Speaker 1: Hello, and welcome to the Australians Money Puzzle podcast. I'm
Speaker 1: James Kirby. Welcome aboard everybody. Now, for investors in shares,
Speaker 1: the single biggest question I believe this year is how
Speaker 1: you as an investor deal with the market, the share market,
Speaker 1: the global market under the influence if you like, of
Speaker 1: the US and Donald Trump. And if you get this right,
Speaker 1: I think you will win in the market, as has
Speaker 1: been the case for some time now since the election
Speaker 1: of Trump. And if you get it wrong, your share
Speaker 1: portfolio I think would be something of a sorry sight
Speaker 1: in a few months time. And the same goes for
Speaker 1: people who are professionals in the market, who are specialists
Speaker 1: in the market. And my guest today is a specialist
Speaker 1: in the market. It's Nick Griffin. He is the co
Speaker 1: founder and chief investment officer at the Monro Group. The
Speaker 1: Monro Group is a fund manager has about six billion
Speaker 1: dollars under management at the moment. It's an active manager.
Speaker 1: They are stock pickers. They select a relatively small amount
Speaker 1: of stocks and go with it. How are you, Nick?
Speaker 2: Good? Thanks James yourself?
Speaker 1: Good? Thank you. Nice to have you on the show.
Speaker 1: It's a funny thing as we sit here midyear, mid
Speaker 1: calendar year on the show for all the dramas, and
Speaker 1: I imagine a lot of traders or lost a lot
Speaker 1: of money. But for all the dramas, things have almost
Speaker 1: back to where they started. On Trump. By that I
Speaker 1: mean shares. They're not greatly up or greatly down on
Speaker 1: the market so far, but that's by no means indicates
Speaker 1: that Trump has settled down. Is Trump and his administration
Speaker 1: and their activities do they really, to a large extent
Speaker 1: director affect how your outcomes will be this year and
Speaker 1: going forward?
Speaker 2: So great question, and yes, they obviously have some influence.
Speaker 2: We have a tagline at Monroe Partner's which is called
Speaker 2: invest in the Journey. We run global equity products that
Speaker 2: invest in global growth companies, so any company outside of
Speaker 2: Australia that we think can grow over time. And it
Speaker 2: has been a journey in the first half of the year,
Speaker 2: that's for sure. What we're seeing here is the share
Speaker 2: markets sort of get used to the way Trump does business,
Speaker 2: which is to, you know, do something really big and
Speaker 2: see what breaks and then roll it back. We sort
Speaker 2: of should know this because that's what he did last
Speaker 2: time as well. But ultimately it's important for all the
Speaker 2: listeners to remember that ultimately that the global equities and
Speaker 2: stocks generally follow their earnings. And so what you've really
Speaker 2: got to analyze out of Trump is he doing anything
Speaker 2: that's going to change the earnings outlook for these companies.
Speaker 2: And I would argue in some cases that's correct. Yes,
Speaker 2: you know, if you're affected by tariffs, your earnings will
Speaker 2: be affected. If you're expecting an economic recovery this year,
Speaker 2: that may not happen. But in other cases, like for instance, Microsoft,
Speaker 2: you know is a good example, it's not really going
Speaker 2: to change how much money Microsoft's going to make this year,
Speaker 2: and it's probably not going to change what they're going
Speaker 2: to make next year. And so many people have used
Speaker 2: this volatility as an opportunity to invest in things that
Speaker 2: they feel confident to get to grow earnings regardless of
Speaker 2: the environment. That's sort of how i'd frame the discussion.
Speaker 1: Well, I see you as a fund manager, and I
Speaker 1: see and you are an active fund manager. I won't
Speaker 1: say old style, that's not because that's probably not what
Speaker 1: you want to hear, but you're an active fund manager, right,
Speaker 1: So your proposition to the investor is, look, I'm going
Speaker 1: to charge you a fee and if I outperform beyond
Speaker 1: what my benchmark is, I'm going to charge an extra
Speaker 1: fee performance fee, and I am going to select from
Speaker 1: you know, thousands and thousands of stocks a relatively small
Speaker 1: amount twenty to forty in your two big funds, and
Speaker 1: you have to come with me, as you say, on
Speaker 1: this journey. This area has been a minefield of recent times,
Speaker 1: and the big names that we all knew, Midgellen and Platinum,
Speaker 1: they've all come undone to the uninitiated, you're doing something
Speaker 1: awfully similar, but you are growing and have had good results,
Speaker 1: particularly since your inception. So what is your approach? What
Speaker 1: is your could you try and to steal your distinct
Speaker 1: approach why you've managed to grow when others around you
Speaker 1: are struggling.
Speaker 2: Yeah, thank you for the opportunity. So I think a
Speaker 2: lot of people look at the share market the wrong way.
