1 00:00:03,430 --> 00:00:06,560 Sean Aylmer: Welcome to the Fear and Greed Daily Interview. I'm Sean Aylmer. 2 00:00:06,920 --> 00:00:09,849 Sean Aylmer: We've spoken before about the influx of day traders attempting 3 00:00:09,850 --> 00:00:12,410 Sean Aylmer: to pick stocks over the last 18 months. It's a 4 00:00:12,410 --> 00:00:16,110 Sean Aylmer: risky business and certainly not for the fainthearted but today 5 00:00:16,110 --> 00:00:18,840 Sean Aylmer: I wanted to focus more on long- term investing. How 6 00:00:18,840 --> 00:00:21,290 Sean Aylmer: do you actually pick a stock that has good long 7 00:00:21,290 --> 00:00:24,579 Sean Aylmer: term prospects and how to stay the course when markets are 8 00:00:24,579 --> 00:00:28,580 Sean Aylmer: getting nervous about case numbers, about inflation, about geopolitical issues, 9 00:00:28,580 --> 00:00:32,040 Sean Aylmer: all sorts of things? Forager Funds Management has around $480 10 00:00:32,600 --> 00:00:36,670 Sean Aylmer: million under management, running two funds on behalf of retail investors. 11 00:00:36,920 --> 00:00:40,470 Sean Aylmer: One focusing on Australian shares and one on international shares. 12 00:00:40,960 --> 00:00:44,250 Sean Aylmer: Steve Johnson is the Chief Investment Officer at Forager and 13 00:00:44,250 --> 00:00:46,350 Sean Aylmer: my guest this morning, Steve, welcome to fear and greed. 14 00:00:46,800 --> 00:00:47,930 Steve Johnson: Hi Sean, pleasure to be here. 15 00:00:48,659 --> 00:00:50,760 Sean Aylmer: When we talk about the long term, what are we thinking? 16 00:00:51,300 --> 00:00:54,880 Steve Johnson: Well forever really. I think the key to distinguishment for 17 00:00:54,890 --> 00:00:58,620 Steve Johnson: people is when you're thinking about investing, you're buying a 18 00:00:58,620 --> 00:01:02,170 Steve Johnson: share in a business and the focus is 100% on 19 00:01:02,580 --> 00:01:04,550 Steve Johnson: how much profit that business is going to make and 20 00:01:04,550 --> 00:01:07,410 Steve Johnson: how much it's going to pay you rather than trying 21 00:01:07,410 --> 00:01:09,610 Steve Johnson: to predict where that share price is going to go 22 00:01:09,610 --> 00:01:11,100 Steve Johnson: and what you might be able to sell it for 23 00:01:11,100 --> 00:01:14,179 Steve Johnson: in the future. So, there's nothing wrong with the latter 24 00:01:14,180 --> 00:01:17,250 Steve Johnson: category and plenty of people do that quite successfully but 25 00:01:17,250 --> 00:01:19,490 Steve Johnson: the key for a long term investor is to really 26 00:01:19,490 --> 00:01:22,380 Steve Johnson: recognize that simple fact that you're buying a share in 27 00:01:22,380 --> 00:01:24,880 Steve Johnson: a business. And if you focus on the business rather 28 00:01:24,880 --> 00:01:28,050 Steve Johnson: than the share price and take a long term view, 29 00:01:28,500 --> 00:01:31,660 Steve Johnson: you have a lot less of those gyrations around market 30 00:01:31,660 --> 00:01:34,550 Steve Johnson: movements and panicking just because a share price has gone down. 31 00:01:34,550 --> 00:01:36,340 Steve Johnson: If you're sitting there saying, well, I own a share 32 00:01:36,340 --> 00:01:38,010 Steve Johnson: in Woolworths and every time someone goes in there and buys 33 00:01:38,150 --> 00:01:41,229 Steve Johnson: some groceries, I own a tiny little bit of those profits. 34 00:01:41,580 --> 00:01:45,310 Steve Johnson: It's a much calmer way of thinking about things so 35 00:01:45,530 --> 00:01:47,720 Steve Johnson: that's the way we go about it. We buy a stock, 36 00:01:47,870 --> 00:01:50,919 Steve Johnson: anticipating that we're going to earn an above average return 37 00:01:51,070 --> 00:01:54,810 Steve Johnson: from that underlying business. More often than not someone else 38 00:01:54,810 --> 00:01:57,170 Steve Johnson: recognises that down the track, the share price goes up 39 00:01:57,170 --> 00:01:59,450 Steve Johnson: and we sell it and move on to another opportunity. 