1 00:00:04,200 --> 00:00:06,660 Sean Aylmer: Welcome to the Fear and Greed Daily Interview. I'm Sean 2 00:00:06,690 --> 00:00:10,860 Sean Aylmer: Aylmer. 12 months ago, Australian coal companies couldn't find a 3 00:00:10,860 --> 00:00:14,759 Sean Aylmer: friend, talk about a turnaround. Now they're delivering record profits 4 00:00:14,759 --> 00:00:17,969 Sean Aylmer: off the back of huge demand and soaring prices. I 5 00:00:17,969 --> 00:00:20,220 Sean Aylmer: wanted to look today at investing in this space. Not 6 00:00:20,220 --> 00:00:24,660 Sean Aylmer: exactly a straightforward proposition, considering the ESG part of the 7 00:00:24,660 --> 00:00:27,960 Sean Aylmer: equation. Remember, this information is general in nature and you 8 00:00:27,960 --> 00:00:31,620 Sean Aylmer: should seek professional advice before making any investment decisions. Brett 9 00:00:31,620 --> 00:00:34,888 Sean Aylmer: Reynolds is the Chief Investment Officer of Tiger Brokers Australia. 10 00:00:34,889 --> 00:00:36,179 Sean Aylmer: Brett, welcome to Fear and Greed. 11 00:00:36,719 --> 00:00:37,529 Brett Reynolds: Hi, guys. 12 00:00:38,369 --> 00:00:41,190 Sean Aylmer: Broadly, what do you make of the coal companies over 13 00:00:41,190 --> 00:00:42,840 Sean Aylmer: the last 12 to 18 months? 14 00:00:43,800 --> 00:00:46,440 Brett Reynolds: Well, we all thought it was a dying asset. It 15 00:00:46,440 --> 00:00:50,670 Brett Reynolds: was going to go away. We've got energy prices soaring 16 00:00:50,670 --> 00:00:53,668 Brett Reynolds: around the world. Europe's in a lot of trouble. We 17 00:00:53,670 --> 00:00:57,600 Brett Reynolds: had the Ukraine situation, which has cut off supply. I 18 00:00:57,600 --> 00:01:02,099 Brett Reynolds: think Russia was delivering 40 million tons of coal a 19 00:01:02,099 --> 00:01:06,149 Brett Reynolds: year. The coal price has gone from less than 100 20 00:01:06,150 --> 00:01:10,740 Brett Reynolds: to 250, 400. It's coming back now, but these stocks are 21 00:01:10,740 --> 00:01:14,970 Brett Reynolds: still trading as if that spot price is not going 22 00:01:14,970 --> 00:01:20,908 Brett Reynolds: to come down. We got New Hope, Whitehaven, Stanmore Bowen, 23 00:01:21,539 --> 00:01:26,579 Brett Reynolds: all up 200 or 300% over the last year. There's no solution to 24 00:01:26,580 --> 00:01:31,380 Brett Reynolds: this crisis. These companies are spitting out a truckload of cash. 25 00:01:33,360 --> 00:01:35,490 Sean Aylmer: I suppose the first question is, if you've missed the 26 00:01:35,490 --> 00:01:38,549 Sean Aylmer: boat, is there's still time to get on it. So 27 00:01:38,910 --> 00:01:41,759 Sean Aylmer: do you think that we can keep seeing the sorts 28 00:01:41,759 --> 00:01:46,020 Sean Aylmer: of returns in terms of production and sales, which then 29 00:01:46,080 --> 00:01:48,600 Sean Aylmer: feeds through to earnings, that we've seen in the last 30 00:01:48,600 --> 00:01:49,260 Sean Aylmer: 12 months? 31 00:01:49,800 --> 00:01:53,340 Brett Reynolds: These stocks are starting to get expensive. I'm looking at 32 00:01:53,340 --> 00:01:59,430 Brett Reynolds: now they're trading at five, six times PE, dividends okay 33 00:01:59,759 --> 00:02:03,030 Brett Reynolds: while they're spinning out cash. That coal price comes down, 34 00:02:03,030 --> 00:02:07,680 Brett Reynolds: you don't want to be in these stocks. BHP is on four times. 