Speaker 2: A lot of people sort of and a lot of
Speaker 2: those companies you mentioned, they would look at the share
Speaker 2: market and basically say, this is what we think the
Speaker 2: global economy is going to do, and we want to
Speaker 2: be overweight certain countries because that country's economy is going
Speaker 2: to do better and this other country economy is can
Speaker 2: do worse, and this sector will be better, and this
Speaker 2: sector will do worse. And we would say that's just
Speaker 2: all noise and probably, quite frankly, a bit of a
Speaker 2: waste of time. The reality is, in our opinion, the
Speaker 2: equity market is made up of very few great companies
Speaker 2: and thousand thousands of mediocre ones. The reality is the
Speaker 2: S and P five hundred is not actually the it's
Speaker 2: the best five hundred companies in the United States, and
Speaker 2: it's made up of these exceptional businesses that are doing
Speaker 2: exceptional things, and that exceptional things that they do create
Speaker 2: strong earnings growth, and their earnings growth creates share price growth.
Speaker 2: So when we look at the world, what we're trying
Speaker 2: to do for our clients to say, we have the
Speaker 2: entire world to choose from. There's more than thirty thousand
Speaker 2: listed companies. We're going to do our best effort to
Speaker 2: pick the most exceptional twenty to forty that we think
Speaker 2: we can buy at good valuations, that they think can
Speaker 2: grow structurally sustainably over a long period of time.
Speaker 1: So you're you're a bottom up, well, it's very much
Speaker 1: bottom up and very much what you described that you
Speaker 1: don't make is top down. Okay, so you're associated you've
Speaker 1: had a good run beyond doubt by being involved in
Speaker 1: the Magnificent seven stocks and they did very well for you.
Speaker 1: If we take a long period of time in the
Speaker 1: last few years as IF fund manager, that's what allowed
Speaker 1: you to grow. And they are the outstanding sort of
Speaker 1: champions of you. Like all of the arguments you're making,
Speaker 1: will they continue to be.
Speaker 2: Yeah? And so to do this well, what you should
Speaker 2: do is not look at the economy or the sectors,
Speaker 2: look at the big structural changes and who's going to win.
Speaker 2: So that's what we do. We try and identify the
Speaker 2: big structural changes and you identify who win. You talked
Speaker 2: about the Magnificent seven. They are the big digital winners. Okay,
Speaker 2: So everybody on this phone call remembers, you know, when
Speaker 2: we used to read newspapers on the train. We don't anymore.
Speaker 2: We read our phone and generally we're looking at Facebook
Speaker 2: or Instagram, or we're looking at Google, etc. And so
Speaker 2: they have structurally won from digital advertising. There's no reason
Speaker 2: why that one continue. They've structurally won by the shift
Speaker 2: to the cloud. So anybody who hosts anything in the
Speaker 2: cloud has to host it at three companies. Amazon Google
Speaker 2: or Microsoft. They're the only cloud providers on the planet.
Speaker 2: And so what's generally happening here is digitalization is creating
Speaker 2: network effects around these companies, and they become the advertising
Speaker 2: company for the world, they become the software company for
Speaker 2: the world. And so all they're doing is taking share
Speaker 2: from Channel seven, Channel nine, Fairfax, et cetera, and bring
Speaker 2: that back to the US. So coming back to my point,
Speaker 2: they're not really linked to the US economy. They're linked
Speaker 2: to the point that digital takes share.
Speaker 1: From their their global they're global and they're base in
Speaker 1: But I actually when I was asking you at the
Speaker 1: start that Magnificent seven, they're all in your top what
Speaker 1: top ten? Would that be fair?
Speaker 2: Not all of them? No, So we would own four
Speaker 2: of the seven today. And so we like in Video
Speaker 2: a lot, we like Meta a lot, we like Amazon
Speaker 2: a lot, and we like Microsoft a lot.
Speaker 1: Okay, Okay, So tell us that's who you like. And
Speaker 1: maybe we could have guessed that to some degree. When
Speaker 1: I looked at the top holdings in the fund, there
Speaker 1: were some names that weren't at all tech or digital
Speaker 1: that you like. Give us an example of some of those.
Speaker 2: Yeah, So if you're investing in structural changes. There's lots
Speaker 2: of structural changes in the world. They don't necessarily have
Speaker 2: to be tech. The really simple one for the last
Speaker 2: decade is being cashed to card. You know, you can
Speaker 2: invest in MasterCard or Visa slightly taking but the reality
Speaker 2: is everybody on this this podcast doesn't use cash anymore.