40 00:01:59,950 --> 00:02:02,920 Steve Johnson: Typically for us, that's a three to five year holding 41 00:02:02,920 --> 00:02:06,000 Steve Johnson: period for that value to be recognised but if we 42 00:02:06,000 --> 00:02:08,220 Steve Johnson: get it right, we'd be perfectly happy to hold the 43 00:02:08,220 --> 00:02:10,070 Steve Johnson: business forever if the share price didn't move. 44 00:02:10,680 --> 00:02:13,660 Sean Aylmer: Okay. So you mentioned Woolworths there, which is in consumer 45 00:02:13,740 --> 00:02:17,180 Sean Aylmer: staple product. You have all sorts of mining companies and 46 00:02:17,180 --> 00:02:20,269 Sean Aylmer: banks and technology companies. Do you think about all the different 47 00:02:20,270 --> 00:02:22,680 Sean Aylmer: sectors in exactly the same way, it's about buying the 48 00:02:22,680 --> 00:02:24,350 Sean Aylmer: business that you expect to outperform? 49 00:02:24,800 --> 00:02:27,880 Steve Johnson: 100% and it's more about buying it at a price 50 00:02:27,880 --> 00:02:30,160 Steve Johnson: that is going to give you a return that is high. 51 00:02:30,440 --> 00:02:30,579 Sean Aylmer: Yeah. 52 00:02:30,650 --> 00:02:33,040 Steve Johnson: It's not necessarily and I think people make this mistake a lot 53 00:02:33,040 --> 00:02:35,590 Steve Johnson: thinking that just because the business is going to do well, 54 00:02:35,590 --> 00:02:38,700 Steve Johnson: I'm going to do well buying the shares. There is 55 00:02:38,700 --> 00:02:41,570 Steve Johnson: a certain amount of expectation in the share price of 56 00:02:41,570 --> 00:02:43,480 Steve Johnson: any business, at any point in time. And what you 57 00:02:43,480 --> 00:02:45,840 Steve Johnson: need to do is try and buy it when those 58 00:02:45,840 --> 00:02:49,790 Steve Johnson: expectations are lower than reality and sell it when they're higher. So yeah, 59 00:02:50,200 --> 00:02:53,780 Steve Johnson: we have bought businesses, the old RAMS Home Loans, for example, it 60 00:02:53,780 --> 00:02:56,070 Steve Johnson: might be a brand that people are familiar with. It 61 00:02:56,070 --> 00:02:58,330 Steve Johnson: was listed on the stock exchange and got into a 62 00:02:58,330 --> 00:03:00,370 Steve Johnson: lot of trouble in the financial crisis and it actually 63 00:03:00,370 --> 00:03:03,930 Steve Johnson: sold the brand to another company and went into rundown. So, 64 00:03:03,930 --> 00:03:07,150 Steve Johnson: they never wrote another piece of business and the business 65 00:03:07,150 --> 00:03:11,000 Steve Johnson: shrank into oblivion and we owned that stock and did 66 00:03:11,000 --> 00:03:13,280 Steve Johnson: exceptionally well out of it because it traded at a 67 00:03:13,280 --> 00:03:15,669 Steve Johnson: price that was just absurd relative to the cash it 68 00:03:15,669 --> 00:03:17,121 Steve Johnson: was going to generate in that rundown. So- 69 00:03:17,121 --> 00:03:17,122 Sean Aylmer: Yeah. 70 00:03:17,122 --> 00:03:19,840 Steve Johnson: Now for context, the share price got down to 5 71 00:03:19,840 --> 00:03:22,100 Steve Johnson: cents and it paid a dollar 20 in fully franked 72 00:03:22,100 --> 00:03:24,570 Steve Johnson: dividend over the coming years and the reason is because 73 00:03:24,570 --> 00:03:25,910 Steve Johnson: everyone was saying, well, why would I want to own 74 00:03:25,910 --> 00:03:27,330 Steve Johnson: this business if it's going to shrink? 75 00:03:27,340 --> 00:03:27,360 Sean Aylmer: Yeah. 76 00:03:27,760 --> 00:03:29,570 Steve Johnson: So it all comes back to the price you pay. 77 00:03:30,060 --> 00:03:32,030 Sean Aylmer: Okay. So let's start with the local market. What do 78 00:03:32,030 --> 00:03:32,929 Sean Aylmer: you like at the moment? 