1 00:00:10,320 --> 00:00:13,399 Speaker 1: Hello, and welcome to the Australians Money Puzzle podcast. I'm 2 00:00:13,480 --> 00:00:17,479 Speaker 1: James Kirby. Welcome aboard everybody. Now, for investors in shares, 3 00:00:18,440 --> 00:00:22,680 Speaker 1: the single biggest question I believe this year is how 4 00:00:22,800 --> 00:00:27,000 Speaker 1: you as an investor deal with the market, the share market, 5 00:00:27,000 --> 00:00:30,880 Speaker 1: the global market under the influence if you like, of 6 00:00:30,920 --> 00:00:33,920 Speaker 1: the US and Donald Trump. And if you get this right, 7 00:00:34,880 --> 00:00:37,720 Speaker 1: I think you will win in the market, as has 8 00:00:37,760 --> 00:00:39,840 Speaker 1: been the case for some time now since the election 9 00:00:39,960 --> 00:00:42,880 Speaker 1: of Trump. And if you get it wrong, your share 10 00:00:42,960 --> 00:00:46,360 Speaker 1: portfolio I think would be something of a sorry sight 11 00:00:47,200 --> 00:00:49,760 Speaker 1: in a few months time. And the same goes for 12 00:00:49,840 --> 00:00:52,560 Speaker 1: people who are professionals in the market, who are specialists 13 00:00:52,600 --> 00:00:56,040 Speaker 1: in the market. And my guest today is a specialist 14 00:00:56,080 --> 00:00:59,600 Speaker 1: in the market. It's Nick Griffin. He is the co 15 00:00:59,680 --> 00:01:03,960 Speaker 1: founder and chief investment officer at the Monro Group. The 16 00:01:04,040 --> 00:01:06,399 Speaker 1: Monro Group is a fund manager has about six billion 17 00:01:06,440 --> 00:01:10,440 Speaker 1: dollars under management at the moment. It's an active manager. 18 00:01:10,720 --> 00:01:13,720 Speaker 1: They are stock pickers. They select a relatively small amount 19 00:01:13,720 --> 00:01:15,520 Speaker 1: of stocks and go with it. How are you, Nick? 20 00:01:16,040 --> 00:01:17,240 Speaker 2: Good? Thanks James yourself? 21 00:01:17,560 --> 00:01:19,399 Speaker 1: Good? Thank you. Nice to have you on the show. 22 00:01:19,680 --> 00:01:22,600 Speaker 1: It's a funny thing as we sit here midyear, mid 23 00:01:22,680 --> 00:01:26,720 Speaker 1: calendar year on the show for all the dramas, and 24 00:01:26,760 --> 00:01:29,679 Speaker 1: I imagine a lot of traders or lost a lot 25 00:01:29,720 --> 00:01:32,360 Speaker 1: of money. But for all the dramas, things have almost 26 00:01:32,360 --> 00:01:35,319 Speaker 1: back to where they started. On Trump. By that I 27 00:01:35,440 --> 00:01:40,720 Speaker 1: mean shares. They're not greatly up or greatly down on 28 00:01:40,760 --> 00:01:44,039 Speaker 1: the market so far, but that's by no means indicates 29 00:01:44,080 --> 00:01:47,319 Speaker 1: that Trump has settled down. Is Trump and his administration 30 00:01:48,160 --> 00:01:52,320 Speaker 1: and their activities do they really, to a large extent 31 00:01:54,160 --> 00:01:57,680 Speaker 1: director affect how your outcomes will be this year and 32 00:01:57,840 --> 00:01:58,480 Speaker 1: going forward? 33 00:02:00,360 --> 00:02:03,280 Speaker 2: So great question, and yes, they obviously have some influence. 34 00:02:03,440 --> 00:02:05,600 Speaker 2: We have a tagline at Monroe Partner's which is called 35 00:02:05,720 --> 00:02:08,960 Speaker 2: invest in the Journey. We run global equity products that 36 00:02:09,000 --> 00:02:11,919 Speaker 2: invest in global growth companies, so any company outside of 37 00:02:11,919 --> 00:02:14,560 Speaker 2: Australia that we think can grow over time. And it 38 00:02:14,639 --> 00:02:16,280 Speaker 2: has been a journey in the first half of the year, 39 00:02:16,320 --> 00:02:19,440 Speaker 2: that's for sure. What we're seeing here is the share 40 00:02:19,480 --> 00:02:22,480 Speaker 2: markets sort of get used to the way Trump does business, 41 00:02:23,000 --> 00:02:25,400 Speaker 2: which is to, you know, do something really big and 42 00:02:25,480 --> 00:02:28,200 Speaker 2: see what breaks and then roll it back. We sort 43 00:02:28,200 --> 00:02:30,280 Speaker 2: of should know this because that's what he did last 44 00:02:30,320 --> 00:02:33,600 Speaker 2: time as well. But ultimately it's important for all the 45 00:02:33,639 --> 00:02:37,560 Speaker 2: listeners to remember that ultimately that the global equities and 46 00:02:37,639 --> 00:02:41,280 Speaker 2: stocks generally follow their earnings. And so what you've really 47 00:02:41,320 --> 00:02:43,280 Speaker 2: got to analyze out of Trump is he doing anything 48 00:02:43,280 --> 00:02:45,920 Speaker 2: that's going to change the earnings outlook for these companies. 49 00:02:46,400 --> 00:02:49,600 Speaker 2: And I would argue in some cases that's correct. Yes, 50 00:02:49,720 --> 00:02:51,840 Speaker 2: you know, if you're affected by tariffs, your earnings will 51 00:02:51,840 --> 00:02:55,119 Speaker 2: be affected. If you're expecting an economic recovery this year, 52 00:02:55,240 --> 00:02:58,840 Speaker 2: that may not happen. But in other cases, like for instance, Microsoft, 53 00:02:58,880 --> 00:03:00,760 Speaker 2: you know is a good example, it's not really going 54 00:03:00,800 --> 00:03:02,880 Speaker 2: to change how much money Microsoft's going to make this year, 55 00:03:02,880 --> 00:03:04,680 Speaker 2: and it's probably not going to change what they're going 56 00:03:04,720 --> 00:03:07,120 Speaker 2: to make next year. And so many people have used 57 00:03:07,160 --> 00:03:10,080 Speaker 2: this volatility as an opportunity to invest in things that 58 00:03:10,080 --> 00:03:12,920 Speaker 2: they feel confident to get to grow earnings regardless of 59 00:03:12,919 --> 00:03:15,360 Speaker 2: the environment. That's sort of how i'd frame the discussion. 60 00:03:15,639 --> 00:03:17,400 Speaker 1: Well, I see you as a fund manager, and I 61 00:03:17,400 --> 00:03:20,800 Speaker 1: see and you are an active fund manager. I won't 62 00:03:20,800 --> 00:03:23,920 Speaker 1: say old style, that's not because that's probably not what 63 00:03:23,960 --> 00:03:26,280 Speaker 1: you want to hear, but you're an active fund manager, right, 64 00:03:26,320 --> 00:03:29,560 Speaker 1: So your proposition to the investor is, look, I'm going 65 00:03:29,600 --> 00:03:33,640 Speaker 1: to charge you a fee and if I outperform beyond 66 00:03:33,040 --> 00:03:35,960 Speaker 1: what my benchmark is, I'm going to charge an extra 67 00:03:36,000 --> 00:03:39,320 Speaker 1: fee performance fee, and I am going to select from 68 00:03:39,520 --> 00:03:42,440 Speaker 1: you know, thousands and thousands of stocks a relatively small 69 00:03:42,480 --> 00:03:45,640 Speaker 1: amount twenty to forty in your two big funds, and 70 00:03:46,880 --> 00:03:49,120 Speaker 1: you have to come with me, as you say, on 71 00:03:49,160 --> 00:03:54,760 Speaker 1: this journey. This area has been a minefield of recent times, 72 00:03:54,760 --> 00:03:58,200 Speaker 1: and the big names that we all knew, Midgellen and Platinum, 73 00:03:58,200 --> 00:04:03,360 Speaker 1: they've all come undone to the uninitiated, you're doing something 74 00:04:03,360 --> 00:04:07,600 Speaker 1: awfully similar, but you are growing and have had good results, 75 00:04:07,640 --> 00:04:12,200 Speaker 1: particularly since your inception. So what is your approach? What 76 00:04:12,280 --> 00:04:14,400 Speaker 1: is your could you try and to steal your distinct 77 00:04:14,440 --> 00:04:19,600 Speaker 1: approach why you've managed to grow when others around you 78 00:04:19,680 --> 00:04:20,760 Speaker 1: are struggling. 