,760 Speaker 1: Morning Star. This is the Fear and Greed Business Interview. 208 00:11:06,760 --> 00:11:09,560 Speaker 1: Remember this is general information only, and you should seek 209 00:11:09,559 --> 00:11:13,040 Speaker 1: professional advice before making investment decisions. Join us every morning 210 00:11:13,120 --> 00:11:15,240 Speaker 1: for the full episode of Fear and Greed. Daily business 211 00:11:15,280 --> 00:11:17,640 Speaker 1: news for people who make their own decisions. I'm chanee 212 00:11:17,640 --> 00:11:19,000 Speaker 1: elma Enjoy your day.