79 00:03:33,330 --> 00:03:35,600 Steve Johnson: This is a controversial one. I quite like Seven West 80 00:03:35,600 --> 00:03:37,960 Steve Johnson: Media as an old school business that I think is 81 00:03:37,960 --> 00:03:40,840 Steve Johnson: perceived as declining into oblivion that is not going to 82 00:03:40,840 --> 00:03:45,430 Steve Johnson: do so. So they own Channel 7 and WA News 83 00:03:45,700 --> 00:03:48,530 Steve Johnson: and a production studio that produces Home and Away and 84 00:03:48,530 --> 00:03:51,580 Steve Johnson: a lot of other programs that people would be familiar with. 85 00:03:51,860 --> 00:03:54,700 Steve Johnson: The argument here is that linear TV is going to 86 00:03:54,930 --> 00:03:58,260 Steve Johnson: shrink to basically nothing. This business trades at something like 87 00:03:58,260 --> 00:04:01,330 Steve Johnson: four times its cash flow. So it's earning 25% of 88 00:04:01,330 --> 00:04:05,150 Steve Johnson: the current market cap in cash flow every year. We think 89 00:04:05,150 --> 00:04:08,330 Steve Johnson: that can actually stabilise and the reason is that the 90 00:04:08,400 --> 00:04:12,610 Steve Johnson: on demand piece of linear TV is growing very quickly 91 00:04:13,010 --> 00:04:16,140 Steve Johnson: and the advertising tools around that are getting very sophisticated 92 00:04:16,140 --> 00:04:18,450 Steve Johnson: and it's actually going to be a, potentially a more 93 00:04:18,450 --> 00:04:21,110 Steve Johnson: powerful business model than the old business model because they 94 00:04:21,110 --> 00:04:23,810 Steve Johnson: can target the ads to a specific type of person 95 00:04:23,810 --> 00:04:24,289 Steve Johnson: at the other end. 96 00:04:24,290 --> 00:04:27,990 Sean Aylmer: So, it's almost like an old world business becoming very 97 00:04:28,080 --> 00:04:30,050 Sean Aylmer: new world and that's where the value is. 98 00:04:30,690 --> 00:04:32,400 Steve Johnson: We don't need it to be particularly new world, if 99 00:04:32,400 --> 00:04:34,120 Steve Johnson: it can just stabilise, we're going to make a lot 100 00:04:34,120 --> 00:04:35,900 Steve Johnson: of money. But I do think there is the potential 101 00:04:35,900 --> 00:04:39,010 Steve Johnson: and the optionality here that it does become something that's perceived 102 00:04:39,010 --> 00:04:40,060 Steve Johnson: very differently down the track. 103 00:04:40,480 --> 00:04:42,860 Sean Aylmer: Okay. What about something else from a different sector? 104 00:04:43,720 --> 00:04:47,510 Steve Johnson: Sure. RPMGlobal, I think is another good example at the 105 00:04:47,510 --> 00:04:50,409 Steve Johnson: complete opposite end of the spectrum for us. We really 106 00:04:50,410 --> 00:04:53,730 Steve Johnson: try and own a mix of different types of businesses. 107 00:04:53,730 --> 00:04:56,350 Steve Johnson: We want them all to be attractive prices when we 108 00:04:56,350 --> 00:05:00,920 Steve Johnson: purchase them but some growing, some shrinking, some deeply unloved, 109 00:05:00,920 --> 00:05:04,110 Steve Johnson: some just misunderstood. And this one is a mining software business. 110 00:05:04,110 --> 00:05:07,180 Steve Johnson: So being in the software space, it's not as unloved 111 00:05:07,510 --> 00:05:09,970 Steve Johnson: as a Seven West Media but there is the mining 112 00:05:10,089 --> 00:05:12,610 Steve Johnson: aspect to it, which makes a lot of people turn away. 113 00:05:13,300 --> 00:05:16,460 Steve Johnson: It's a really high quality growing business. The share price 114 00:05:16,460 --> 00:05:18,839 Steve Johnson: has done well over the past two to three years. 115 00:05:18,880 --> 00:05:20,260 Steve Johnson: We've already done well out of it but we think 116 00:05:20,260 --> 00:05:22,720 Steve Johnson: it's got a lot more upside in it. It's one 117 00:05:22,720 --> 00:05:26,150 Steve Johnson: of these subscription type businesses where once people sign up, 118 00:05:26,540 --> 00:05:29,570 Steve Johnson: they start using this company software to manage their mines, 119 00:05:29,570 --> 00:05:32,140 Steve Johnson: to plan where they're going to dig in future and 120 00:05:32,140 --> 00:05:35,120 Steve Johnson: to optimise how they run the mine. Once you put 121 00:05:35,200 --> 00:05:37,960 Steve Johnson: that sort of software into your business, it's very hard to get out. 122 00:05:37,960 --> 00:05:42,589 Steve Johnson: So nice, reliable, predictable revenues. And it's growing those predictable 123 00:05:42,589 --> 00:05:44,229 Steve Johnson: revenues quite quickly every year as well. 124 00:05:44,680 --> 00:05:47,270 Sean Aylmer: Those two companies that you've mentioned are at a smaller 125 00:05:47,270 --> 00:05:50,070 Sean Aylmer: caps or mid- caps, probably mid to smaller caps. Is 126 00:05:50,070 --> 00:05:52,310 Sean Aylmer: it harder to find these sorts of deals in the 127 00:05:52,310 --> 00:05:53,960 Sean Aylmer: large cap part of the market? 