79 00:04:21,360 --> 00:04:24,359 Speaker 2: Yeah, thank you for the opportunity. So I think a 80 00:04:24,360 --> 00:04:26,640 Speaker 2: lot of people look at the share market the wrong way. 81 00:04:26,960 --> 00:04:28,640 Speaker 2: A lot of people sort of and a lot of 82 00:04:28,640 --> 00:04:30,839 Speaker 2: those companies you mentioned, they would look at the share 83 00:04:30,880 --> 00:04:33,159 Speaker 2: market and basically say, this is what we think the 84 00:04:33,160 --> 00:04:36,000 Speaker 2: global economy is going to do, and we want to 85 00:04:36,000 --> 00:04:38,719 Speaker 2: be overweight certain countries because that country's economy is going 86 00:04:38,760 --> 00:04:40,919 Speaker 2: to do better and this other country economy is can 87 00:04:41,040 --> 00:04:43,359 Speaker 2: do worse, and this sector will be better, and this 88 00:04:43,400 --> 00:04:45,599 Speaker 2: sector will do worse. And we would say that's just 89 00:04:45,680 --> 00:04:48,320 Speaker 2: all noise and probably, quite frankly, a bit of a 90 00:04:48,360 --> 00:04:51,599 Speaker 2: waste of time. The reality is, in our opinion, the 91 00:04:51,640 --> 00:04:54,359 Speaker 2: equity market is made up of very few great companies 92 00:04:54,760 --> 00:04:58,039 Speaker 2: and thousand thousands of mediocre ones. The reality is the 93 00:04:58,120 --> 00:05:00,480 Speaker 2: S and P five hundred is not actually the it's 94 00:05:00,520 --> 00:05:03,240 Speaker 2: the best five hundred companies in the United States, and 95 00:05:03,320 --> 00:05:06,279 Speaker 2: it's made up of these exceptional businesses that are doing 96 00:05:06,440 --> 00:05:11,120 Speaker 2: exceptional things, and that exceptional things that they do create 97 00:05:11,160 --> 00:05:14,000 Speaker 2: strong earnings growth, and their earnings growth creates share price growth. 98 00:05:14,400 --> 00:05:16,920 Speaker 2: So when we look at the world, what we're trying 99 00:05:16,960 --> 00:05:18,560 Speaker 2: to do for our clients to say, we have the 100 00:05:18,720 --> 00:05:20,960 Speaker 2: entire world to choose from. There's more than thirty thousand 101 00:05:21,000 --> 00:05:23,760 Speaker 2: listed companies. We're going to do our best effort to 102 00:05:23,760 --> 00:05:27,120 Speaker 2: pick the most exceptional twenty to forty that we think 103 00:05:27,160 --> 00:05:29,440 Speaker 2: we can buy at good valuations, that they think can 104 00:05:29,480 --> 00:05:32,159 Speaker 2: grow structurally sustainably over a long period of time. 105 00:05:32,320 --> 00:05:35,560 Speaker 1: So you're you're a bottom up, well, it's very much 106 00:05:35,640 --> 00:05:37,720 Speaker 1: bottom up and very much what you described that you 107 00:05:37,760 --> 00:05:41,120 Speaker 1: don't make is top down. Okay, so you're associated you've 108 00:05:41,120 --> 00:05:46,080 Speaker 1: had a good run beyond doubt by being involved in 109 00:05:46,120 --> 00:05:50,040 Speaker 1: the Magnificent seven stocks and they did very well for you. 110 00:05:50,520 --> 00:05:52,640 Speaker 1: If we take a long period of time in the 111 00:05:52,760 --> 00:05:54,960 Speaker 1: last few years as IF fund manager, that's what allowed 112 00:05:55,000 --> 00:05:59,080 Speaker 1: you to grow. And they are the outstanding sort of 113 00:05:59,240 --> 00:06:01,920 Speaker 1: champions of you. Like all of the arguments you're making, 114 00:06:02,560 --> 00:06:04,120 Speaker 1: will they continue to be. 115 00:06:06,200 --> 00:06:09,799 Speaker 2: Yeah? And so to do this well, what you should 116 00:06:09,800 --> 00:06:11,719 Speaker 2: do is not look at the economy or the sectors, 117 00:06:11,720 --> 00:06:13,880 Speaker 2: look at the big structural changes and who's going to win. 118 00:06:14,240 --> 00:06:15,760 Speaker 2: So that's what we do. We try and identify the 119 00:06:15,760 --> 00:06:18,360 Speaker 2: big structural changes and you identify who win. You talked 120 00:06:18,400 --> 00:06:21,920 Speaker 2: about the Magnificent seven. They are the big digital winners. Okay, 121 00:06:22,080 --> 00:06:25,479 Speaker 2: So everybody on this phone call remembers, you know, when 122 00:06:25,520 --> 00:06:28,000 Speaker 2: we used to read newspapers on the train. We don't anymore. 123 00:06:28,040 --> 00:06:30,799 Speaker 2: We read our phone and generally we're looking at Facebook 124 00:06:30,880 --> 00:06:33,080 Speaker 2: or Instagram, or we're looking at Google, etc. And so 125 00:06:33,120 --> 00:06:36,840 Speaker 2: they have structurally won from digital advertising. There's no reason 126 00:06:36,880 --> 00:06:39,919 Speaker 2: why that one continue. They've structurally won by the shift 127 00:06:39,920 --> 00:06:42,320 Speaker 2: to the cloud. So anybody who hosts anything in the 128 00:06:42,360 --> 00:06:45,680 Speaker 2: cloud has to host it at three companies. Amazon Google 129 00:06:45,880 --> 00:06:48,200 Speaker 2: or Microsoft. They're the only cloud providers on the planet. 130 00:06:48,560 --> 00:06:52,640 Speaker 2: And so what's generally happening here is digitalization is creating 131 00:06:52,680 --> 00:06:56,320 Speaker 2: network effects around these companies, and they become the advertising 132 00:06:56,360 --> 00:06:58,480 Speaker 2: company for the world, they become the software company for 133 00:06:58,520 --> 00:07:01,599 Speaker 2: the world. And so all they're doing is taking share 134 00:07:02,040 --> 00:07:05,360 Speaker 2: from Channel seven, Channel nine, Fairfax, et cetera, and bring 135 00:07:05,360 --> 00:07:07,280 Speaker 2: that back to the US. So coming back to my point, 136 00:07:07,279 --> 00:07:10,080 Speaker 2: they're not really linked to the US economy. They're linked 137 00:07:10,080 --> 00:07:12,000 Speaker 2: to the point that digital takes share. 138 00:07:11,800 --> 00:07:15,400 Speaker 1: From their their global they're global and they're base in 139 00:07:15,640 --> 00:07:17,000 Speaker 1: But I actually when I was asking you at the 140 00:07:17,000 --> 00:07:20,080 Speaker 1: start that Magnificent seven, they're all in your top what 141 00:07:20,360 --> 00:07:21,400 Speaker 1: top ten? Would that be fair? 142 00:07:21,520 --> 00:07:23,640 Speaker 2: Not all of them? No, So we would own four 143 00:07:23,680 --> 00:07:26,440 Speaker 2: of the seven today. And so we like in Video 144 00:07:26,480 --> 00:07:29,560 Speaker 2: a lot, we like Meta a lot, we like Amazon 145 00:07:29,600 --> 00:07:31,720 Speaker 2: a lot, and we like Microsoft a lot. 146 00:07:31,920 --> 00:07:34,960 Speaker 1: Okay, Okay, So tell us that's who you like. And 147 00:07:34,960 --> 00:07:37,120 Speaker 1: maybe we could have guessed that to some degree. When 148 00:07:37,160 --> 00:07:39,760 Speaker 1: I looked at the top holdings in the fund, there 149 00:07:39,800 --> 00:07:43,120 Speaker 1: were some names that weren't at all tech or digital 150 00:07:43,600 --> 00:07:45,800 Speaker 1: that you like. Give us an example of some of those. 151 00:07:46,280 --> 00:07:48,880 Speaker 2: Yeah, So if you're investing in structural changes. There's lots 152 00:07:48,920 --> 00:07:51,120 Speaker 2: of structural changes in the world. They don't necessarily have 153 00:07:51,200 --> 00:07:53,720 Speaker 2: to be tech. The really simple one for the last 154 00:07:53,800 --> 00:07:55,920 Speaker 2: decade is being cashed to card. You know, you can 155 00:07:55,960 --> 00:07:59,320 Speaker 2: invest in MasterCard or Visa slightly taking but the reality 156 00:07:59,360 --> 00:08:02,000 Speaker 2: is everybody on this this podcast doesn't use cash anymore. 