1 00:00:05,559 --> 00:00:08,240 Speaker 1: Welcome to Fear and Greed, summer investing series brought to 2 00:00:08,320 --> 00:00:12,120 Speaker 1: you by Vanta, specialists in compliance led growth. I'm Sean Almer. 3 00:00:12,400 --> 00:00:15,480 Speaker 1: There are many different approaches to building an investment portfolio, 4 00:00:15,560 --> 00:00:17,000 Speaker 1: and we've heard a lot of them here on Fear 5 00:00:17,040 --> 00:00:19,760 Speaker 1: and Greed. Today's guest has a new one for us, 6 00:00:19,760 --> 00:00:23,240 Speaker 1: comparing the art of investing to building a football team. 7 00:00:23,400 --> 00:00:25,760 Speaker 1: As always, this is general information learning and you should 8 00:00:25,760 --> 00:00:29,280 Speaker 1: seek independent advice before making investment decisions. Brian Hann is 9 00:00:29,320 --> 00:00:33,120 Speaker 1: the director of ecre's Research Australia, New Zealand at Morning Star. 10 00:00:33,640 --> 00:00:35,120 Speaker 1: Brian and welcome back to Fear and Greed. 11 00:00:35,320 --> 00:00:35,920 Speaker 2: Hello Sean. 12 00:00:36,000 --> 00:00:38,320 Speaker 1: How are you why a sports team? You are obviously 13 00:00:38,400 --> 00:00:39,080 Speaker 1: a sports fan. 14 00:00:39,520 --> 00:00:42,000 Speaker 2: Yes, I am Sean, and you'd be surprised how much 15 00:00:42,000 --> 00:00:45,080 Speaker 2: of a parallel there is between building a portfolio and 16 00:00:45,159 --> 00:00:46,200 Speaker 2: building a sports team. 17 00:00:46,280 --> 00:00:50,080 Speaker 1: Okay, so let's just go through it broadly and without 18 00:00:50,120 --> 00:00:52,440 Speaker 1: making it too particular centric. You sort of have the 19 00:00:52,479 --> 00:00:56,440 Speaker 1: outside players, the speedy guys, you know, they're on the 20 00:00:56,480 --> 00:00:59,480 Speaker 1: outskirts of the field. Generally might be winger in football, 21 00:00:59,520 --> 00:01:03,520 Speaker 1: that might be fullback in NRL. What about that, Like, 22 00:01:03,560 --> 00:01:06,160 Speaker 1: how do you put that into the investment portfolio. 23 00:01:06,560 --> 00:01:08,880 Speaker 2: Okay, so you know, you a portfolio. It would be, 24 00:01:09,319 --> 00:01:11,319 Speaker 2: for instance, you just mentioned all the flashy players, and 25 00:01:11,360 --> 00:01:13,600 Speaker 2: I mean, if you had your choice, you would fill 26 00:01:13,600 --> 00:01:17,039 Speaker 2: your whole team with these flashy players. But that's not 27 00:01:17,200 --> 00:01:20,720 Speaker 2: how it works in reality because you have so many constraints. 28 00:01:20,959 --> 00:01:23,640 Speaker 2: So now, in terms of flashy players such as wingers 29 00:01:23,640 --> 00:01:27,360 Speaker 2: and all of that, in portfolio parlance, we would probably 30 00:01:27,400 --> 00:01:31,399 Speaker 2: equate them with high flying growth stocks. These stocks that 31 00:01:31,480 --> 00:01:37,360 Speaker 2: are really richy earnings multiple, got really explosive earnings growth outlook, 32 00:01:37,840 --> 00:01:40,880 Speaker 2: and everybody loves them. There's the future of the future 33 00:01:40,920 --> 00:01:42,679 Speaker 2: of the you know, the sector and all of that. 34 00:01:43,480 --> 00:01:46,000 Speaker 2: On the other hand, though, there is a lot of 35 00:01:46,080 --> 00:01:49,440 Speaker 2: uncertainty in terms of your valuation of them because so 36 00:01:49,520 --> 00:01:52,520 Speaker 2: much of the value is in the future. And therefore, 37 00:01:52,640 --> 00:01:54,840 Speaker 2: just like a fullback or a winger or any other 38 00:01:55,080 --> 00:01:58,280 Speaker 2: speedy playsure talking about when they make a mistake or 39 00:01:58,320 --> 00:02:00,880 Speaker 2: fumble the ball, I mean, the concert quinces are dire 40 00:02:01,000 --> 00:02:06,000 Speaker 2: and very visible, just like any gross stock, whereby ritzie multiple. 