Speaker 2: They benefited from that. But another great example for US
Speaker 2: has been security. We've been investing in, for instance, European
Speaker 2: defense companies for more than three years because we felt
Speaker 2: that the war would cause a structural shift in defense spending,
Speaker 2: and that's what's happened the Ukraine War. Yes, and we've
Speaker 2: invested in things like homeland security, so we own companies
Speaker 2: like Axel and Motorolo solutions that you help police with policing,
Speaker 2: help with body cameras, et cetera, et cetera. So all
Speaker 2: of these areas are basically you're basically trying to identify
Speaker 2: the area structural change and identify the winner. Healthcare is
Speaker 2: another obvious area where we've goun things like Lily and
Speaker 2: Orice that producers and Munjara. So these are big structural
Speaker 2: changes that occur in the world, and as a global investor,
Speaker 2: we can identify the change and investor benefit for our clients.
Speaker 1: How do you get an edge on that you're sitting
Speaker 1: in Australia, how do you say that drug in that
Speaker 1: big farmer company is going to be the one that
Speaker 1: moves the dial. And what competitive advantage could you possibly have.
Speaker 2: That's a great question. So what we think and Monroe,
Speaker 2: in case you don't know, is a word for Scottish mountains.
Speaker 2: Mountains over three thousand feet of Monroe's and I spent
Speaker 2: a lot of my career living and working in Edinburgh,
Speaker 2: and if you go to other places in the world
Speaker 2: like Edinburgh, there are fund managers who sit in a
Speaker 2: very far away place in the world and take long
Speaker 2: term views of the world. When I looked at those
Speaker 2: fund managers, that's what we wanted Monroe to be in Australia.
Speaker 2: So we have roughly thirty one people here in Melbourne, Australia,
Speaker 2: and we are just trying to solve one problem. Who
Speaker 2: are these exceptional companies We look in these areas of
Speaker 2: structural growth and obviously we do heaps of research and
Speaker 2: we travel extensively.
Speaker 1: Okay, so your cultural training was in that well that
Speaker 1: Scottish Aberdeen, Scottish widows, Bill Gifford, whoever. They're all in Edinburgh, Canny.
Speaker 1: We know that, but that's your cultural context, correct.
Speaker 2: Yeah, And so the word Monroe is you know, a
Speaker 2: bit of homage, because that's how we want it to
Speaker 2: be like them. And so to answer your question specifically,
Speaker 2: we travel a lot, we talk to everybody in an area,
Speaker 2: so we might know the whole world well, but these
Speaker 2: areas of structural growth, we know them really well. And
Speaker 2: so next week I'm off to see these states. I'm
Speaker 2: off to see in Video Gain. I've been going to
Speaker 2: see in Video for six years now. We've owned the
Speaker 2: company since twenty eighteen. Every time we speak to them,
Speaker 2: they tell us what they're doing. Every time we go back,
Speaker 2: they're roughly achieving what they say. And so this just
Speaker 2: comes from experience and research quite frankly, just extensive research
Speaker 2: to help you find those few winners.
Speaker 1: And you find getting in front of the companies still
Speaker 1: very important. Do are you sitting face to face?
Speaker 2: Sitting face to face for the companies and also with
Speaker 2: their customers. So in in videos case, for instance, their
Speaker 2: biggest customers are other companies we own, like Meta and
Speaker 2: Google and Amazon. And they will tell us that in
Speaker 2: Video's the best chips. They've been telling us in Video
Speaker 2: is the best chips for ten years. So that just
Speaker 2: checks out what the other companies told you. And this
Speaker 2: is just again but I come back to the first point.
Speaker 2: Different to our peers. This is all we're trying to solve.
Speaker 2: We're not trying to solve the economy. I'm not trying
Speaker 2: to solve what French retail sales are doing. I'm just
Speaker 2: trying to solve who are the big structural winners and
Speaker 2: as over time we just the more we do it,
Speaker 2: the better we get at it.
Speaker 1: Okay, all right now. One of the things I'm really
Speaker 1: interested and hear your view, which seems to be the
Speaker 1: big question for the Australian investor this year and the
Speaker 1: big question for the big super funds this year, and
Speaker 1: they're talking about it on stage and they're giving different answers,
Speaker 1: is whether you should stick with the US, whether after
Speaker 1: all these years, it can keep doing what it's doing
Speaker 1: because it's been so good. And there's been some big
Speaker 1: fund address saying we're coming back to Australia, some saying no,
Speaker 1: we're sticking with the US. They've been tested, that's for sure.
Speaker 1: I want to come back to that after a break. Hello,
Speaker 1: Welcome back to the Australian's Money Puzzle podcast. James Kirby
Speaker 1: here talking to Nick Griffin of the Monroe Partners Investment Group,
Speaker 1: specialist really in global investing, offshore investing with a well.
Speaker 1: As he's explaining the first part of the show, he's
Speaker 1: really interested as picking companies bottom up based on their
Speaker 1: numbers and their promise, if you like, of a structural
Speaker 1: change which gives them a leap in profitability. I mean,
Speaker 1: obviously you mentioned the video. Why wouldn't you. That's the
Speaker 1: one that's everyone's favorite right now and it's staying up,
Speaker 1: which is fascinating. But Nick, what about that issue then
Speaker 1: that how could the US possibly continue to return the
Speaker 1: level of returns. It's not that it's been better than
Speaker 1: the ASEX, like it's been multiples better than the ASEX
Speaker 1: for years and years. Do you think that's forever now?