157 00:08:02,040 --> 00:08:04,880 Speaker 2: They benefited from that. But another great example for US 158 00:08:04,880 --> 00:08:08,000 Speaker 2: has been security. We've been investing in, for instance, European 159 00:08:08,040 --> 00:08:10,440 Speaker 2: defense companies for more than three years because we felt 160 00:08:10,480 --> 00:08:13,320 Speaker 2: that the war would cause a structural shift in defense spending, 161 00:08:13,360 --> 00:08:17,280 Speaker 2: and that's what's happened the Ukraine War. Yes, and we've 162 00:08:17,280 --> 00:08:21,080 Speaker 2: invested in things like homeland security, so we own companies 163 00:08:21,640 --> 00:08:26,360 Speaker 2: like Axel and Motorolo solutions that you help police with policing, 164 00:08:26,400 --> 00:08:29,640 Speaker 2: help with body cameras, et cetera, et cetera. So all 165 00:08:29,640 --> 00:08:32,560 Speaker 2: of these areas are basically you're basically trying to identify 166 00:08:32,559 --> 00:08:35,319 Speaker 2: the area structural change and identify the winner. Healthcare is 167 00:08:35,360 --> 00:08:38,440 Speaker 2: another obvious area where we've goun things like Lily and 168 00:08:38,920 --> 00:08:42,079 Speaker 2: Orice that producers and Munjara. So these are big structural 169 00:08:42,120 --> 00:08:44,720 Speaker 2: changes that occur in the world, and as a global investor, 170 00:08:44,760 --> 00:08:47,960 Speaker 2: we can identify the change and investor benefit for our clients. 171 00:08:48,120 --> 00:08:50,240 Speaker 1: How do you get an edge on that you're sitting 172 00:08:50,320 --> 00:08:53,560 Speaker 1: in Australia, how do you say that drug in that 173 00:08:53,640 --> 00:08:56,320 Speaker 1: big farmer company is going to be the one that 174 00:08:56,440 --> 00:08:59,760 Speaker 1: moves the dial. And what competitive advantage could you possibly have. 175 00:09:00,080 --> 00:09:03,920 Speaker 2: That's a great question. So what we think and Monroe, 176 00:09:03,960 --> 00:09:07,760 Speaker 2: in case you don't know, is a word for Scottish mountains. 177 00:09:09,480 --> 00:09:12,200 Speaker 2: Mountains over three thousand feet of Monroe's and I spent 178 00:09:12,280 --> 00:09:15,199 Speaker 2: a lot of my career living and working in Edinburgh, 179 00:09:15,280 --> 00:09:17,079 Speaker 2: and if you go to other places in the world 180 00:09:17,120 --> 00:09:19,720 Speaker 2: like Edinburgh, there are fund managers who sit in a 181 00:09:19,800 --> 00:09:21,320 Speaker 2: very far away place in the world and take long 182 00:09:21,360 --> 00:09:23,439 Speaker 2: term views of the world. When I looked at those 183 00:09:23,480 --> 00:09:25,920 Speaker 2: fund managers, that's what we wanted Monroe to be in Australia. 184 00:09:25,960 --> 00:09:28,160 Speaker 2: So we have roughly thirty one people here in Melbourne, Australia, 185 00:09:28,600 --> 00:09:30,760 Speaker 2: and we are just trying to solve one problem. Who 186 00:09:30,760 --> 00:09:33,440 Speaker 2: are these exceptional companies We look in these areas of 187 00:09:33,440 --> 00:09:35,480 Speaker 2: structural growth and obviously we do heaps of research and 188 00:09:35,520 --> 00:09:36,560 Speaker 2: we travel extensively. 189 00:09:36,720 --> 00:09:39,880 Speaker 1: Okay, so your cultural training was in that well that 190 00:09:40,040 --> 00:09:47,720 Speaker 1: Scottish Aberdeen, Scottish widows, Bill Gifford, whoever. They're all in Edinburgh, Canny. 191 00:09:47,880 --> 00:09:51,640 Speaker 1: We know that, but that's your cultural context, correct. 192 00:09:51,320 --> 00:09:53,000 Speaker 2: Yeah, And so the word Monroe is you know, a 193 00:09:53,000 --> 00:09:54,839 Speaker 2: bit of homage, because that's how we want it to 194 00:09:54,880 --> 00:09:57,319 Speaker 2: be like them. And so to answer your question specifically, 195 00:09:57,360 --> 00:09:59,880 Speaker 2: we travel a lot, we talk to everybody in an area, 196 00:10:00,120 --> 00:10:03,280 Speaker 2: so we might know the whole world well, but these 197 00:10:03,320 --> 00:10:05,720 Speaker 2: areas of structural growth, we know them really well. And 198 00:10:05,760 --> 00:10:08,160 Speaker 2: so next week I'm off to see these states. I'm 199 00:10:08,160 --> 00:10:10,160 Speaker 2: off to see in Video Gain. I've been going to 200 00:10:10,160 --> 00:10:12,439 Speaker 2: see in Video for six years now. We've owned the 201 00:10:12,480 --> 00:10:15,520 Speaker 2: company since twenty eighteen. Every time we speak to them, 202 00:10:15,559 --> 00:10:17,400 Speaker 2: they tell us what they're doing. Every time we go back, 203 00:10:17,400 --> 00:10:20,480 Speaker 2: they're roughly achieving what they say. And so this just 204 00:10:20,520 --> 00:10:24,240 Speaker 2: comes from experience and research quite frankly, just extensive research 205 00:10:24,400 --> 00:10:26,000 Speaker 2: to help you find those few winners. 206 00:10:26,160 --> 00:10:30,240 Speaker 1: And you find getting in front of the companies still 207 00:10:30,679 --> 00:10:32,760 Speaker 1: very important. Do are you sitting face to face? 208 00:10:34,080 --> 00:10:36,760 Speaker 2: Sitting face to face for the companies and also with 209 00:10:36,840 --> 00:10:40,079 Speaker 2: their customers. So in in videos case, for instance, their 210 00:10:40,080 --> 00:10:43,080 Speaker 2: biggest customers are other companies we own, like Meta and 211 00:10:43,240 --> 00:10:45,840 Speaker 2: Google and Amazon. And they will tell us that in 212 00:10:45,880 --> 00:10:47,560 Speaker 2: Video's the best chips. They've been telling us in Video 213 00:10:47,600 --> 00:10:49,920 Speaker 2: is the best chips for ten years. So that just 214 00:10:50,040 --> 00:10:52,560 Speaker 2: checks out what the other companies told you. And this 215 00:10:52,720 --> 00:10:55,160 Speaker 2: is just again but I come back to the first point. 216 00:10:55,960 --> 00:10:58,559 Speaker 2: Different to our peers. This is all we're trying to solve. 217 00:10:58,640 --> 00:11:00,720 Speaker 2: We're not trying to solve the economy. I'm not trying 218 00:11:00,720 --> 00:11:03,600 Speaker 2: to solve what French retail sales are doing. I'm just 219 00:11:03,640 --> 00:11:05,920 Speaker 2: trying to solve who are the big structural winners and 220 00:11:05,960 --> 00:11:07,800 Speaker 2: as over time we just the more we do it, 221 00:11:07,800 --> 00:11:08,679 Speaker 2: the better we get at it. 222 00:11:09,000 --> 00:11:10,960 Speaker 1: Okay, all right now. One of the things I'm really 223 00:11:11,000 --> 00:11:14,559 Speaker 1: interested and hear your view, which seems to be the 224 00:11:14,559 --> 00:11:16,880 Speaker 1: big question for the Australian investor this year and the 225 00:11:16,880 --> 00:11:18,719 Speaker 1: big question for the big super funds this year, and 226 00:11:18,720 --> 00:11:21,120 Speaker 1: they're talking about it on stage and they're giving different answers, 227 00:11:21,840 --> 00:11:24,600 Speaker 1: is whether you should stick with the US, whether after 228 00:11:24,679 --> 00:11:28,160 Speaker 1: all these years, it can keep doing what it's doing 229 00:11:28,160 --> 00:11:30,160 Speaker 1: because it's been so good. And there's been some big 230 00:11:30,160 --> 00:11:32,720 Speaker 1: fund address saying we're coming back to Australia, some saying no, 231 00:11:32,760 --> 00:11:35,640 Speaker 1: we're sticking with the US. They've been tested, that's for sure. 232 00:11:35,760 --> 00:11:47,120 Speaker 1: I want to come back to that after a break. Hello, 233 00:11:47,240 --> 00:11:50,319 Speaker 1: Welcome back to the Australian's Money Puzzle podcast. James Kirby 234 00:11:50,360 --> 00:11:55,720 Speaker 1: here talking to Nick Griffin of the Monroe Partners Investment Group, 235 00:11:56,040 --> 00:12:00,360 Speaker 1: specialist really in global investing, offshore investing with a well. 236 00:12:00,360 --> 00:12:03,000 Speaker 1: As he's explaining the first part of the show, he's 237 00:12:03,040 --> 00:12:07,120 Speaker 1: really interested as picking companies bottom up based on their 238 00:12:07,200 --> 00:12:10,640 Speaker 1: numbers and their promise, if you like, of a structural 239 00:12:10,720 --> 00:12:14,160 Speaker 1: change which gives them a leap in profitability. I mean, 240 00:12:14,200 --> 00:12:17,600 Speaker 1: obviously you mentioned the video. Why wouldn't you. That's the 241 00:12:17,640 --> 00:12:20,560 Speaker 1: one that's everyone's favorite right now and it's staying up, 242 00:12:20,600 --> 00:12:23,320 Speaker 1: which is fascinating. But Nick, what about that issue then 243 00:12:23,679 --> 00:12:28,160 Speaker 1: that how could the US possibly continue to return the 244 00:12:28,280 --> 00:12:30,960 Speaker 1: level of returns. It's not that it's been better than 245 00:12:30,960 --> 00:12:33,760 Speaker 1: the ASEX, like it's been multiples better than the ASEX 246 00:12:33,800 --> 00:12:38,679 Speaker 1: for years and years. Do you think that's forever now? 247 00:12:39,600 --> 00:12:42,440 Speaker 2: So from our point of view over the medium term 248 00:12:42,520 --> 00:12:45,920 Speaker 2: the answers yes, over the medium term. Over the short term, 249 00:12:46,000 --> 00:12:48,760 Speaker 2: I can see why multiples in the US might be 250 00:12:48,800 --> 00:12:51,200 Speaker 2: too high and multiples in the UK and France are 251 00:12:51,240 --> 00:12:54,040 Speaker 2: too low and they should converge with each other for 252 00:12:54,120 --> 00:12:57,000 Speaker 2: a period of time, but in the end it's earning scritter. 