35 00:02:07,680 --> 00:02:12,870 Brett Reynolds: I'd rather a diversified miner like Rios or BHP. The 36 00:02:12,870 --> 00:02:18,719 Brett Reynolds: market got caught surprised by coal and yes, they're generating 37 00:02:18,719 --> 00:02:21,630 Brett Reynolds: a lot of cash at the moment while the spot 38 00:02:21,630 --> 00:02:24,029 Brett Reynolds: price is here. But it is starting to come under. 39 00:02:26,010 --> 00:02:27,570 Sean Aylmer: I just want to talk about ESG because it was 40 00:02:27,570 --> 00:02:31,020 Sean Aylmer: such a big issue 18 months ago for the industry. 41 00:02:31,020 --> 00:02:35,280 Sean Aylmer: Now obviously the immediate impact of Russia's invasion of Ukraine, 42 00:02:35,280 --> 00:02:38,309 Sean Aylmer: soaring energy prices, has kind of pushed it to the 43 00:02:38,309 --> 00:02:41,100 Sean Aylmer: background just a little bit. But this is, what we're 44 00:02:41,100 --> 00:02:44,130 Sean Aylmer: talking about coal prices now is cyclical, whereas ESG is 45 00:02:44,130 --> 00:02:48,540 Sean Aylmer: structural. So at some point those factors will once again 46 00:02:48,540 --> 00:02:49,260 Sean Aylmer: become relevant. 47 00:02:49,410 --> 00:02:52,590 Brett Reynolds: Yeah, yeah. Supply and demand, Yes. We all don't want 48 00:02:52,590 --> 00:02:56,280 Brett Reynolds: to use coal longer term. What's the solution? What's the 49 00:02:56,280 --> 00:03:00,269 Brett Reynolds: solution? We've got oil prices, they're coming back down now, 50 00:03:00,270 --> 00:03:04,470 Brett Reynolds: but we all need oil. Oil's adding into inflation, coal's, adding to 51 00:03:04,650 --> 00:03:09,689 Brett Reynolds: inflation. Yes, we all want to be environmentally friendly, but 52 00:03:09,750 --> 00:03:11,519 Brett Reynolds: it's not going to happen quickly. 53 00:03:11,940 --> 00:03:14,219 Sean Aylmer: What do you think the coal companies, the Whitehavens and 54 00:03:14,219 --> 00:03:17,820 Sean Aylmer: New Hopes, Stanmore Bowen's, should be doing with all the 55 00:03:18,120 --> 00:03:21,180 Sean Aylmer: cash they're generating now? Should they be giving it back 56 00:03:21,180 --> 00:03:22,050 Sean Aylmer: to shareholders? 57 00:03:22,290 --> 00:03:23,880 Brett Reynolds: They are. Look at the yields. 58 00:03:23,940 --> 00:03:26,160 Sean Aylmer: Should they be thinking about the renewables? Should they be 59 00:03:26,160 --> 00:03:28,078 Sean Aylmer: thinking about transitioning their businesses? 60 00:03:29,550 --> 00:03:30,600 Brett Reynolds: They know they're a dying industry, so I don't think they will. 61 00:03:30,600 --> 00:03:34,679 Sean Aylmer: Okay, so it's kind of make as much cash as 62 00:03:34,680 --> 00:03:36,450 Sean Aylmer: you can as they run down. 63 00:03:37,110 --> 00:03:40,980 Brett Reynolds: Yeah, until we have a ... What's our solution? Solar? I 64 00:03:40,980 --> 00:03:44,370 Brett Reynolds: don't know, what is our solution? But as I said, 65 00:03:44,429 --> 00:03:48,360 Brett Reynolds: Europe's about to go into recession. The States are probably already in 66 00:03:48,360 --> 00:03:52,559 Brett Reynolds: recession. What are we going to do to get our energy prices down? You're 67 00:03:52,559 --> 00:03:58,230 Brett Reynolds: looking food, energy, all those things are inflationary. Raising rates 68 00:03:58,320 --> 00:04:00,330 Brett Reynolds: is not going to fix this situation. 