41 00:02:06,080 --> 00:02:09,200 Speaker 2: So when they disappoint even a little bit, the consequences 42 00:02:09,200 --> 00:02:10,040 Speaker 2: can be very dire. 43 00:02:10,639 --> 00:02:13,400 Speaker 1: Right, Let's go to the other end. The ruckman, the 44 00:02:13,440 --> 00:02:16,560 Speaker 1: hard workers might be the second rowers, props or something 45 00:02:16,680 --> 00:02:20,680 Speaker 1: rather in rugby league, the fullbacks I think in football, 46 00:02:20,680 --> 00:02:23,680 Speaker 1: and I think they're just kind of they're almost the 47 00:02:23,680 --> 00:02:24,720 Speaker 1: heart of your team a bit. 48 00:02:25,160 --> 00:02:27,079 Speaker 2: Yeah, I would say they're the bad rock of the team. 49 00:02:27,120 --> 00:02:29,760 Speaker 2: I mean, the typical what I'm saying in sports parlance 50 00:02:30,000 --> 00:02:32,799 Speaker 2: is that big forwards win big games. Now, these are 51 00:02:32,840 --> 00:02:36,079 Speaker 2: not the sexiest the flashiest of the players, but as 52 00:02:36,120 --> 00:02:39,440 Speaker 2: you say, the ruckman and the props, they are basically 53 00:02:39,560 --> 00:02:43,440 Speaker 2: the foundation of the team and that they are consistent. 54 00:02:43,880 --> 00:02:46,400 Speaker 2: And I would equate them in a portfolio parlance to 55 00:02:47,480 --> 00:02:51,800 Speaker 2: defensive stocks, stocks which have very reliable cash flows that 56 00:02:51,840 --> 00:02:55,040 Speaker 2: will provide you with very good cash flow, earnings and 57 00:02:55,080 --> 00:02:58,720 Speaker 2: therefore dividends. Now they might not be sexy when gross 58 00:02:58,720 --> 00:03:01,520 Speaker 2: stocks are going through the roof, but when conditions turn, 59 00:03:01,800 --> 00:03:04,960 Speaker 2: you rely on them to provide that underpinning support to 60 00:03:05,000 --> 00:03:05,840 Speaker 2: your whole portfolio. 61 00:03:06,040 --> 00:03:07,720 Speaker 1: So I know, in one of the portfolios you put 62 00:03:07,760 --> 00:03:11,280 Speaker 1: together a lot of infrastructure style like Spark, Apa, Telstra, 63 00:03:11,639 --> 00:03:14,520 Speaker 1: they're kind of they're just they're reliable. I suppose it's 64 00:03:14,520 --> 00:03:15,280 Speaker 1: the best putting it. 65 00:03:15,760 --> 00:03:18,880 Speaker 2: Exactly because when you look at the underlying businesses, they 66 00:03:18,880 --> 00:03:23,680 Speaker 2: are not as volatile as other businesses and the earnings 67 00:03:23,720 --> 00:03:26,880 Speaker 2: you can really rely on year after year because they 68 00:03:26,919 --> 00:03:30,080 Speaker 2: are defensive and they are relied upon by businesses to 69 00:03:30,160 --> 00:03:33,359 Speaker 2: either make money or for consumers to either live their lives. So, 70 00:03:33,520 --> 00:03:37,600 Speaker 2: as you mentioned APA, a guest transmission network operator, Telstra 71 00:03:38,040 --> 00:03:41,440 Speaker 2: a communications provider which we will need. So those are 72 00:03:41,440 --> 00:03:44,160 Speaker 2: the players that those are the stocks that we equate to. 73 00:03:44,240 --> 00:03:46,920 Speaker 2: These prop or ruckman type of players. 74 00:03:47,920 --> 00:03:53,640 Speaker 1: Okay, the marquee players, the rovers, the halves, the strikers 75 00:03:53,680 --> 00:03:56,320 Speaker 1: maybe in football, or maybe the cent and a half 76 00:03:56,360 --> 00:03:59,800 Speaker 1: in football. They're kind of somewhere in between or that. 77 00:04:00,120 --> 00:04:04,640 Speaker 1: They're almost the ones that you really combine the flashiness 78 00:04:04,680 --> 00:04:05,440 Speaker 1: and the hard work. 79 00:04:05,480 --> 00:04:08,680 Speaker 2: Almost exactly as you say, Sean, they are the marquee 80 00:04:08,720 --> 00:04:12,760 Speaker 2: players around whom the whole team is built, and they 81 00:04:12,840 --> 00:04:16,560 Speaker 2: need to basically have little bit of everything. So in 82 00:04:16,920 --> 00:04:20,200 Speaker 2: stop parlance terms, you're talking about stocks that not only 83 00:04:20,360 --> 00:04:24,640 Speaker 2: have generally reliable earnings, but they got good management, very 84 00:04:24,680 --> 00:04:29,479 Speaker 2: strong franchise, and they can be relied upon to deliver 85 00:04:29,560 --> 00:04:32,760 Speaker 2: you earnings year after year, but