253 00:12:57,040 --> 00:12:59,560 Speaker 2: As I said before, the Drivestock prices, And if you 254 00:12:59,600 --> 00:13:02,640 Speaker 2: want to invest in cloud computing, you have to invest 255 00:13:02,640 --> 00:13:05,920 Speaker 2: in the US. If you want to invest in semiconductive development, 256 00:13:06,240 --> 00:13:08,240 Speaker 2: you pretty much have to invest in the US. Outside 257 00:13:08,280 --> 00:13:09,240 Speaker 2: oft SA Tearsom see in. 258 00:13:09,240 --> 00:13:12,760 Speaker 1: Taiwan, there's the emergence of structural tariffs. 259 00:13:13,960 --> 00:13:16,960 Speaker 2: Tariffs, and I agree that tariffs are an issue, but 260 00:13:17,040 --> 00:13:19,000 Speaker 2: they are sort of a one time issue. So it's 261 00:13:19,040 --> 00:13:21,720 Speaker 2: a one time cost to these companies that will that 262 00:13:21,760 --> 00:13:23,760 Speaker 2: they'll deal with, but then they'll go back to doing 263 00:13:23,800 --> 00:13:26,680 Speaker 2: what they do before, which is, you know, be positioned 264 00:13:26,679 --> 00:13:28,920 Speaker 2: in these great areas. And it's not I want to 265 00:13:28,960 --> 00:13:31,040 Speaker 2: be clear on the call, it's not the Australian's fault 266 00:13:31,040 --> 00:13:32,880 Speaker 2: that this is happening in the US. It happens in 267 00:13:32,920 --> 00:13:36,040 Speaker 2: the US not because they're smarter than US. It happens 268 00:13:36,080 --> 00:13:38,680 Speaker 2: because they've just got more people and they've got more money. 269 00:13:39,200 --> 00:13:41,240 Speaker 2: And so if you think about it, and I've said 270 00:13:41,240 --> 00:13:43,640 Speaker 2: this example a lot, if Google was invented in Australia, 271 00:13:43,640 --> 00:13:46,520 Speaker 2: it still wouldn't have won. But when Google's invented in 272 00:13:46,559 --> 00:13:49,520 Speaker 2: the US, everyone looks at Google, so everyone has to 273 00:13:49,559 --> 00:13:51,400 Speaker 2: be on Google. So everyone looks at Google, so everyone 274 00:13:51,440 --> 00:13:53,160 Speaker 2: has to be on Google, and then Google becomes the 275 00:13:53,160 --> 00:13:54,480 Speaker 2: dominant search engine in the world. 276 00:13:54,800 --> 00:13:56,880 Speaker 1: Someone just reminded me the other day that the Australian 277 00:13:56,920 --> 00:13:57,880 Speaker 1: company looks smart. 278 00:13:58,600 --> 00:13:59,880 Speaker 2: Yeah poor. 279 00:14:00,200 --> 00:14:02,760 Speaker 1: Once upon a time met a bit for Google one time, 280 00:14:03,160 --> 00:14:04,680 Speaker 1: which would have been really good if Big got it. 281 00:14:05,120 --> 00:14:07,040 Speaker 2: Yes, well, you can have a lot of funny at 282 00:14:07,040 --> 00:14:10,400 Speaker 2: Alta Vista, ask Jeeves. Yeahoo, there was exortent. But now 283 00:14:10,440 --> 00:14:12,800 Speaker 2: Google has a ninety seven percent market share. That's network 284 00:14:12,800 --> 00:14:15,800 Speaker 2: effects at work. Microsoft does this as well. You're the 285 00:14:15,800 --> 00:14:18,480 Speaker 2: biggest software company, so everyone uses Microsoft server and has 286 00:14:18,480 --> 00:14:21,200 Speaker 2: to be on Microsoft server, news microphones Exactly. The same 287 00:14:21,200 --> 00:14:24,720 Speaker 2: thing's happening at Netflix. And so these network effects around 288 00:14:24,720 --> 00:14:28,320 Speaker 2: digitalization is concentrating wealth in companies that happened to be 289 00:14:28,360 --> 00:14:30,400 Speaker 2: listed in the US. Why because they were. They have 290 00:14:30,480 --> 00:14:33,080 Speaker 2: the biggest population based on money base to start with, 291 00:14:33,520 --> 00:14:34,320 Speaker 2: not because they're smarter. 292 00:14:34,760 --> 00:14:38,080 Speaker 1: Do you worry at all that the Trump and this 293 00:14:38,240 --> 00:14:40,840 Speaker 1: is the second term of Trump, and it's stronger obviously 294 00:14:41,120 --> 00:14:44,360 Speaker 1: than ever, more confident if you could imagine such a thing, 295 00:14:44,560 --> 00:14:48,360 Speaker 1: but more confident in his position in power, do you 296 00:14:48,440 --> 00:14:53,680 Speaker 1: worry that this core worry that the US itself, that 297 00:14:53,800 --> 00:14:59,280 Speaker 1: it's bond market, that it's currency may be at a 298 00:14:59,400 --> 00:15:03,080 Speaker 1: period where it's about to decline, Like all empires decline, 299 00:15:03,120 --> 00:15:05,880 Speaker 1: nothing lasts forever, and it's an empire and it's the 300 00:15:05,880 --> 00:15:08,360 Speaker 1: beginning of its decline, and Trump, in some ways is 301 00:15:08,360 --> 00:15:11,360 Speaker 1: the personification of that. What do you say to that view. 302 00:15:11,280 --> 00:15:13,440 Speaker 2: Of the world. That is a very good question. So 303 00:15:13,560 --> 00:15:16,160 Speaker 2: I think we can all agree that these companies are 304 00:15:16,160 --> 00:15:19,120 Speaker 2: clearly stronger and potentially more powerful and more likely to 305 00:15:19,120 --> 00:15:23,600 Speaker 2: grow than say a French supermarket or a Japanese trading company. 306 00:15:23,440 --> 00:15:26,600 Speaker 2: So I think most people can see that and they 307 00:15:26,640 --> 00:15:29,160 Speaker 2: want to invest in the US. But the point you 308 00:15:29,200 --> 00:15:31,600 Speaker 2: make is a good one. So, but the problem is 309 00:15:31,640 --> 00:15:34,320 Speaker 2: what happens if the currency goes down? What happens if 310 00:15:34,320 --> 00:15:37,240 Speaker 2: the bond market riots, etc. These are what we would 311 00:15:37,240 --> 00:15:40,760 Speaker 2: call exogenous shocks. The currency is less of an issue 312 00:15:40,760 --> 00:15:43,800 Speaker 2: because we can hedge that out for instance, and vice versa. 313 00:15:43,800 --> 00:15:45,480 Speaker 2: A lot of these companies are foreign earners, so they 314 00:15:45,520 --> 00:15:47,520 Speaker 2: actually end up their ownings going up as the currency 315 00:15:47,560 --> 00:15:50,000 Speaker 2: going down. But the bond market things a big issue 316 00:15:50,080 --> 00:15:52,160 Speaker 2: because if the bond market at it for in some 317 00:15:52,480 --> 00:15:55,640 Speaker 2: point then that would cause you know, a significantly bigger 318 00:15:55,680 --> 00:15:59,360 Speaker 2: economic slowdown, and I can see some reasons to diversify there. 