Speaker 2: So from our point of view over the medium term
Speaker 2: the answers yes, over the medium term. Over the short term,
Speaker 2: I can see why multiples in the US might be
Speaker 2: too high and multiples in the UK and France are
Speaker 2: too low and they should converge with each other for
Speaker 2: a period of time, but in the end it's earning scritter.
Speaker 2: As I said before, the Drivestock prices, And if you
Speaker 2: want to invest in cloud computing, you have to invest
Speaker 2: in the US. If you want to invest in semiconductive development,
Speaker 2: you pretty much have to invest in the US. Outside
Speaker 2: oft SA Tearsom see in.
Speaker 1: Taiwan, there's the emergence of structural tariffs.
Speaker 2: Tariffs, and I agree that tariffs are an issue, but
Speaker 2: they are sort of a one time issue. So it's
Speaker 2: a one time cost to these companies that will that
Speaker 2: they'll deal with, but then they'll go back to doing
Speaker 2: what they do before, which is, you know, be positioned
Speaker 2: in these great areas. And it's not I want to
Speaker 2: be clear on the call, it's not the Australian's fault
Speaker 2: that this is happening in the US. It happens in
Speaker 2: the US not because they're smarter than US. It happens
Speaker 2: because they've just got more people and they've got more money.
Speaker 2: And so if you think about it, and I've said
Speaker 2: this example a lot, if Google was invented in Australia,
Speaker 2: it still wouldn't have won. But when Google's invented in
Speaker 2: the US, everyone looks at Google, so everyone has to
Speaker 2: be on Google. So everyone looks at Google, so everyone
Speaker 2: has to be on Google, and then Google becomes the
Speaker 2: dominant search engine in the world.
Speaker 1: Someone just reminded me the other day that the Australian
Speaker 1: company looks smart.
Speaker 2: Yeah poor.
Speaker 1: Once upon a time met a bit for Google one time,
Speaker 1: which would have been really good if Big got it.
Speaker 2: Yes, well, you can have a lot of funny at
Speaker 2: Alta Vista, ask Jeeves. Yeahoo, there was exortent. But now
Speaker 2: Google has a ninety seven percent market share. That's network
Speaker 2: effects at work. Microsoft does this as well. You're the
Speaker 2: biggest software company, so everyone uses Microsoft server and has
Speaker 2: to be on Microsoft server, news microphones Exactly. The same
Speaker 2: thing's happening at Netflix. And so these network effects around
Speaker 2: digitalization is concentrating wealth in companies that happened to be
Speaker 2: listed in the US. Why because they were. They have
Speaker 2: the biggest population based on money base to start with,
Speaker 2: not because they're smarter.
Speaker 1: Do you worry at all that the Trump and this
Speaker 1: is the second term of Trump, and it's stronger obviously
Speaker 1: than ever, more confident if you could imagine such a thing,
Speaker 1: but more confident in his position in power, do you
Speaker 1: worry that this core worry that the US itself, that
Speaker 1: it's bond market, that it's currency may be at a
Speaker 1: period where it's about to decline, Like all empires decline,
Speaker 1: nothing lasts forever, and it's an empire and it's the
Speaker 1: beginning of its decline, and Trump, in some ways is
Speaker 1: the personification of that. What do you say to that view.
Speaker 2: Of the world. That is a very good question. So
Speaker 2: I think we can all agree that these companies are
Speaker 2: clearly stronger and potentially more powerful and more likely to
Speaker 2: grow than say a French supermarket or a Japanese trading company.
Speaker 2: So I think most people can see that and they
Speaker 2: want to invest in the US. But the point you
Speaker 2: make is a good one. So, but the problem is
Speaker 2: what happens if the currency goes down? What happens if
Speaker 2: the bond market riots, etc. These are what we would
Speaker 2: call exogenous shocks. The currency is less of an issue
Speaker 2: because we can hedge that out for instance, and vice versa.
Speaker 2: A lot of these companies are foreign earners, so they
Speaker 2: actually end up their ownings going up as the currency
Speaker 2: going down. But the bond market things a big issue
Speaker 2: because if the bond market at it for in some
Speaker 2: point then that would cause you know, a significantly bigger
Speaker 2: economic slowdown, and I can see some reasons to diversify there.
Speaker 2: The only last thing I'd say is, look, obviously, people
Speaker 2: have been predicting this for twenty years, and that's twenty
Speaker 2: years of great returns they missed out on. It could
Speaker 2: and may happen one day, maybe today's day. Maybe it's not.