128 00:05:54,550 --> 00:05:58,510 Steve Johnson: Absolutely, it is. What I've said here today, everyone is 129 00:05:58,510 --> 00:05:59,380 Steve Johnson: trying to do the same thing, right? 130 00:05:59,381 --> 00:05:59,382 Sean Aylmer: Yeah. 131 00:05:59,382 --> 00:06:03,580 Steve Johnson: Everyone's trying to buy businesses at cheap prices. So the idea that 132 00:06:03,630 --> 00:06:05,150 Steve Johnson: you're just going to look at something and say, oh, 133 00:06:05,150 --> 00:06:08,270 Steve Johnson: this is cheap and nobody has noticed it is arrogant 134 00:06:08,490 --> 00:06:11,620 Steve Johnson: and it's really important to have some humility about that. 135 00:06:11,839 --> 00:06:14,180 Steve Johnson: I just, I think at the smaller end of the market, 136 00:06:14,180 --> 00:06:16,360 Steve Johnson: where there are less people looking, there are less brokers 137 00:06:16,360 --> 00:06:20,320 Steve Johnson: covering it, there are less professional investors who are analysing 138 00:06:20,320 --> 00:06:24,339 Steve Johnson: the stock. You're far more likely to find mispricings. The 139 00:06:24,339 --> 00:06:27,880 Steve Johnson: price of volatility is just far more extreme as well. 140 00:06:28,010 --> 00:06:30,910 Steve Johnson: For our style of investing, volatility is a plus. You 141 00:06:30,910 --> 00:06:33,580 Steve Johnson: don't get to buy things at absurdly cheap prices unless 142 00:06:33,580 --> 00:06:36,540 Steve Johnson: those prices move around a lot. So yeah, we tend 143 00:06:36,540 --> 00:06:38,640 Steve Johnson: to focus on the smaller end of the market. It 144 00:06:38,640 --> 00:06:41,160 Steve Johnson: waxes and wanes though. I think there are times when 145 00:06:41,170 --> 00:06:43,650 Steve Johnson: there are great opportunities at the small end of the 146 00:06:43,650 --> 00:06:46,880 Steve Johnson: market and there are times when those opportunities are less 147 00:06:46,880 --> 00:06:50,300 Steve Johnson: common and we're really patient and we like to wait 148 00:06:50,300 --> 00:06:52,849 Steve Johnson: for those opportunities to become extreme. While we wait, there's 149 00:06:52,850 --> 00:06:55,080 Steve Johnson: nothing wrong with owning some larger businesses that are paying 150 00:06:55,089 --> 00:06:58,240 Steve Johnson: you dividends every year that can provide you with the 151 00:06:58,240 --> 00:07:02,350 Steve Johnson: source of portfolio capital to deploy into those small- cap 152 00:07:02,350 --> 00:07:04,210 Steve Johnson: opportunities in more volatile markets. 153 00:07:04,529 --> 00:07:07,169 Sean Aylmer: Okay. Diversity at the end of the day, you need a bit of 154 00:07:07,170 --> 00:07:09,140 Sean Aylmer: a lot, no, a lot of a bit. You know what I'm saying? 155 00:07:09,370 --> 00:07:10,950 Steve Johnson: At the right point in time. Yeah. I think there 156 00:07:10,950 --> 00:07:14,160 Steve Johnson: are times for being aggressively concentrated when the market gets 157 00:07:14,160 --> 00:07:17,240 Steve Johnson: really crazy and disjointed. And there are times for being 158 00:07:17,240 --> 00:07:19,680 Steve Johnson: really sensible and I think we're probably in the latter 159 00:07:20,580 --> 00:07:22,330 Steve Johnson: type of market environment at the moment. 160 00:07:22,720 --> 00:07:24,520 Sean Aylmer: Stay with me, Steve, we'll be back in a minute. 