319 00:15:59,560 --> 00:16:01,560 Speaker 2: The only last thing I'd say is, look, obviously, people 320 00:16:01,560 --> 00:16:05,280 Speaker 2: have been predicting this for twenty years, and that's twenty 321 00:16:05,360 --> 00:16:08,040 Speaker 2: years of great returns they missed out on. It could 322 00:16:08,200 --> 00:16:11,480 Speaker 2: and may happen one day, maybe today's day. Maybe it's not. 323 00:16:11,680 --> 00:16:15,400 Speaker 2: But obviously that's something we're watching very closely. But fundamentally, 324 00:16:15,480 --> 00:16:19,040 Speaker 2: the corporates in the US are growing faster, they're more dynamic, 325 00:16:19,080 --> 00:16:21,760 Speaker 2: they're more advantaged, and so ultimately we prefer at least 326 00:16:21,800 --> 00:16:23,560 Speaker 2: having at least a good chunk of our money there 327 00:16:23,560 --> 00:16:25,400 Speaker 2: because the companies we like the most there. 328 00:16:25,840 --> 00:16:28,760 Speaker 1: Okay, all right, well, fairly for some support for the 329 00:16:28,840 --> 00:16:31,960 Speaker 1: US market there, Okay, while we have you. For anyone 330 00:16:32,160 --> 00:16:35,680 Speaker 1: that's listening to you, what they love to hear from 331 00:16:35,720 --> 00:16:39,120 Speaker 1: someone like you is what you see as hotspots and 332 00:16:39,200 --> 00:16:44,160 Speaker 1: black spots basically in the coming year, well, this particular climate, 333 00:16:44,720 --> 00:16:48,080 Speaker 1: this market, what are the sort of companies and you 334 00:16:48,120 --> 00:16:50,440 Speaker 1: have to some extents illustrated what you do like, what 335 00:16:50,480 --> 00:16:54,320 Speaker 1: you've always liked. Is there anything new that are a 336 00:16:54,400 --> 00:16:57,320 Speaker 1: new theme that you are keen on and are there 337 00:16:57,440 --> 00:16:59,000 Speaker 1: themes that you keep away from? 338 00:17:00,120 --> 00:17:02,320 Speaker 2: Great And so just to clarify the last question, it 339 00:17:02,320 --> 00:17:04,600 Speaker 2: doesn't mean we don't just invest outside the US. We do. 340 00:17:04,840 --> 00:17:08,360 Speaker 2: We do. We do like companies like TSMC, for instance, 341 00:17:08,359 --> 00:17:11,560 Speaker 2: in Taiwan. And I already talked about European defense stocks earlier. 342 00:17:11,680 --> 00:17:13,760 Speaker 2: So if we can find structural growth in other parts 343 00:17:13,760 --> 00:17:16,240 Speaker 2: of the world, by all means, we'll invest in Okay, 344 00:17:16,640 --> 00:17:19,159 Speaker 2: going forward, this is an exciting time and I know 345 00:17:19,200 --> 00:17:22,359 Speaker 2: Trump is causing volatility, and I know it's hard to 346 00:17:22,440 --> 00:17:25,239 Speaker 2: keep track of. But in the background we have the 347 00:17:25,280 --> 00:17:28,320 Speaker 2: emergence of AI, and so artificial intelligence, we think is 348 00:17:28,320 --> 00:17:29,879 Speaker 2: probably going to be the biggest structural change in the 349 00:17:29,960 --> 00:17:33,120 Speaker 2: next decade. This is the fourth tectonic shift in computing, 350 00:17:33,160 --> 00:17:34,679 Speaker 2: if you think about it. So we went through a 351 00:17:34,680 --> 00:17:37,440 Speaker 2: mainframe era, we went through a PC era, we went 352 00:17:37,440 --> 00:17:39,840 Speaker 2: through a mobile era. We're now in an AI era. 353 00:17:40,160 --> 00:17:41,359 Speaker 2: And so what's going to happen is you're going to 354 00:17:41,359 --> 00:17:43,760 Speaker 2: connect every device on the planet to the Internet, and 355 00:17:43,880 --> 00:17:45,840 Speaker 2: AI is going to process that data to give us 356 00:17:45,840 --> 00:17:48,879 Speaker 2: better outcomes. The beauty of AI, which is really interesting, 357 00:17:48,960 --> 00:17:52,040 Speaker 2: is it doesn't just affect software and consumer application and 358 00:17:52,040 --> 00:17:56,040 Speaker 2: infects things like autonomous driving, robotics, like drug discovery, and 359 00:17:56,119 --> 00:18:00,679 Speaker 2: like security. And so we are finding today companies that 360 00:18:00,720 --> 00:18:04,440 Speaker 2: can harness this technology are seeing a massive structural shift 361 00:18:04,440 --> 00:18:06,879 Speaker 2: in their ownings growth at a big structural shift in 362 00:18:06,880 --> 00:18:08,159 Speaker 2: the attractiveness of their product. 363 00:18:08,320 --> 00:18:10,400 Speaker 1: Can you give me an example of somebody. 364 00:18:10,040 --> 00:18:11,919 Speaker 2: Yeah, So I'll give you a couple of examples. So 365 00:18:12,440 --> 00:18:15,159 Speaker 2: one example i'd mentioned is again those security companies I 366 00:18:15,160 --> 00:18:17,800 Speaker 2: talked about before. So if you're a company selling security cameras, 367 00:18:17,800 --> 00:18:20,520 Speaker 2: for instance, you sell security cameras, you can now put 368 00:18:20,560 --> 00:18:23,520 Speaker 2: software on those security cameras, and you can identify who's 369 00:18:23,520 --> 00:18:26,760 Speaker 2: at your front door. You can identify threat detection faster 370 00:18:26,880 --> 00:18:29,680 Speaker 2: and better, and so you sell hardware and now software 371 00:18:29,960 --> 00:18:33,000 Speaker 2: and software. That's quite frankly, everyone is cool. Everyone's podcast 372 00:18:33,080 --> 00:18:35,720 Speaker 2: can see is quite useful. That would be one example. 373 00:18:36,119 --> 00:18:39,679 Speaker 2: If you think about medical technology or MRI technology, you 374 00:18:39,720 --> 00:18:43,480 Speaker 2: can now get an MRI and potentially identify cancer. 375 00:18:43,160 --> 00:18:45,800 Speaker 1: Two years earlier diagnostics acceleration. 376 00:18:46,440 --> 00:18:49,760 Speaker 2: Yeah, and so you basically and everybody would know that 377 00:18:50,080 --> 00:18:52,359 Speaker 2: finding cancer earlier is obviously what we'd all like to 378 00:18:52,400 --> 00:18:55,040 Speaker 2: do to stay live longer. So there's a general benefit 379 00:18:55,440 --> 00:18:58,160 Speaker 2: for using the technology and a reason why people would 380 00:18:58,200 --> 00:19:00,440 Speaker 2: pay for it. In both those examples, those would be 381 00:19:00,480 --> 00:19:02,600 Speaker 2: two i'd give you off the bat. But the last 382 00:19:02,640 --> 00:19:06,440 Speaker 2: one is obviously software. You know, we can summarize this podcast. 383 00:19:06,520 --> 00:19:08,639 Speaker 2: You can drop it into a GPT and it'll just 384 00:19:08,680 --> 00:19:10,400 Speaker 2: tell you what the summary was without having to listen 385 00:19:10,400 --> 00:19:13,120 Speaker 2: to the whole thing. You can summarize the good parts. 386 00:19:13,119 --> 00:19:15,720 Speaker 1: If you do that, yeah, you're going to miss jokes. 387 00:19:16,040 --> 00:19:18,400 Speaker 1: Tell me about what you don't like. 388 00:19:19,680 --> 00:19:25,440 Speaker 2: So what we don't like. So honestly, just mediocre companies. 389 00:19:25,520 --> 00:19:28,400 Speaker 2: I'm not saying they're bad. I'm just saying that they're 390 00:19:28,440 --> 00:19:33,320 Speaker 2: stuck in competitive industries that that ultimately I don't have 391 00:19:33,400 --> 00:19:35,919 Speaker 2: an edge versus say someone else who's looking at it. 392 00:19:35,960 --> 00:19:37,920 Speaker 2: So i'd give you an example here is like banks. 393 00:19:38,080 --> 00:19:40,080 Speaker 2: I mean banks are great and obviously in Australia they 394 00:19:40,080 --> 00:19:42,960 Speaker 2: have done well, but they're not growing that much and 395 00:19:43,080 --> 00:19:45,200 Speaker 2: you rely on interest rates in the economy and a 396 00:19:45,200 --> 00:19:46,840 Speaker 2: whole bunch of things that I have a view on, 397 00:19:46,920 --> 00:19:48,880 Speaker 2: but I don't have an edge. I've got an edge 398 00:19:48,880 --> 00:19:50,800 Speaker 2: on AI I think we do, and that's how we're 399 00:19:50,800 --> 00:19:54,320 Speaker 2: making money. Other areas would be you know, a consumer 400 00:19:54,400 --> 00:19:57,720 Speaker 2: fashion is hard like, it's hard. I'm not very fashionable, 401 00:19:58,240 --> 00:19:59,960 Speaker 2: but I have people on my team who are fashionable. 