69 00:04:00,690 --> 00:04:02,580 Sean Aylmer: Stay with me, Brett will be back in a minute. 70 00:04:08,790 --> 00:04:11,459 Sean Aylmer: My guest this morning is Brett Reynolds, Chief Investment Officer 71 00:04:11,459 --> 00:04:16,320 Sean Aylmer: at Tiger Brokers Australia. Okay, so that's the coal companies 72 00:04:16,380 --> 00:04:19,620 Sean Aylmer: and a fairly unique set of circumstances for them over 73 00:04:19,620 --> 00:04:23,700 Sean Aylmer: the last 12 to 18 months. But you've just said over time 74 00:04:24,178 --> 00:04:27,539 Sean Aylmer: that it is a dying industry, what about lithium? Because 75 00:04:27,540 --> 00:04:29,730 Sean Aylmer: that seems to be almost the opposite end of the 76 00:04:29,730 --> 00:04:33,390 Sean Aylmer: spectrum, where certainly if you listen to Elon Musk, it's 77 00:04:33,390 --> 00:04:35,430 Sean Aylmer: a boom industry. But he's not alone. There are plenty 78 00:04:35,430 --> 00:04:37,770 Sean Aylmer: of people out there saying lithium is a long term play. 79 00:04:38,790 --> 00:04:43,289 Brett Reynolds: Well, when you can recharge a truck from a battery 80 00:04:43,290 --> 00:04:46,859 Brett Reynolds: charger the size of your phone, you realize how important 81 00:04:46,859 --> 00:04:51,900 Brett Reynolds: lithium is. I've heard silicon is as big a component. 82 00:04:52,500 --> 00:04:56,578 Brett Reynolds: So yes, lithium at the moment, you see all your 83 00:04:56,580 --> 00:05:00,839 Brett Reynolds: gardeners, no one is using petrol anymore. We're going to 84 00:05:00,839 --> 00:05:05,670 Brett Reynolds: disposable economy where we're all using lithium powered lawn mowers, 85 00:05:05,670 --> 00:05:10,080 Brett Reynolds: leaf blowers. But again, supply and demand. As the demand's 86 00:05:10,080 --> 00:05:12,390 Brett Reynolds: there short term, supply will pick up. I was looking 87 00:05:12,390 --> 00:05:16,830 Brett Reynolds: at Pilborough. That's gone from 80 cents to $ 5. These 88 00:05:16,830 --> 00:05:19,859 Brett Reynolds: stocks are getting ahead of themselves. The other day, the 89 00:05:19,860 --> 00:05:23,339 Brett Reynolds: big market move, the top 30 shorts were up 6% 90 00:05:23,760 --> 00:05:25,110 Brett Reynolds: against the market up two. 91 00:05:25,620 --> 00:05:26,010 Sean Aylmer: Right. 92 00:05:26,550 --> 00:05:29,910 Brett Reynolds: People are shorting the market thinking we're going into recession, 93 00:05:29,910 --> 00:05:32,910 Brett Reynolds: but there's still stocks. I'm looking at the banks. Some 94 00:05:32,910 --> 00:05:37,499 Brett Reynolds: of these banks actually are looking attractive. Their net interest 95 00:05:37,500 --> 00:05:41,490 Brett Reynolds: margins are improving. We're not going to have these big 96 00:05:41,490 --> 00:05:45,839 Brett Reynolds: doubtful debts that everyone's worried about. This interest rate rise 97 00:05:45,839 --> 00:05:49,200 Brett Reynolds: will slow down, but as I said, we would've been 98 00:05:49,200 --> 00:05:53,280 Brett Reynolds: begging for a mortgage rate of 6% five years ago. 99 00:05:53,910 --> 00:05:56,099 Brett Reynolds: The rates were too low. We're going back to a 100 00:05:56,099 --> 00:05:58,439 Brett Reynolds: normalized interest rate environment. 