Speaker 2: But obviously that's something we're watching very closely. But fundamentally,
Speaker 2: the corporates in the US are growing faster, they're more dynamic,
Speaker 2: they're more advantaged, and so ultimately we prefer at least
Speaker 2: having at least a good chunk of our money there
Speaker 2: because the companies we like the most there.
Speaker 1: Okay, all right, well, fairly for some support for the
Speaker 1: US market there, Okay, while we have you. For anyone
Speaker 1: that's listening to you, what they love to hear from
Speaker 1: someone like you is what you see as hotspots and
Speaker 1: black spots basically in the coming year, well, this particular climate,
Speaker 1: this market, what are the sort of companies and you
Speaker 1: have to some extents illustrated what you do like, what
Speaker 1: you've always liked. Is there anything new that are a
Speaker 1: new theme that you are keen on and are there
Speaker 1: themes that you keep away from?
Speaker 2: Great And so just to clarify the last question, it
Speaker 2: doesn't mean we don't just invest outside the US. We do.
Speaker 2: We do. We do like companies like TSMC, for instance,
Speaker 2: in Taiwan. And I already talked about European defense stocks earlier.
Speaker 2: So if we can find structural growth in other parts
Speaker 2: of the world, by all means, we'll invest in Okay,
Speaker 2: going forward, this is an exciting time and I know
Speaker 2: Trump is causing volatility, and I know it's hard to
Speaker 2: keep track of. But in the background we have the
Speaker 2: emergence of AI, and so artificial intelligence, we think is
Speaker 2: probably going to be the biggest structural change in the
Speaker 2: next decade. This is the fourth tectonic shift in computing,
Speaker 2: if you think about it. So we went through a
Speaker 2: mainframe era, we went through a PC era, we went
Speaker 2: through a mobile era. We're now in an AI era.
Speaker 2: And so what's going to happen is you're going to
Speaker 2: connect every device on the planet to the Internet, and
Speaker 2: AI is going to process that data to give us
Speaker 2: better outcomes. The beauty of AI, which is really interesting,
Speaker 2: is it doesn't just affect software and consumer application and
Speaker 2: infects things like autonomous driving, robotics, like drug discovery, and
Speaker 2: like security. And so we are finding today companies that
Speaker 2: can harness this technology are seeing a massive structural shift
Speaker 2: in their ownings growth at a big structural shift in
Speaker 2: the attractiveness of their product.
Speaker 1: Can you give me an example of somebody.
Speaker 2: Yeah, So I'll give you a couple of examples. So
Speaker 2: one example i'd mentioned is again those security companies I
Speaker 2: talked about before. So if you're a company selling security cameras,
Speaker 2: for instance, you sell security cameras, you can now put
Speaker 2: software on those security cameras, and you can identify who's
Speaker 2: at your front door. You can identify threat detection faster
Speaker 2: and better, and so you sell hardware and now software
Speaker 2: and software. That's quite frankly, everyone is cool. Everyone's podcast
Speaker 2: can see is quite useful. That would be one example.
Speaker 2: If you think about medical technology or MRI technology, you
Speaker 2: can now get an MRI and potentially identify cancer.
Speaker 1: Two years earlier diagnostics acceleration.
Speaker 2: Yeah, and so you basically and everybody would know that
Speaker 2: finding cancer earlier is obviously what we'd all like to
Speaker 2: do to stay live longer. So there's a general benefit
Speaker 2: for using the technology and a reason why people would
Speaker 2: pay for it. In both those examples, those would be
Speaker 2: two i'd give you off the bat. But the last
Speaker 2: one is obviously software. You know, we can summarize this podcast.
Speaker 2: You can drop it into a GPT and it'll just
Speaker 2: tell you what the summary was without having to listen
Speaker 2: to the whole thing. You can summarize the good parts.
Speaker 1: If you do that, yeah, you're going to miss jokes.
Speaker 1: Tell me about what you don't like.
Speaker 2: So what we don't like. So honestly, just mediocre companies.
Speaker 2: I'm not saying they're bad. I'm just saying that they're
Speaker 2: stuck in competitive industries that that ultimately I don't have
Speaker 2: an edge versus say someone else who's looking at it.
Speaker 2: So i'd give you an example here is like banks.
Speaker 2: I mean banks are great and obviously in Australia they
Speaker 2: have done well, but they're not growing that much and
Speaker 2: you rely on interest rates in the economy and a
Speaker 2: whole bunch of things that I have a view on,
Speaker 2: but I don't have an edge. I've got an edge
Speaker 2: on AI I think we do, and that's how we're
Speaker 2: making money. Other areas would be you know, a consumer
Speaker 2: fashion is hard like, it's hard. I'm not very fashionable,
Speaker 2: but I have people on my team who are fashionable.