402 00:20:00,160 --> 00:20:02,439 Speaker 2: But fashions change and so it's hard to get a 403 00:20:02,520 --> 00:20:05,679 Speaker 2: three to five year viewpoint. We've got some companies in 404 00:20:05,720 --> 00:20:07,560 Speaker 2: this area that we like, but it is harder those 405 00:20:08,119 --> 00:20:10,000 Speaker 2: And you know, I think you know, things like airlines 406 00:20:10,000 --> 00:20:14,240 Speaker 2: and stuff are rather anything that's a highly competitive industry. Lastly, 407 00:20:14,320 --> 00:20:16,960 Speaker 2: anything you know that the Chinese get into. If the 408 00:20:17,040 --> 00:20:19,000 Speaker 2: Chinese turn up, generally the profits leave. 409 00:20:19,480 --> 00:20:21,600 Speaker 1: That sounds like the car. That sounds like that sounds 410 00:20:21,680 --> 00:20:22,320 Speaker 1: like cars. 411 00:20:22,960 --> 00:20:26,640 Speaker 2: Yeah, cars, Cars is a terrible business, you know, basically 412 00:20:26,680 --> 00:20:30,880 Speaker 2: margins disappearing at speed in a massive technology race, environmental race. 413 00:20:30,960 --> 00:20:34,200 Speaker 2: It's hard and all these national champions that are quite 414 00:20:34,240 --> 00:20:35,240 Speaker 2: frankly going to disappear. 415 00:20:35,640 --> 00:20:41,200 Speaker 1: Okay, thanks cars, fashion companies. You heard it here first, 416 00:20:41,320 --> 00:20:43,840 Speaker 1: all right, I have some actually very I've kept a 417 00:20:43,840 --> 00:20:46,800 Speaker 1: couple of questions off my sleeve for you, Nick, and 418 00:20:46,840 --> 00:20:49,600 Speaker 1: the fact the very first one is on airlines. So 419 00:20:49,880 --> 00:20:52,080 Speaker 1: we will be back in a moment with some very 420 00:20:52,119 --> 00:21:00,800 Speaker 1: good questions for me. Hello, oh, and welcome back to 421 00:21:00,800 --> 00:21:04,560 Speaker 1: the Australian's Money Puzzle podcast. I'm James Kirby and I'm 422 00:21:04,560 --> 00:21:08,400 Speaker 1: talking to Nick Griffin, fund manager at Monroe Partners, specialist 423 00:21:09,320 --> 00:21:12,879 Speaker 1: in overseas investing, primarily the US, but oh anywhere in 424 00:21:12,880 --> 00:21:15,680 Speaker 1: the world that he thinks he can find value over 425 00:21:15,800 --> 00:21:19,000 Speaker 1: and above what your ETF is going to do. And 426 00:21:19,119 --> 00:21:21,480 Speaker 1: your premise, Nick, which I didn't give you a chance 427 00:21:21,520 --> 00:21:24,199 Speaker 1: to explain, obviously, I mentioned that you have fees. But 428 00:21:24,320 --> 00:21:27,320 Speaker 1: your proposal, obviously is you're going to beat the benchmark 429 00:21:27,359 --> 00:21:31,560 Speaker 1: being probably been the Mogen Standy Capital Internationally INDICX or whatever. 430 00:21:31,880 --> 00:21:33,960 Speaker 1: And to what extent have you managed to do that? 431 00:21:34,960 --> 00:21:37,200 Speaker 2: So in our call long any product the manner of 432 00:21:37,240 --> 00:21:40,200 Speaker 2: concentrated Global Growth Fund, which is our relative return fund, 433 00:21:40,200 --> 00:21:42,480 Speaker 2: we've made it by five percent per annum since. 434 00:21:42,280 --> 00:21:46,720 Speaker 1: In such Okay, all right, very good. Now, question Anthony. 435 00:21:46,840 --> 00:21:49,359 Speaker 1: I am interested in the airline sector. This is on 436 00:21:49,440 --> 00:21:51,800 Speaker 1: the ASEX I hold Quantus and they have had a 437 00:21:51,800 --> 00:21:54,600 Speaker 1: great recovery, Anthony, they have had a great recovery. I 438 00:21:54,640 --> 00:21:58,320 Speaker 1: had no idea. I hadn't watched them. You know, everybody's 439 00:21:58,440 --> 00:22:01,960 Speaker 1: obsessed with them during the allen joyce Vanessa Hudson. Maybe 440 00:22:02,080 --> 00:22:03,600 Speaker 1: you know it was a nice time to come in 441 00:22:03,600 --> 00:22:06,040 Speaker 1: to take over an airline in any event, I mean 442 00:22:06,280 --> 00:22:09,439 Speaker 1: quite just has tripled since the bad days of COVID, 443 00:22:09,760 --> 00:22:11,880 Speaker 1: and it's one of the better stops of the year. Now, 444 00:22:11,920 --> 00:22:19,560 Speaker 1: Anthony's question is this, what is your investment take on airlines? 445 00:22:19,640 --> 00:22:22,960 Speaker 1: And I mean he mentions obvious things nick like like 446 00:22:23,119 --> 00:22:27,520 Speaker 1: the price of aviation fuel, currencies, conflagrations around the world. 447 00:22:27,600 --> 00:22:30,680 Speaker 1: But in passing there on the second segment of the show, 448 00:22:30,960 --> 00:22:32,800 Speaker 1: you basically said you didn't like airlines. 449 00:22:33,440 --> 00:22:35,560 Speaker 2: Yeah, I'd put this, Yeah, so I'd put this in 450 00:22:35,600 --> 00:22:38,040 Speaker 2: the you know, it's in the hard camp because you 451 00:22:38,160 --> 00:22:41,960 Speaker 2: need to I think the viewer poses the question, Well, 452 00:22:42,000 --> 00:22:44,719 Speaker 2: you need to understand what's happening with fuel, you understand 453 00:22:44,720 --> 00:22:46,600 Speaker 2: what's happening with demand, you need to understand what's happening 454 00:22:46,640 --> 00:22:49,440 Speaker 2: with interest rates. These are things that are notoriously hard 455 00:22:49,440 --> 00:22:52,000 Speaker 2: to predict. And I'm not saying it's a bad investment, 456 00:22:52,200 --> 00:22:55,160 Speaker 2: and value investors could look at it and you can 457 00:22:55,200 --> 00:22:58,680 Speaker 2: trade it really well. I would just prefer to say that, 458 00:22:58,800 --> 00:23:00,680 Speaker 2: you know, software is going to be an increasing share 459 00:23:00,760 --> 00:23:03,000 Speaker 2: of my wallet over a long period of time, and 460 00:23:03,640 --> 00:23:05,520 Speaker 2: Microsoft's probably going to get it. And I just think 461 00:23:05,520 --> 00:23:07,919 Speaker 2: that's an easy event and a longer term bet. And 462 00:23:07,960 --> 00:23:11,639 Speaker 2: so I just encourage people to say, just as a screen, 463 00:23:11,720 --> 00:23:13,920 Speaker 2: if you're looking at a company and you can't tell 464 00:23:14,000 --> 00:23:16,639 Speaker 2: with extreme confidence what the earnings are going to be 465 00:23:16,720 --> 00:23:19,600 Speaker 2: three years from now, that it's probably not investment. It's 466 00:23:19,600 --> 00:23:19,920 Speaker 2: a train. 467 00:23:20,840 --> 00:23:24,439 Speaker 1: Do you actually believe someone sits in front of you 468 00:23:24,480 --> 00:23:26,560 Speaker 1: and says our earnings in three years time should be X. 469 00:23:26,600 --> 00:23:27,920 Speaker 1: Do you really take that seriously? 470 00:23:28,600 --> 00:23:30,600 Speaker 2: I think from many companies in the world you can 471 00:23:30,680 --> 00:23:32,520 Speaker 2: actually and this is where it helps to be global. 472 00:23:32,760 --> 00:23:35,040 Speaker 2: You can actually predict that they're in such a strong 473 00:23:35,080 --> 00:23:38,520 Speaker 2: competitive position and you know that demand will grow. You 474 00:23:38,560 --> 00:23:40,560 Speaker 2: can predict that whether you want to pay them multiple 475 00:23:40,560 --> 00:23:42,000 Speaker 2: that you have to pay for it to get that. 476 00:23:42,160 --> 00:23:43,040 Speaker 2: It's a different story. 477 00:23:43,240 --> 00:23:45,520 Speaker 1: So this will be utility types companies, and I don't 478 00:23:45,640 --> 00:23:48,480 Speaker 1: by that, I don't necessarily mean pipelines. I would imagine 479 00:23:49,040 --> 00:23:50,880 Speaker 1: Amazon to some extent is utility type. 480 00:23:50,880 --> 00:23:53,840 Speaker 2: Tru fact, Amazon is a good example of this. Amazon's 481 00:23:53,840 --> 00:23:56,080 Speaker 2: a good example of this. TSMC is a good example 482 00:23:56,080 --> 00:24:00,840 Speaker 2: of this. Companies that live in industries where they're oligobalistic, monopolistic, 483 00:24:01,359 --> 00:24:03,359 Speaker 2: you know the industry's going to grow, and yes there 484 00:24:03,440 --> 00:24:06,080 Speaker 2: might be bumps, but you can say with a reasonable 485 00:24:06,080 --> 00:24:08,000 Speaker 2: amount of confidence over the next three to five years, 486 00:24:08,000 --> 00:24:10,439 Speaker 2: that the earnings are going to be significantly higher, and 487 00:24:10,480 --> 00:24:12,160 Speaker 2: then you're just going to get her out in the multiple. 