101 00:05:58,650 --> 00:06:01,890 Sean Aylmer: So if you're looking, I mean we've spoken about coal, 102 00:06:01,890 --> 00:06:05,039 Sean Aylmer: we've spoken about lithium and maybe some of these lithium 103 00:06:05,040 --> 00:06:07,409 Sean Aylmer: companies are getting ahead of themselves, but you'd agree that 104 00:06:07,740 --> 00:06:11,370 Sean Aylmer: they're abetter long term play than coal, for example. Sorry, silicon 105 00:06:11,370 --> 00:06:13,979 Sean Aylmer: in there. Kind of what other sectors? So banking you 106 00:06:13,980 --> 00:06:17,219 Sean Aylmer: like as an option? And I'm talking about, I'm not 107 00:06:17,279 --> 00:06:19,440 Sean Aylmer: day trader here. We're talking about long term investing. 108 00:06:20,640 --> 00:06:24,870 Brett Reynolds: Yeah, I'd be in the banks. I'd be still in 109 00:06:24,870 --> 00:06:31,349 Brett Reynolds: resources. BHP, Woodside. When the market rallies, the blue chips 110 00:06:31,440 --> 00:06:34,380 Brett Reynolds: go first. Not small caps, the blue chips. 111 00:06:34,709 --> 00:06:34,889 Sean Aylmer: Right. 112 00:06:35,250 --> 00:06:40,320 Brett Reynolds: So stick to your banks, your top 50 companies, start 113 00:06:40,320 --> 00:06:42,930 Brett Reynolds: investing in that. We all want to make the money 114 00:06:42,930 --> 00:06:45,839 Brett Reynolds: quick. That's in a bull market. In a bear market, 115 00:06:46,170 --> 00:06:47,490 Brett Reynolds: you go for the blue chips. 116 00:06:47,610 --> 00:06:51,808 Sean Aylmer: Righto. And then what about things like retailers and tech 117 00:06:51,809 --> 00:06:53,909 Sean Aylmer: stocks and healthcare, those sorts of sectors? 118 00:06:54,299 --> 00:06:58,110 Brett Reynolds: Well, we looked at Netflix the other night. Netflix, that 119 00:06:58,110 --> 00:07:00,690 Brett Reynolds: thing's down maybe at its worst down ... 120 00:07:00,900 --> 00:07:01,860 Sean Aylmer: 40% or something, wasn't it? 121 00:07:02,160 --> 00:07:07,890 Brett Reynolds: Yeah, 40, 50, 60. That's coming back. Twitter, Elon Musk pulled off 122 00:07:08,250 --> 00:07:11,069 Brett Reynolds: probably a great strategy there. He didn't have to pay 123 00:07:11,129 --> 00:07:14,880 Brett Reynolds: a bigger premium. He played it very well. We got 124 00:07:14,880 --> 00:07:18,960 Brett Reynolds: that. We got Apple and that's a benchmark. Google, they're not 125 00:07:19,200 --> 00:07:23,159 Brett Reynolds: overly expensive. Netflix as well. They're going to grow their 126 00:07:23,160 --> 00:07:27,630 Brett Reynolds: customer base. People don't care about advertising. They'll take it. 127 00:07:27,780 --> 00:07:29,939 Sean Aylmer: What about the healthcare stocks? So we have some great 128 00:07:29,940 --> 00:07:34,500 Sean Aylmer: healthcare stocks in Australia, obviously led by CSL. Do you 129 00:07:34,500 --> 00:07:35,220 Sean Aylmer: like healthcare? 130 00:07:35,580 --> 00:07:38,369 Brett Reynolds: Well, I like CSL. I can't believe our government sold it at 131 00:07:38,429 --> 00:07:41,430 Brett Reynolds: the price they did. But yeah, Medibank, stocks off that. 132 00:07:41,639 --> 00:07:44,759 Brett Reynolds: They're an industry where you are always going to have 133 00:07:44,759 --> 00:07:48,510 Brett Reynolds: recurring earnings. It's not going to fall away. It's not 134 00:07:48,510 --> 00:07:50,880 Brett Reynolds: as volatile as the other sectors. 