161 00:07:24,520 --> 00:07:34,110 Sean Aylmer: I'm speaking to Steve Johnson, Chief Investment Officer at Forager. Okay. 162 00:07:34,110 --> 00:07:37,030 Sean Aylmer: So sometimes there are things such as COVID, which hits 163 00:07:37,030 --> 00:07:40,510 Sean Aylmer: certain stocks and recently you've spoken about the opportunities in 164 00:07:40,510 --> 00:07:44,010 Sean Aylmer: travel exposed companies. I just want to think about that. Then the next 165 00:07:44,200 --> 00:07:47,070 Sean Aylmer: thing I want to think about is something where there's a mega global trend. 166 00:07:47,150 --> 00:07:49,920 Sean Aylmer: ESG is the obvious one at the moment. How you 167 00:07:49,920 --> 00:07:52,420 Sean Aylmer: think about those sorts of companies? So just with the 168 00:07:52,420 --> 00:07:56,450 Sean Aylmer: more discreet two, three year opportunities, so travel exposed companies, 169 00:07:56,450 --> 00:07:58,190 Sean Aylmer: how do you think about investing in them? 170 00:07:58,630 --> 00:08:00,550 Steve Johnson: Well, exactly the same way. We sit there and say, 171 00:08:00,550 --> 00:08:02,210 Steve Johnson: how much profit do we think this business is going 172 00:08:02,310 --> 00:08:05,300 Steve Johnson: to make and what price are we paying today? I 173 00:08:05,300 --> 00:08:09,330 Steve Johnson: would've said even just six months ago, people were massively 174 00:08:09,330 --> 00:08:12,660 Steve Johnson: overestimating the long term impacts on the industry. It will 175 00:08:12,660 --> 00:08:15,400 Steve Johnson: recover. That's been pretty obvious already and I think it 176 00:08:15,400 --> 00:08:17,340 Steve Johnson: would been pretty obvious to anyone that you asked about 177 00:08:17,340 --> 00:08:19,620 Steve Johnson: it but a lot of people don't like investing into 178 00:08:19,620 --> 00:08:22,810 Steve Johnson: these types of things too early. So, we've been investing 179 00:08:22,810 --> 00:08:25,380 Steve Johnson: in these businesses since March 2020. 180 00:08:25,460 --> 00:08:26,530 Sean Aylmer: Good outcomes since then. 181 00:08:27,190 --> 00:08:29,290 Steve Johnson: Yeah, absolutely right and I think today, I think a 182 00:08:29,290 --> 00:08:31,620 Steve Johnson: lot of people are now saying, oh, recovery is going 183 00:08:31,620 --> 00:08:33,140 Steve Johnson: to come to the travel space and I'm going to 184 00:08:33,140 --> 00:08:35,990 Steve Johnson: go and buy some travel shares. I look at a lot 185 00:08:35,990 --> 00:08:39,330 Steve Johnson: of them and they're already factoring in a very, very significant recovery. 186 00:08:39,740 --> 00:08:39,880 Sean Aylmer: Yeah. 187 00:08:39,880 --> 00:08:42,869 Steve Johnson: Flight Center and Webjet, the two bigger players are actually 188 00:08:42,870 --> 00:08:46,201 Steve Johnson: trading at substantially higher evaluations today than they were pre- COVID. 189 00:08:46,201 --> 00:08:46,561 Sean Aylmer: Right. 190 00:08:47,300 --> 00:08:49,050 Steve Johnson: And I think this recovery is going to take a 191 00:08:49,050 --> 00:08:52,910 Steve Johnson: bit of time. We had Heathrow Airport out this week 192 00:08:52,910 --> 00:08:56,699 Steve Johnson: saying they don't expect full recovery until 2026. I think 193 00:08:56,700 --> 00:08:59,040 Steve Johnson: the more you see COVID hang around, the more fear 194 00:08:59,040 --> 00:09:01,030 Steve Johnson: you see, there's going to be a percentage of the 195 00:09:01,030 --> 00:09:03,410 Steve Johnson: population that just doesn't want to travel. So, there's some 196 00:09:03,410 --> 00:09:05,870 Steve Johnson: great opportunities out there. There have been over the past 12 197 00:09:05,870 --> 00:09:07,660 Steve Johnson: months but I think people need to be careful about 198 00:09:07,660 --> 00:09:10,860 Steve Johnson: just piling in because the recovery is coming when the 199 00:09:10,860 --> 00:09:12,819 Steve Johnson: stock market is already figured that out before you. 200 00:09:13,300 --> 00:09:16,410 Sean Aylmer: Yeah. Okay. So how do you think about fossil fuel companies, coal companies, 201 00:09:16,410 --> 00:09:19,110 Sean Aylmer: oil and