on top of that 86 00:04:33,000 --> 00:04:35,640 Speaker 2: to have that beta variance at the top to provide 87 00:04:35,640 --> 00:04:39,360 Speaker 2: you with some growth. So for instance, we would equate 88 00:04:39,520 --> 00:04:45,240 Speaker 2: Brambles the palette service provider, or even Endeavor the owner 89 00:04:45,440 --> 00:04:49,480 Speaker 2: of Dan Murphy, because on the one hand defensive, on 90 00:04:49,520 --> 00:04:51,880 Speaker 2: the other hand, they do provide you with that growth 91 00:04:51,920 --> 00:04:56,799 Speaker 2: angle longer term down the track. And also they're relatively safe, 92 00:04:56,880 --> 00:04:58,680 Speaker 2: so that they're not the kind of stocks like the 93 00:04:58,720 --> 00:05:00,640 Speaker 2: fullbacks and the fleshy play as we could go down 94 00:05:00,720 --> 00:05:03,719 Speaker 2: twenty percent in one day because they disappointed the other group. 95 00:05:03,760 --> 00:05:06,360 Speaker 1: I just want to mention I suppose I might be 96 00:05:06,600 --> 00:05:09,960 Speaker 1: torturing the analogy here. The centers in rugby league, maybe 97 00:05:10,000 --> 00:05:14,239 Speaker 1: the half forwards in IFL, A lot of running, really 98 00:05:14,279 --> 00:05:17,679 Speaker 1: solid players. Why do you need those sort of players? 99 00:05:18,400 --> 00:05:21,120 Speaker 2: Yeah, because you need some players to provide you with 100 00:05:21,200 --> 00:05:23,839 Speaker 2: the X factor. So when you only got two minutes 101 00:05:23,880 --> 00:05:25,839 Speaker 2: to go in the game and you rely on somebody 102 00:05:25,880 --> 00:05:28,520 Speaker 2: to really break the game open and score that crucial 103 00:05:28,600 --> 00:05:32,280 Speaker 2: try or make that critical tackle. So that X factor 104 00:05:32,880 --> 00:05:36,960 Speaker 2: in a portfolio would mean something like something that's completely 105 00:05:37,080 --> 00:05:41,200 Speaker 2: uncorrelated to the stock market in Australia. Now, in my view, 106 00:05:41,400 --> 00:05:44,400 Speaker 2: in a portfolio, the X factor would be provided by 107 00:05:44,520 --> 00:05:49,640 Speaker 2: overseas exposure overseas stocks, So I'm thinking of stocks like 108 00:05:49,760 --> 00:05:52,960 Speaker 2: tencent in China, which makes a lot of gaming and 109 00:05:53,000 --> 00:05:56,799 Speaker 2: a lot of apps type of products and also stocks 110 00:05:56,839 --> 00:06:01,200 Speaker 2: like Sday Louder. I see Sday Louder products everywhere in 111 00:06:01,200 --> 00:06:03,839 Speaker 2: my bathroom, everywhere. I don't use it for some reason. 112 00:06:03,880 --> 00:06:07,279 Speaker 2: My wife hasn't laying around everywhere. And apparently they're really, 113 00:06:07,720 --> 00:06:10,440 Speaker 2: you know, they're really with the you know, the trendsetters. 114 00:06:11,160 --> 00:06:13,960 Speaker 1: I think you might be. You doth protest too much, Brian, 115 00:06:14,040 --> 00:06:16,039 Speaker 1: But thank you very much for your time this morning. 116 00:06:16,320 --> 00:06:16,880 Speaker 2: Thank you, Sean. 117 00:06:17,279 --> 00:06:20,520 Speaker 1: That was Brian Hand, director of Equity's Research Australia, New 118 00:06:20,600 --> 00:06:23,600 Speaker 1: Zealand at Morning Star. Remember to get your own independent 119 00:06:23,600 --> 00:06:26,239 Speaker 1: advice before making decisions. This is Fear and Greed Summer 120 00:06:26,279 --> 00:06:29,840 Speaker 1: investing series, brought to you by Vanta. Vanta automates compliance 121 00:06:29,839 --> 00:06:34,440 Speaker 1: for frameworks like ISO twenty seven one so to CPS 122 00:06:34,480 --> 00:06:36,520 Speaker 1: two three four in essential eate saving time and money 123 00:06:36,560 --> 00:06:39,880 Speaker 1: while building trust. Join over eight thousand companies like at Lassian, 124 00:06:39,960 --> 00:06:42,839 Speaker 1: Dovetail and fire Ant managing real time risk in one 125 00:06:42,880 --> 00:06:46,480 Speaker 1: thousand dollars off at Banta dot com. Slash Fear and Greed. 126 00:06:46,640 --> 00:06:49,720 Speaker 1: I'm Sean Elmer. Enjoy your day.