488 00:24:12,200 --> 00:24:14,480 Speaker 2: And the multiple is a different conversation, but that's more 489 00:24:14,480 --> 00:24:16,879 Speaker 2: of an investment. The ones where you can't predict it, 490 00:24:17,280 --> 00:24:20,040 Speaker 2: you're ultimately trading. And that's okay. People are really good 491 00:24:20,040 --> 00:24:22,040 Speaker 2: at that, and other people did. It's just not how 492 00:24:22,080 --> 00:24:22,439 Speaker 2: we do it. 493 00:24:22,520 --> 00:24:24,919 Speaker 1: The problem with bottom up investing is the course that 494 00:24:25,040 --> 00:24:28,800 Speaker 1: the on four that the black swan, the thing you 495 00:24:28,800 --> 00:24:31,320 Speaker 1: can't see coming. Like you mentioned t SMC and I'm 496 00:24:31,320 --> 00:24:34,880 Speaker 1: sure our listeners know that's Taiwan, the key semi conductor 497 00:24:34,920 --> 00:24:36,959 Speaker 1: company in the world, based in Taiwan. I'm sure it's 498 00:24:37,000 --> 00:24:40,440 Speaker 1: earnings are great, it's in Taiwan. There's political risks there. 499 00:24:41,119 --> 00:24:42,760 Speaker 1: Do you how do you factor that in? 500 00:24:43,119 --> 00:24:45,720 Speaker 2: Yeah, so obviously that's something I didn't say. I want 501 00:24:45,720 --> 00:24:47,440 Speaker 2: to say you sit here with confidence and say you 502 00:24:47,480 --> 00:24:49,359 Speaker 2: think that's going to happen. It doesn't mean it's going 503 00:24:49,359 --> 00:24:49,720 Speaker 2: to happen. 504 00:24:49,800 --> 00:24:51,959 Speaker 1: And of course we presume you don't know the future. 505 00:24:52,040 --> 00:24:53,760 Speaker 2: But there's plenty of companies you can sit here today 506 00:24:53,800 --> 00:24:55,679 Speaker 2: and you say I can't actually predict this, but I'm 507 00:24:55,720 --> 00:24:58,399 Speaker 2: going to invest anyway, that's what we don't do. So 508 00:24:58,520 --> 00:25:00,159 Speaker 2: this is what we think will happen. So I mean, 509 00:25:00,160 --> 00:25:03,480 Speaker 2: Taiwan does not get invaded, semikin demand's going to go up. 510 00:25:03,680 --> 00:25:06,320 Speaker 2: TSMC's a monopoly and their earnings will go up all 511 00:25:06,359 --> 00:25:08,639 Speaker 2: over time and probably double over the next five years. 512 00:25:08,960 --> 00:25:12,320 Speaker 2: But obviously things can go wrong, and that's what liquidity 513 00:25:12,359 --> 00:25:15,160 Speaker 2: is for. That's what things like stop losses are for, 514 00:25:15,560 --> 00:25:17,600 Speaker 2: and because sometimes you're going to make mistakes and you 515 00:25:17,640 --> 00:25:18,879 Speaker 2: should be obviously aware of that. 516 00:25:19,480 --> 00:25:22,480 Speaker 1: Actually, the next question is on stop losses, which again 517 00:25:22,520 --> 00:25:26,760 Speaker 1: I've curated especially for you, Huie. He says capital protection 518 00:25:26,840 --> 00:25:29,800 Speaker 1: and position sizing is often mentioned as having a large 519 00:25:29,800 --> 00:25:32,640 Speaker 1: impact on investor returns. I was hoping you could discuss 520 00:25:33,040 --> 00:25:36,560 Speaker 1: the use of stop losses for your average investor. Now 521 00:25:36,560 --> 00:25:39,600 Speaker 1: here's something really interesting, Hue. And of course, as always, folks, 522 00:25:39,720 --> 00:25:44,119 Speaker 1: none of this is advice information, only that Nick I 523 00:25:44,160 --> 00:25:46,760 Speaker 1: saw reports a few months ago. I knew you. I 524 00:25:46,840 --> 00:25:48,840 Speaker 1: knew as a fund that you guys were well into 525 00:25:48,920 --> 00:25:51,440 Speaker 1: the US, and then I saw how the Trump there 526 00:25:51,480 --> 00:25:53,360 Speaker 1: was the Trump sort of scare, if you like. In 527 00:25:54,520 --> 00:25:57,400 Speaker 1: when was it February when the market's really tumbled when 528 00:25:57,400 --> 00:26:01,359 Speaker 1: he launched the tower. He launched the tower. Really, I 529 00:26:01,400 --> 00:26:04,200 Speaker 1: saw where you had stop losses and at one stage 530 00:26:04,359 --> 00:26:07,960 Speaker 1: that allowed your That meant your cash, which I imagine is 531 00:26:07,960 --> 00:26:10,159 Speaker 1: normally sitting at something like five to ten percent in 532 00:26:10,200 --> 00:26:13,679 Speaker 1: your funds, blew up to thirty percent of your fund 533 00:26:14,200 --> 00:26:17,240 Speaker 1: So I expect that was useful as long as you 534 00:26:17,480 --> 00:26:20,760 Speaker 1: applied it very smartly. Afterwards, I don't know how you did, 535 00:26:21,320 --> 00:26:22,879 Speaker 1: and I know, and I think it's worth putting on 536 00:26:22,920 --> 00:26:25,760 Speaker 1: the record that this last quarter, I mean, you haven't 537 00:26:25,760 --> 00:26:29,080 Speaker 1: matched the index in this quarter for because whatever you're 538 00:26:29,160 --> 00:26:31,480 Speaker 1: up to strategically, which I'm sure you're hoping will work 539 00:26:31,520 --> 00:26:33,600 Speaker 1: out better. But that's worth putting on the table in 540 00:26:33,640 --> 00:26:37,080 Speaker 1: an event for a Hue Week about stop losses. They're useful. 541 00:26:37,160 --> 00:26:39,720 Speaker 1: Can you explain, if you would, what you think about 542 00:26:39,760 --> 00:26:42,520 Speaker 1: them for the every day investor who's listening to the show. 543 00:26:43,160 --> 00:26:45,879 Speaker 2: Yeah. So it's a great question, and it's very misdute. Okay, 544 00:26:45,880 --> 00:26:47,560 Speaker 2: So if you think about it, you're trying to find 545 00:26:47,560 --> 00:26:49,440 Speaker 2: the top twenty to forty companies in the world, and 546 00:26:49,480 --> 00:26:52,200 Speaker 2: you're looking at the universe of thirty thousand. Let's take 547 00:26:52,240 --> 00:26:55,240 Speaker 2: it statistically, you're probably going to make some mistakes. In fact, 548 00:26:55,240 --> 00:26:56,639 Speaker 2: take it to the bank. You are going to make 549 00:26:56,680 --> 00:27:00,720 Speaker 2: some mistakes. Every investor will, and to listening to this 550 00:27:00,760 --> 00:27:03,200 Speaker 2: podcast has probably got a company that they owned that's 551 00:27:03,200 --> 00:27:05,160 Speaker 2: sitting in the bottom drawer that they've lost ninety percent 552 00:27:05,200 --> 00:27:07,920 Speaker 2: of their money on and they can't bring themselves to 553 00:27:07,960 --> 00:27:09,680 Speaker 2: look at it. Seemed like a good idea at the time, 554 00:27:09,720 --> 00:27:11,800 Speaker 2: but they just and then they just kept hanging on 555 00:27:11,840 --> 00:27:14,320 Speaker 2: and hang in. We all o that, and trust me, 556 00:27:14,560 --> 00:27:17,680 Speaker 2: it's easy to do. So what a stop loss does 557 00:27:17,800 --> 00:27:21,280 Speaker 2: is you just basically pick a number minus ten, minus twenty, whatever, 558 00:27:21,960 --> 00:27:24,199 Speaker 2: and you force yourself to look at the company. So 559 00:27:24,240 --> 00:27:26,040 Speaker 2: you don't have to sell it. You just force yourself. 560 00:27:26,080 --> 00:27:29,200 Speaker 2: We force ourselves to repitch the investment case. And when 561 00:27:29,240 --> 00:27:32,040 Speaker 2: we repitch that investment case, we say, has anything changed? 