Speaker 2: But fashions change and so it's hard to get a
Speaker 2: three to five year viewpoint. We've got some companies in
Speaker 2: this area that we like, but it is harder those
Speaker 2: And you know, I think you know, things like airlines
Speaker 2: and stuff are rather anything that's a highly competitive industry. Lastly,
Speaker 2: anything you know that the Chinese get into. If the
Speaker 2: Chinese turn up, generally the profits leave.
Speaker 1: That sounds like the car. That sounds like that sounds
Speaker 1: like cars.
Speaker 2: Yeah, cars, Cars is a terrible business, you know, basically
Speaker 2: margins disappearing at speed in a massive technology race, environmental race.
Speaker 2: It's hard and all these national champions that are quite
Speaker 2: frankly going to disappear.
Speaker 1: Okay, thanks cars, fashion companies. You heard it here first,
Speaker 1: all right, I have some actually very I've kept a
Speaker 1: couple of questions off my sleeve for you, Nick, and
Speaker 1: the fact the very first one is on airlines. So
Speaker 1: we will be back in a moment with some very
Speaker 1: good questions for me. Hello, oh, and welcome back to
Speaker 1: the Australian's Money Puzzle podcast. I'm James Kirby and I'm
Speaker 1: talking to Nick Griffin, fund manager at Monroe Partners, specialist
Speaker 1: in overseas investing, primarily the US, but oh anywhere in
Speaker 1: the world that he thinks he can find value over
Speaker 1: and above what your ETF is going to do. And
Speaker 1: your premise, Nick, which I didn't give you a chance
Speaker 1: to explain, obviously, I mentioned that you have fees. But
Speaker 1: your proposal, obviously is you're going to beat the benchmark
Speaker 1: being probably been the Mogen Standy Capital Internationally INDICX or whatever.
Speaker 1: And to what extent have you managed to do that?
Speaker 2: So in our call long any product the manner of
Speaker 2: concentrated Global Growth Fund, which is our relative return fund,
Speaker 2: we've made it by five percent per annum since.
Speaker 1: In such Okay, all right, very good. Now, question Anthony.
Speaker 1: I am interested in the airline sector. This is on
Speaker 1: the ASEX I hold Quantus and they have had a
Speaker 1: great recovery, Anthony, they have had a great recovery. I
Speaker 1: had no idea. I hadn't watched them. You know, everybody's
Speaker 1: obsessed with them during the allen joyce Vanessa Hudson. Maybe
Speaker 1: you know it was a nice time to come in
Speaker 1: to take over an airline in any event, I mean
Speaker 1: quite just has tripled since the bad days of COVID,
Speaker 1: and it's one of the better stops of the year. Now,
Speaker 1: Anthony's question is this, what is your investment take on airlines?
Speaker 1: And I mean he mentions obvious things nick like like
Speaker 1: the price of aviation fuel, currencies, conflagrations around the world.
Speaker 1: But in passing there on the second segment of the show,
Speaker 1: you basically said you didn't like airlines.
Speaker 2: Yeah, I'd put this, Yeah, so I'd put this in
Speaker 2: the you know, it's in the hard camp because you
Speaker 2: need to I think the viewer poses the question, Well,
Speaker 2: you need to understand what's happening with fuel, you understand
Speaker 2: what's happening with demand, you need to understand what's happening
Speaker 2: with interest rates. These are things that are notoriously hard
Speaker 2: to predict. And I'm not saying it's a bad investment,
Speaker 2: and value investors could look at it and you can
Speaker 2: trade it really well. I would just prefer to say that,
Speaker 2: you know, software is going to be an increasing share
Speaker 2: of my wallet over a long period of time, and
Speaker 2: Microsoft's probably going to get it. And I just think
Speaker 2: that's an easy event and a longer term bet. And
Speaker 2: so I just encourage people to say, just as a screen,
Speaker 2: if you're looking at a company and you can't tell
Speaker 2: with extreme confidence what the earnings are going to be
Speaker 2: three years from now, that it's probably not investment. It's
Speaker 2: a train.
Speaker 1: Do you actually believe someone sits in front of you
Speaker 1: and says our earnings in three years time should be X.
Speaker 1: Do you really take that seriously?
Speaker 2: I think from many companies in the world you can
Speaker 2: actually and this is where it helps to be global.
Speaker 2: You can actually predict that they're in such a strong
Speaker 2: competitive position and you know that demand will grow. You
Speaker 2: can predict that whether you want to pay them multiple
Speaker 2: that you have to pay for it to get that.
Speaker 2: It's a different story.
Speaker 1: So this will be utility types companies, and I don't
Speaker 1: by that, I don't necessarily mean pipelines. I would imagine
Speaker 1: Amazon to some extent is utility type.
Speaker 2: Tru fact, Amazon is a good example of this. Amazon's
Speaker 2: a good example of this. TSMC is a good example
Speaker 2: of this. Companies that live in industries where they're oligobalistic, monopolistic,
Speaker 2: you know the industry's going to grow, and yes there
Speaker 2: might be bumps, but you can say with a reasonable
Speaker 2: amount of confidence over the next three to five years,
Speaker 2: that the earnings are going to be significantly higher, and
Speaker 2: then you're just going to get her out in the multiple.