135 00:07:51,150 --> 00:07:54,540 Sean Aylmer: Okay, so Brett, the $ 100 question or the $ 64 question, 136 00:07:54,540 --> 00:07:57,360 Sean Aylmer: I think they say, don't they? So what are your 137 00:07:57,360 --> 00:08:00,569 Sean Aylmer: favored sectors? Even if they're not stocks just at the moment, 138 00:08:01,320 --> 00:08:05,430 Brett Reynolds: I would still be buying resources. I think the coal 139 00:08:05,430 --> 00:08:08,820 Brett Reynolds: stocks, yes, they're still on run, but I'm a trader. 140 00:08:09,840 --> 00:08:11,220 Sean Aylmer: Yeah. Which is different. 141 00:08:11,220 --> 00:08:14,790 Brett Reynolds: For a long term investor, I would be actually adding 142 00:08:14,790 --> 00:08:18,510 Brett Reynolds: to the banks. I'd be buying the blue chips. But 143 00:08:18,929 --> 00:08:22,529 Brett Reynolds: what people don't realize, there's nothing wrong with selling as 144 00:08:22,529 --> 00:08:27,390 Brett Reynolds: well. Do not just keep buying when your stock's up 145 00:08:27,390 --> 00:08:31,170 Brett Reynolds: 10, 15% in a year. Lighten some off. 146 00:08:31,320 --> 00:08:33,660 Sean Aylmer: Yeah. The whole take profit strategy. 147 00:08:33,840 --> 00:08:37,469 Brett Reynolds: We're all trying to outperform an index, but why outperform 148 00:08:37,469 --> 00:08:40,980 Brett Reynolds: an index that's down? The index is down 13%. Why 149 00:08:40,980 --> 00:08:44,550 Brett Reynolds: wouldn't you, when you're up 15%, that's better than what 150 00:08:44,550 --> 00:08:47,910 Brett Reynolds: you're going to get in the bank, sell some and 151 00:08:47,910 --> 00:08:54,030 Brett Reynolds: wait and reinvest. Be more active, move your portfolio around. 152 00:08:54,420 --> 00:08:56,819 Brett Reynolds: There's nothing wrong, with the costs are so low these 153 00:08:56,820 --> 00:09:00,718 Brett Reynolds: days. Move your portfolio around. Stock goes up 15, you've 154 00:09:00,720 --> 00:09:03,270 Brett Reynolds: made 15% of your money. What are you happy with having 155 00:09:03,270 --> 00:09:06,718 Brett Reynolds: it at 4% in the bank? Move that stock around because 156 00:09:06,960 --> 00:09:10,170 Brett Reynolds: your job is not to actually outperform an index, it's 157 00:09:10,170 --> 00:09:13,350 Brett Reynolds: actually to make an absolute return. So you want to 158 00:09:13,590 --> 00:09:16,889 Brett Reynolds: have as much capital at the end of the day, 159 00:09:17,279 --> 00:09:21,179 Brett Reynolds: not say I've outperformed index 5%, but the index is 160 00:09:21,179 --> 00:09:23,550 Brett Reynolds: down 20. That's not a smart bet. 161 00:09:23,670 --> 00:09:25,530 Sean Aylmer: Brett, thank you for talking to Fear and Greed. 162 00:09:26,040 --> 00:09:26,550 Brett Reynolds: Okay, 163 00:09:26,760 --> 00:09:30,059 Sean Aylmer: That was Brett Reynolds, Chief Investment Officer at Tiger Brokers 164 00:09:30,059 --> 00:09:32,880 Sean Aylmer: Australia. This is the Fear and Greed Daily interview. Remember, 165 00:09:32,880 --> 00:09:35,789 Sean Aylmer: this information is general in nature and you should always 166 00:09:35,789 --> 00:09:39,900 Sean Aylmer: seek professional advice before making any investment decisions. Join us every 167 00:09:39,900 --> 00:09:41,940 Sean Aylmer: morning for the full episode of Fear and Greed, Australia's 168 00:09:41,940 --> 00:09:45,510 Sean Aylmer: most popular business podcast. I'm Sean Aylmer. Enjoy your day.