gas, when there is this mega trend towards 202 00:09:19,110 --> 00:09:22,260 Sean Aylmer: ESG and concerns about climate change? I know you're going 203 00:09:22,260 --> 00:09:25,120 Sean Aylmer: to say, oh, we use the same process, but isn't there 204 00:09:25,120 --> 00:09:27,950 Sean Aylmer: an issue here that the mega trend in the next 205 00:09:27,950 --> 00:09:30,820 Sean Aylmer: 5, 10, 15 years is that there is a shift to 206 00:09:30,820 --> 00:09:34,329 Sean Aylmer: renewable energy? And yeah, I'm just interested in how you think about it. 207 00:09:35,090 --> 00:09:36,979 Steve Johnson: I think the mega trend in the next five years 208 00:09:36,980 --> 00:09:40,080 Steve Johnson: is that there has been a massive underinvestment in the 209 00:09:40,080 --> 00:09:43,880 Steve Johnson: fossil fuel space because of all these ESG concerns. And also 210 00:09:43,880 --> 00:09:48,359 Steve Johnson: because of really poor economic returns from people that invested 211 00:09:48,360 --> 00:09:52,050 Steve Johnson: in US shale. For example, I heard a Podcast this morning 212 00:09:52,050 --> 00:09:55,270 Steve Johnson: with a Goldman Sachs resources analysts saying of every dollar 213 00:09:55,270 --> 00:09:58,010 Steve Johnson: that got invested in the US shale space between 2015 and 214 00:09:58,110 --> 00:10:01,380 Steve Johnson: 2020, they lost 20 cents, let alone making a positive 215 00:10:01,380 --> 00:10:03,959 Steve Johnson: return. They lost 20% of the money. So, it's been 216 00:10:03,960 --> 00:10:07,179 Steve Johnson: a horrible space to be invested. There's been no investment. 217 00:10:07,179 --> 00:10:09,069 Steve Johnson: And now you've got ESG on top of that, which 218 00:10:09,070 --> 00:10:11,670 Steve Johnson: is dramatically increased the cost of capital for the sector. 219 00:10:12,110 --> 00:10:15,429 Steve Johnson: That is why you are seeing oil prices, gas prices, 220 00:10:15,429 --> 00:10:18,170 Steve Johnson: coal price go up. And I think in the short 221 00:10:18,170 --> 00:10:21,309 Steve Johnson: term, the risk of that going substantially higher is significant 222 00:10:21,309 --> 00:10:23,410 Steve Johnson: because this transition is going to take a lot of 223 00:10:23,410 --> 00:10:26,360 Steve Johnson: time. In my view, it needs to be driven by 224 00:10:26,360 --> 00:10:30,679 Steve Johnson: government policy rather than investor actions. I think you're seeing 225 00:10:30,690 --> 00:10:33,670 Steve Johnson: in the world at the moment that just divesting these 226 00:10:33,670 --> 00:10:36,819 Steve Johnson: industries does not fix the problem in terms of people 227 00:10:36,820 --> 00:10:39,150 Steve Johnson: need electricity and demand. And I think it needs to 228 00:10:39,150 --> 00:10:41,540 Steve Johnson: be fixed by government policy and then investors need to 229 00:10:41,540 --> 00:10:45,179 Steve Johnson: work around that policy to allocate capital where it most 230 00:10:45,179 --> 00:10:47,240 Steve Johnson: needs to go. So look, my personal view is I 231 00:10:47,240 --> 00:10:49,219 Steve Johnson: look at the whole ESG space at the moment and 232 00:10:49,230 --> 00:10:52,460 Steve Johnson: I see people are making decisions here that are completely unrelated to 233 00:10:52,460 --> 00:10:56,400 Steve Johnson: the profitability and cash flow of the business and that creates 234 00:10:56,400 --> 00:10:59,250 Steve Johnson: the potential for opportunities. If your main concern here is 235 00:10:59,250 --> 00:11:00,730 Steve Johnson: whether you make money out of the shares or not, 236 00:11:00,730 --> 00:11:02,579 Steve Johnson: over the next five or 10 years, I actually think, 237 00:11:02,870 --> 00:11:07,470 Steve Johnson: thinking anti ESG is probably a more prospective strategy than 238 00:11:07,470 --> 00:11:10,210 Steve Johnson: investing in ESG stocks that are already quite expensive. 