Speaker 2: And the multiple is a different conversation, but that's more
Speaker 2: of an investment. The ones where you can't predict it,
Speaker 2: you're ultimately trading. And that's okay. People are really good
Speaker 2: at that, and other people did. It's just not how
Speaker 2: we do it.
Speaker 1: The problem with bottom up investing is the course that
Speaker 1: the on four that the black swan, the thing you
Speaker 1: can't see coming. Like you mentioned t SMC and I'm
Speaker 1: sure our listeners know that's Taiwan, the key semi conductor
Speaker 1: company in the world, based in Taiwan. I'm sure it's
Speaker 1: earnings are great, it's in Taiwan. There's political risks there.
Speaker 1: Do you how do you factor that in?
Speaker 2: Yeah, so obviously that's something I didn't say. I want
Speaker 2: to say you sit here with confidence and say you
Speaker 2: think that's going to happen. It doesn't mean it's going
Speaker 2: to happen.
Speaker 1: And of course we presume you don't know the future.
Speaker 2: But there's plenty of companies you can sit here today
Speaker 2: and you say I can't actually predict this, but I'm
Speaker 2: going to invest anyway, that's what we don't do. So
Speaker 2: this is what we think will happen. So I mean,
Speaker 2: Taiwan does not get invaded, semikin demand's going to go up.
Speaker 2: TSMC's a monopoly and their earnings will go up all
Speaker 2: over time and probably double over the next five years.
Speaker 2: But obviously things can go wrong, and that's what liquidity
Speaker 2: is for. That's what things like stop losses are for,
Speaker 2: and because sometimes you're going to make mistakes and you
Speaker 2: should be obviously aware of that.
Speaker 1: Actually, the next question is on stop losses, which again
Speaker 1: I've curated especially for you, Huie. He says capital protection
Speaker 1: and position sizing is often mentioned as having a large
Speaker 1: impact on investor returns. I was hoping you could discuss
Speaker 1: the use of stop losses for your average investor. Now
Speaker 1: here's something really interesting, Hue. And of course, as always, folks,
Speaker 1: none of this is advice information, only that Nick I
Speaker 1: saw reports a few months ago. I knew you. I
Speaker 1: knew as a fund that you guys were well into
Speaker 1: the US, and then I saw how the Trump there
Speaker 1: was the Trump sort of scare, if you like. In
Speaker 1: when was it February when the market's really tumbled when
Speaker 1: he launched the tower. He launched the tower. Really, I
Speaker 1: saw where you had stop losses and at one stage
Speaker 1: that allowed your That meant your cash, which I imagine is
Speaker 1: normally sitting at something like five to ten percent in
Speaker 1: your funds, blew up to thirty percent of your fund
Speaker 1: So I expect that was useful as long as you
Speaker 1: applied it very smartly. Afterwards, I don't know how you did,
Speaker 1: and I know, and I think it's worth putting on
Speaker 1: the record that this last quarter, I mean, you haven't
Speaker 1: matched the index in this quarter for because whatever you're
Speaker 1: up to strategically, which I'm sure you're hoping will work
Speaker 1: out better. But that's worth putting on the table in
Speaker 1: an event for a Hue Week about stop losses. They're useful.
Speaker 1: Can you explain, if you would, what you think about
Speaker 1: them for the every day investor who's listening to the show.
Speaker 2: Yeah. So it's a great question, and it's very misdute. Okay,
Speaker 2: So if you think about it, you're trying to find
Speaker 2: the top twenty to forty companies in the world, and
Speaker 2: you're looking at the universe of thirty thousand. Let's take
Speaker 2: it statistically, you're probably going to make some mistakes. In fact,
Speaker 2: take it to the bank. You are going to make
Speaker 2: some mistakes. Every investor will, and to listening to this
Speaker 2: podcast has probably got a company that they owned that's
Speaker 2: sitting in the bottom drawer that they've lost ninety percent
Speaker 2: of their money on and they can't bring themselves to
Speaker 2: look at it. Seemed like a good idea at the time,
Speaker 2: but they just and then they just kept hanging on
Speaker 2: and hang in. We all o that, and trust me,
Speaker 2: it's easy to do. So what a stop loss does
Speaker 2: is you just basically pick a number minus ten, minus twenty, whatever,
Speaker 2: and you force yourself to look at the company. So
Speaker 2: you don't have to sell it. You just force yourself.
Speaker 2: We force ourselves to repitch the investment case. And when
Speaker 2: we repitch that investment case, we say, has anything changed?
Speaker 2: And if nothing's changed, then you know our mass is
Speaker 2: still right. We're still happy to own the company. But
Speaker 2: often if you force yourself to look at it before
Speaker 2: it turns into ninety percent, you might recognize that actually
Speaker 2: something's changed. And in this case it was tariff's tariffs changed.