562 00:27:32,520 --> 00:27:34,720 Speaker 2: And if nothing's changed, then you know our mass is 563 00:27:34,720 --> 00:27:37,080 Speaker 2: still right. We're still happy to own the company. But 564 00:27:37,200 --> 00:27:39,240 Speaker 2: often if you force yourself to look at it before 565 00:27:39,240 --> 00:27:42,399 Speaker 2: it turns into ninety percent, you might recognize that actually 566 00:27:42,440 --> 00:27:45,240 Speaker 2: something's changed. And in this case it was tariff's tariffs changed. 567 00:27:45,280 --> 00:27:48,160 Speaker 2: The tariff policy was much worse than everyone predicted, including us, 568 00:27:48,680 --> 00:27:51,600 Speaker 2: And if that has changed, for the company, and that's 569 00:27:51,600 --> 00:27:54,200 Speaker 2: going to change the earnings, then you should change your view. 570 00:27:54,920 --> 00:27:57,120 Speaker 2: And so what we're trying to do there is it's 571 00:27:57,119 --> 00:27:59,320 Speaker 2: a reaction function. We're trying to force ourselves to look 572 00:27:59,320 --> 00:28:01,920 Speaker 2: at it quickly to change our view. And you made 573 00:28:01,960 --> 00:28:05,000 Speaker 2: the point earlier. You know, there was eleven search engines once, 574 00:28:05,480 --> 00:28:07,280 Speaker 2: and I could have been sitting here with my Yahoo 575 00:28:07,320 --> 00:28:09,360 Speaker 2: stock saying, yeah, who's going to be the one. It's 576 00:28:09,359 --> 00:28:10,960 Speaker 2: going to be the one. But eventually, at some point 577 00:28:11,000 --> 00:28:13,400 Speaker 2: it would have stopped out or stop lost. I would 578 00:28:13,400 --> 00:28:15,000 Speaker 2: have forced myself to look at it. I would have 579 00:28:15,000 --> 00:28:17,639 Speaker 2: gone I probably shouldn't be in Yahoo, and then I 580 00:28:17,680 --> 00:28:19,800 Speaker 2: probably would have ended up at Google. So not only 581 00:28:19,840 --> 00:28:21,800 Speaker 2: does it not only does it force you out of 582 00:28:21,800 --> 00:28:24,320 Speaker 2: your mistakes, it can often force you towards the winner 583 00:28:24,320 --> 00:28:25,400 Speaker 2: that you missed the first time. 584 00:28:25,520 --> 00:28:27,840 Speaker 1: Right. And the stop loss is where you see to 585 00:28:27,880 --> 00:28:31,719 Speaker 1: the broker, if this stock goes under fifteen percent from 586 00:28:31,760 --> 00:28:34,119 Speaker 1: where it is, or pick a number ten twenty percent, 587 00:28:34,520 --> 00:28:36,720 Speaker 1: sell it. 588 00:28:36,760 --> 00:28:40,400 Speaker 2: So that's a direct that's how it can be interpreted. 589 00:28:40,400 --> 00:28:42,440 Speaker 2: But that's not what we do. So we're not forced 590 00:28:42,440 --> 00:28:44,440 Speaker 2: to sell it, We're just forced to review it. 591 00:28:44,640 --> 00:28:47,280 Speaker 1: Okay, So an alarm bell rings for you. 592 00:28:47,240 --> 00:28:49,600 Speaker 2: And our alarm bell rings. Yes, and we're reviewing it 593 00:28:49,640 --> 00:28:51,600 Speaker 2: and then we can keep it. If we all decide 594 00:28:51,640 --> 00:28:52,880 Speaker 2: to keep it, we can keep it, but we can 595 00:28:52,920 --> 00:28:54,480 Speaker 2: only keep it for thirty days, and then you have 596 00:28:54,520 --> 00:28:56,880 Speaker 2: to review it again. And then in thirty days time, 597 00:28:56,920 --> 00:28:59,080 Speaker 2: you have to review it again, and eventually you realize 598 00:28:59,280 --> 00:29:01,760 Speaker 2: the mistake, you mate. And I think the simple way 599 00:29:01,760 --> 00:29:03,880 Speaker 2: to think about this, James, is, Look, the reality is 600 00:29:03,880 --> 00:29:07,360 Speaker 2: people spend all their time doing research buying stocks, and 601 00:29:07,400 --> 00:29:09,720 Speaker 2: then they buy them, but they don't do the same 602 00:29:09,720 --> 00:29:12,080 Speaker 2: amount of research when they're selling stocks. They just assume 603 00:29:12,160 --> 00:29:14,280 Speaker 2: every one of them is going to be great. But 604 00:29:14,360 --> 00:29:17,320 Speaker 2: statistically we know that's not what's going to happen. So 605 00:29:17,440 --> 00:29:19,920 Speaker 2: your cell decision is as important as your buy decision. 606 00:29:19,960 --> 00:29:22,400 Speaker 2: And so all we're doing is putting some discipline around 607 00:29:22,440 --> 00:29:25,160 Speaker 2: that rather than just assuming everything's going to be fine 608 00:29:25,200 --> 00:29:27,880 Speaker 2: the whole time, because as you pointed out earlier, everything's 609 00:29:27,920 --> 00:29:29,760 Speaker 2: not going to be fine the whole time. You know, 610 00:29:29,880 --> 00:29:32,520 Speaker 2: and you know, BlackBerry wasn't the smartphone winner, and eBay 611 00:29:32,560 --> 00:29:35,200 Speaker 2: wasn't the e commerce winner, and you know, and the 612 00:29:35,240 --> 00:29:37,040 Speaker 2: list goes on, and so you just got to be 613 00:29:37,640 --> 00:29:39,480 Speaker 2: wary that you're looking in the right place, but you 614 00:29:39,560 --> 00:29:42,400 Speaker 2: made a mistake, Accept the mistake, and go find the 615 00:29:42,440 --> 00:29:44,560 Speaker 2: next one. Otherwise it just sits in your bottom drawer, 616 00:29:45,160 --> 00:29:46,880 Speaker 2: it's away at your head, and it's stopping you from 617 00:29:46,920 --> 00:29:50,000 Speaker 2: making your next best decision. When mistakes is part of 618 00:29:50,000 --> 00:29:52,120 Speaker 2: this business. Everyone makes them, including us. 619 00:29:52,400 --> 00:29:54,760 Speaker 1: So it sounds like you think it's a damn good 620 00:29:54,760 --> 00:29:57,000 Speaker 1: idea really for someone like all the Hueyes of the 621 00:29:57,040 --> 00:30:00,240 Speaker 1: world out there to actively have stop last positions on 622 00:30:00,240 --> 00:30:04,640 Speaker 1: on not on all stocks, I imagine, but on volatile stocks, correct. 623 00:30:04,720 --> 00:30:07,080 Speaker 2: I think all you're saying is the price is potentially 624 00:30:07,120 --> 00:30:11,360 Speaker 2: forcing you to say question your view now often most 625 00:30:11,400 --> 00:30:13,880 Speaker 2: of the time, we decided to keep it Amazon, we've 626 00:30:13,880 --> 00:30:16,320 Speaker 2: owned for a decade. It would have stoped lost twenty 627 00:30:16,360 --> 00:30:18,880 Speaker 2: times over that period, and we never sold it. We 628 00:30:19,000 --> 00:30:21,120 Speaker 2: kept it the whole way. In Video, we've owned for 629 00:30:21,160 --> 00:30:22,920 Speaker 2: six years. It would have stoped lost twenty times over 630 00:30:22,920 --> 00:30:25,560 Speaker 2: the whole period, but we forced ourselves to requestion the 631 00:30:25,600 --> 00:30:28,720 Speaker 2: investment case and forever Nvidia, I can assure you there's 632 00:30:28,720 --> 00:30:31,640 Speaker 2: another five that didn't work out like that, where the 633 00:30:31,720 --> 00:30:33,160 Speaker 2: stop loss saved us a lot of money. 634 00:30:33,480 --> 00:30:36,160 Speaker 1: Okay, terrific, very good, I'm very interesting. I think we 635 00:30:36,280 --> 00:30:36,680 Speaker 1: leave it there. 636 00:30:36,800 --> 00:30:36,960 Speaker 2: Nick. 637 00:30:37,120 --> 00:30:38,880 Speaker 1: We haven't had you on the show before. I'm delighted 638 00:30:38,960 --> 00:30:40,800 Speaker 1: we did hope to have you on again. Thank you 639 00:30:40,840 --> 00:30:41,320 Speaker 1: for your time. 640 00:30:41,480 --> 00:30:42,520 Speaker 2: Thanks very much for having me. 641 00:30:43,800 --> 00:30:46,600 Speaker 1: Lovely to have you Okay, folks, keep the emails rolling. 642 00:30:46,640 --> 00:30:49,440 Speaker 1: Love to have some more on the markets too, because 643 00:30:49,520 --> 00:30:52,840 Speaker 1: we've been distracted by other issues of late particularly super etc. 644 00:30:53,680 --> 00:30:55,760 Speaker 1: But hey, you know you make your money in the markets. 645 00:30:56,000 --> 00:30:59,000 Speaker 1: Let's have some questions the money puzzle at the Australian 646 00:30:59,120 --> 00:31:01,320 Speaker 1: dot com dot Hey, you talk to you soon. 647 00:31:03,560 --> 00:31:07,800 Speaker 2: Servan