239 00:11:10,750 --> 00:11:13,750 Sean Aylmer: Before you go just internationally, what markets and are there any, 240 00:11:14,030 --> 00:11:17,610 Sean Aylmer: I think TESCO was one that's a supermarket chain listed 241 00:11:17,710 --> 00:11:21,020 Sean Aylmer: in London. Janus International is another one. It's a Wall Street Group. 242 00:11:21,290 --> 00:11:23,150 Sean Aylmer: I'm just interested in some of the international names you 243 00:11:23,150 --> 00:11:23,839 Sean Aylmer: like at the moment. 244 00:11:24,410 --> 00:11:26,800 Steve Johnson: Yeah. Most of what we do globally would not be 245 00:11:26,800 --> 00:11:30,150 Steve Johnson: familiar to people. Tesco obviously would be but we're invested 246 00:11:30,150 --> 00:11:32,850 Steve Johnson: mostly in companies with a market capitalisation of less than $ 247 00:11:32,850 --> 00:11:33,390 Steve Johnson: 5 billion and- 248 00:11:33,410 --> 00:11:33,929 Sean Aylmer: Okay. 249 00:11:34,700 --> 00:11:36,800 Steve Johnson: Yeah. Our objective is to get out there and invest 250 00:11:36,800 --> 00:11:38,970 Steve Johnson: in things that people have never heard of. You can 251 00:11:39,050 --> 00:11:41,690 Steve Johnson: get the big, large stuff by investing in an index 252 00:11:41,690 --> 00:11:44,929 Steve Johnson: fund or most of Australia's international managers are doing large 253 00:11:44,929 --> 00:11:48,150 Steve Johnson: cap stuff. So, lots of businesses that people haven't heard of, 254 00:11:48,179 --> 00:11:51,150 Steve Johnson: you touched on two there that are quite defensive. So, I 255 00:11:51,150 --> 00:11:54,120 Steve Johnson: think there're businesses that are going to perform well, irrespective 256 00:11:54,120 --> 00:11:57,320 Steve Johnson: of what happens economically and our view is that this is 257 00:11:57,320 --> 00:12:00,440 Steve Johnson: a market that some of those businesses are being dramatically 258 00:12:00,540 --> 00:12:04,880 Steve Johnson: under priced and it's pretty volatile and wild out there 259 00:12:04,880 --> 00:12:08,530 Steve Johnson: in terms of both the economy that we're facing and 260 00:12:08,530 --> 00:12:12,660 Steve Johnson: the markets as well. We've got a pretty decent allocation 261 00:12:12,660 --> 00:12:16,819 Steve Johnson: in our portfolio. One of those businesses installs high tech, 262 00:12:16,960 --> 00:12:20,470 Steve Johnson: roller doors and things in storage centres. You think of 263 00:12:20,730 --> 00:12:23,470 Steve Johnson: the big storage centres you see around Australia, the new 264 00:12:23,470 --> 00:12:25,480 Steve Johnson: ones that are being constructed of which there are lots 265 00:12:25,480 --> 00:12:28,230 Steve Johnson: because of COVID and people moving houses. We're all now 266 00:12:28,230 --> 00:12:30,120 Steve Johnson: needing to store our junk in more space. 267 00:12:30,170 --> 00:12:30,189 Sean Aylmer: Yeah. 268 00:12:30,500 --> 00:12:34,070 Steve Johnson: That industry's expanding pretty consistently and this business is very 269 00:12:34,280 --> 00:12:37,490 Steve Johnson: dominant market share in it. And TESCO, you look at 270 00:12:37,500 --> 00:12:39,699 Steve Johnson: Woolies trades on 30 times earnings, you can buy TESCO 271 00:12:39,700 --> 00:12:41,910 Steve Johnson: on 12 times earnings in the UK. And I think 272 00:12:41,910 --> 00:12:45,590 Steve Johnson: it's a similar quality business but a lot of what 273 00:12:45,590 --> 00:12:49,610 Steve Johnson: we do globally is smaller tech companies. For example, one 274 00:12:49,610 --> 00:12:52,730 Steve Johnson: of our favourites is a data erasure software company that's 275 00:12:52,730 --> 00:12:56,790 Steve Johnson: listed in the UK called Blancco and again, another growing 276 00:12:56,950 --> 00:12:59,770 Steve Johnson: industry and a dramatically under priced stock. And yeah, I 277 00:12:59,770 --> 00:13:01,530 Steve Johnson: think it's probably a good example of the way we 278 00:13:01,530 --> 00:13:04,200 Steve Johnson: go about things. We love owning good growing businesses, if 279 00:13:04,200 --> 00:13:06,370 Steve Johnson: we can find them and the UK at the moment, 280 00:13:06,920 --> 00:13:10,370 Steve Johnson: everyone's super pessimistic about it. It's dramatically underperformed the rest 281 00:13:10,370 --> 00:13:12,010 Steve Johnson: of the world over the past 20 years. 