Speaker 2: The tariff policy was much worse than everyone predicted, including us,
Speaker 2: And if that has changed, for the company, and that's
Speaker 2: going to change the earnings, then you should change your view.
Speaker 2: And so what we're trying to do there is it's
Speaker 2: a reaction function. We're trying to force ourselves to look
Speaker 2: at it quickly to change our view. And you made
Speaker 2: the point earlier. You know, there was eleven search engines once,
Speaker 2: and I could have been sitting here with my Yahoo
Speaker 2: stock saying, yeah, who's going to be the one. It's
Speaker 2: going to be the one. But eventually, at some point
Speaker 2: it would have stopped out or stop lost. I would
Speaker 2: have forced myself to look at it. I would have
Speaker 2: gone I probably shouldn't be in Yahoo, and then I
Speaker 2: probably would have ended up at Google. So not only
Speaker 2: does it not only does it force you out of
Speaker 2: your mistakes, it can often force you towards the winner
Speaker 2: that you missed the first time.
Speaker 1: Right. And the stop loss is where you see to
Speaker 1: the broker, if this stock goes under fifteen percent from
Speaker 1: where it is, or pick a number ten twenty percent,
Speaker 1: sell it.
Speaker 2: So that's a direct that's how it can be interpreted.
Speaker 2: But that's not what we do. So we're not forced
Speaker 2: to sell it, We're just forced to review it.
Speaker 1: Okay, So an alarm bell rings for you.
Speaker 2: And our alarm bell rings. Yes, and we're reviewing it
Speaker 2: and then we can keep it. If we all decide
Speaker 2: to keep it, we can keep it, but we can
Speaker 2: only keep it for thirty days, and then you have
Speaker 2: to review it again. And then in thirty days time,
Speaker 2: you have to review it again, and eventually you realize
Speaker 2: the mistake, you mate. And I think the simple way
Speaker 2: to think about this, James, is, Look, the reality is
Speaker 2: people spend all their time doing research buying stocks, and
Speaker 2: then they buy them, but they don't do the same
Speaker 2: amount of research when they're selling stocks. They just assume
Speaker 2: every one of them is going to be great. But
Speaker 2: statistically we know that's not what's going to happen. So
Speaker 2: your cell decision is as important as your buy decision.
Speaker 2: And so all we're doing is putting some discipline around
Speaker 2: that rather than just assuming everything's going to be fine
Speaker 2: the whole time, because as you pointed out earlier, everything's
Speaker 2: not going to be fine the whole time. You know,
Speaker 2: and you know, BlackBerry wasn't the smartphone winner, and eBay
Speaker 2: wasn't the e commerce winner, and you know, and the
Speaker 2: list goes on, and so you just got to be
Speaker 2: wary that you're looking in the right place, but you
Speaker 2: made a mistake, Accept the mistake, and go find the
Speaker 2: next one. Otherwise it just sits in your bottom drawer,
Speaker 2: it's away at your head, and it's stopping you from
Speaker 2: making your next best decision. When mistakes is part of
Speaker 2: this business. Everyone makes them, including us.
Speaker 1: So it sounds like you think it's a damn good
Speaker 1: idea really for someone like all the Hueyes of the
Speaker 1: world out there to actively have stop last positions on
Speaker 1: on not on all stocks, I imagine, but on volatile stocks, correct.
Speaker 2: I think all you're saying is the price is potentially
Speaker 2: forcing you to say question your view now often most
Speaker 2: of the time, we decided to keep it Amazon, we've
Speaker 2: owned for a decade. It would have stoped lost twenty
Speaker 2: times over that period, and we never sold it. We
Speaker 2: kept it the whole way. In Video, we've owned for
Speaker 2: six years. It would have stoped lost twenty times over
Speaker 2: the whole period, but we forced ourselves to requestion the
Speaker 2: investment case and forever Nvidia, I can assure you there's
Speaker 2: another five that didn't work out like that, where the
Speaker 2: stop loss saved us a lot of money.
Speaker 1: Okay, terrific, very good, I'm very interesting. I think we
Speaker 1: leave it there.
Speaker 2: Nick.
Speaker 1: We haven't had you on the show before. I'm delighted
Speaker 1: we did hope to have you on again. Thank you
Speaker 1: for your time.
Speaker 2: Thanks very much for having me.
Speaker 1: Lovely to have you Okay, folks, keep the emails rolling.
Speaker 1: Love to have some more on the markets too, because
Speaker 1: we've been distracted by other issues of late particularly super etc.
Speaker 1: But hey, you know you make your money in the markets.
Speaker 1: Let's have some questions the money puzzle at the Australian
Speaker 1: dot com dot Hey, you talk to you soon.
Speaker 2: Servan