282 00:13:13,110 --> 00:13:13,111 Sean Aylmer: Yeah. 283 00:13:13,111 --> 00:13:16,010 Steve Johnson: And you're finding good businesses there at very attractive prices. 284 00:13:16,320 --> 00:13:18,140 Steve Johnson: You go over to the US and you look at the 285 00:13:18,140 --> 00:13:19,730 Steve Johnson: prices that you've got to pay for a similar type 286 00:13:19,730 --> 00:13:21,540 Steve Johnson: of business and it's two, three times as much. 287 00:13:22,050 --> 00:13:24,630 Sean Aylmer: Final question. Is it hard to sell? Is it hard 288 00:13:24,630 --> 00:13:27,160 Sean Aylmer: to take profits or is it harder to sell than buy? 289 00:13:27,720 --> 00:13:30,160 Steve Johnson: I'd say, if anything, I've been guilty of selling too early. 290 00:13:30,420 --> 00:13:30,449 Sean Aylmer: Right. 291 00:13:31,020 --> 00:13:34,010 Steve Johnson: So, I think when you've got something that you know 292 00:13:34,010 --> 00:13:36,010 Steve Johnson: is working out well and the business is going the 293 00:13:36,010 --> 00:13:38,670 Steve Johnson: way you anticipated it going actually hanging onto that and 294 00:13:38,670 --> 00:13:40,979 Steve Johnson: making the most out of it is often very important. 295 00:13:41,480 --> 00:13:43,480 Steve Johnson: But look, our process is to think less about an 296 00:13:43,480 --> 00:13:46,040 Steve Johnson: absolute buy and sell and more think, well, what is 297 00:13:46,040 --> 00:13:49,650 Steve Johnson: the right exposure for me in my portfolio today to 298 00:13:49,650 --> 00:13:49,831 Steve Johnson: this business? 299 00:13:49,831 --> 00:13:50,331 Sean Aylmer: Yeah. 300 00:13:50,870 --> 00:13:53,570 Steve Johnson: And the buy or the sell is then a secondary decision. And so, 301 00:13:53,990 --> 00:13:56,650 Steve Johnson: okay. I think the right weighting here is five. If 302 00:13:56,650 --> 00:13:58,750 Steve Johnson: we have three, then we need to buy. If we 303 00:13:58,750 --> 00:13:59,910 Steve Johnson: have seven, we need to sell. 304 00:14:00,010 --> 00:14:00,189 Sean Aylmer: Yeah. 305 00:14:00,500 --> 00:14:03,260 Steve Johnson: And we take that because I think a lot of people find it really hard. 306 00:14:03,260 --> 00:14:05,120 Steve Johnson: They say, okay, this is still a good investment opportunity 307 00:14:05,120 --> 00:14:06,439 Steve Johnson: therefore, I don't want to sell it. 308 00:14:06,670 --> 00:14:06,920 Sean Aylmer: Yeah. 309 00:14:07,000 --> 00:14:09,110 Steve Johnson: Okay. It's a good investment opportunity but do you have 310 00:14:09,110 --> 00:14:11,460 Steve Johnson: too much exposure to it for the risk and reward 311 00:14:11,460 --> 00:14:13,640 Steve Johnson: that's on offer. And we think about that right down 312 00:14:13,640 --> 00:14:15,620 Steve Johnson: to zero. So we just keep making that decision. Okay. 313 00:14:15,620 --> 00:14:17,959 Steve Johnson: It's a three, it's a one at this price. It's 314 00:14:17,960 --> 00:14:20,250 Steve Johnson: now a zero. So it wasn't one decision to say 315 00:14:20,250 --> 00:14:22,310 Steve Johnson: sell it. It was a constant series of decisions to 316 00:14:22,310 --> 00:14:24,630 Steve Johnson: say, we want a lower weighting because the price is higher. 317 00:14:25,000 --> 00:14:26,710 Sean Aylmer: Steve, thank you for talking to Fear and Greed. 318 00:14:27,010 --> 00:14:27,850 Steve Johnson: Thanks, Sean. Good to be on. 319 00:14:28,260 --> 00:14:31,760 Sean Aylmer: That was Steve Johnson, Chief Investment Officer at Forager. This 320 00:14:31,760 --> 00:14:33,840 Sean Aylmer: is a Fear and Greed Daily Interview. Join me every 321 00:14:33,840 --> 00:14:36,119 Sean Aylmer: morning for the full Fear and Greed Podcast with all 322 00:14:36,120 --> 00:14:38,560 Sean Aylmer: the business news you need to know. I'm Sean Aylmer. 323 00:14:38,860 --> 00:14:39,250 Sean Aylmer: Enjoy your day.