1 00:00:00,080 --> 00:00:02,880 Speaker 1: Now, quality stocks like healthcare companies are trading at their 2 00:00:02,920 --> 00:00:05,520 Speaker 1: cheapest level relative to the market in decades, and that's 3 00:00:05,519 --> 00:00:08,480 Speaker 1: happening while market concentration is at record levels. Sam Dickey 4 00:00:08,560 --> 00:00:10,639 Speaker 1: from Fisher Funds is looking into this and is with us. 5 00:00:10,680 --> 00:00:13,480 Speaker 1: Hi Sam, Hey, Sam, Before we get into it, have 6 00:00:13,520 --> 00:00:15,080 Speaker 1: you managed to get out of Palmerston North? 7 00:00:17,000 --> 00:00:21,000 Speaker 2: Not? You can't associate everything in the Central North Island 8 00:00:21,160 --> 00:00:23,239 Speaker 2: with Palms North. That was New Plumber. Actually, you know, 9 00:00:23,320 --> 00:00:24,600 Speaker 2: I did get out of there. 10 00:00:24,600 --> 00:00:26,479 Speaker 1: It's a lot hours, a lot better. But hold on, 11 00:00:26,520 --> 00:00:30,680 Speaker 1: were you waiting for nine hours? Yes? Oh mate? What 12 00:00:30,800 --> 00:00:31,560 Speaker 1: time do you get out? 13 00:00:33,240 --> 00:00:36,000 Speaker 2: We we got out of there about three thirty four o'clock. 14 00:00:36,080 --> 00:00:36,880 Speaker 2: Oh yeah, it wasn't it. 15 00:00:37,240 --> 00:00:38,920 Speaker 1: Oh I'm pleased that you need to get out though. 16 00:00:39,159 --> 00:00:41,120 Speaker 2: Hey. By the way, but I love Naki the naki though, 17 00:00:41,159 --> 00:00:42,519 Speaker 2: so I was very happy to be there for that 18 00:00:42,560 --> 00:00:43,080 Speaker 2: extra time. 19 00:00:43,240 --> 00:00:45,040 Speaker 1: Isn't it like if you're going to be trapped in 20 00:00:45,080 --> 00:00:48,559 Speaker 1: a small rural town. Well, when I say small, it's 21 00:00:48,560 --> 00:00:50,720 Speaker 1: a small rural city. New Plymbers will be one of 22 00:00:50,760 --> 00:00:52,240 Speaker 1: the ones that you'd be quite happy to be trapped 23 00:00:52,240 --> 00:00:54,640 Speaker 1: in because they've got a great hotel. That's the nice hotel, 24 00:00:54,840 --> 00:00:56,560 Speaker 1: and then all these wonderful places to eat. 25 00:00:56,560 --> 00:00:58,279 Speaker 2: Ay, that's one number one. 26 00:00:58,360 --> 00:00:59,960 Speaker 1: Yep, did you stay at the nice hotel? 27 00:01:01,200 --> 00:01:04,280 Speaker 2: Ah? No, but it's just on number one region in 28 00:01:04,280 --> 00:01:05,000 Speaker 2: the country. 29 00:01:05,160 --> 00:01:07,400 Speaker 1: I totally agree with you. Anyway, Listen to the important stuff. 30 00:01:07,560 --> 00:01:09,760 Speaker 1: When you say that these quality stocks are cheap, What 31 00:01:09,760 --> 00:01:10,480 Speaker 1: do you mean by that? 32 00:01:11,840 --> 00:01:14,560 Speaker 2: Yes, probably best to give you just a couple of factoids. 33 00:01:14,600 --> 00:01:18,440 Speaker 2: So the last six months in the US, companies making 34 00:01:18,600 --> 00:01:21,280 Speaker 2: no profits or losses are up about forty percent, and 35 00:01:21,360 --> 00:01:25,000 Speaker 2: companies that actually make a profit, which is typically a 36 00:01:25,000 --> 00:01:27,600 Speaker 2: pretty key threshold for being a quality company, a barely 37 00:01:27,680 --> 00:01:30,279 Speaker 2: up ten percent. And if you broaden out that measure 38 00:01:30,319 --> 00:01:33,840 Speaker 2: of quality to things like strong balance sheets, ability to 39 00:01:33,880 --> 00:01:36,400 Speaker 2: convert any profits you do get into cash pretty easily, 40 00:01:36,959 --> 00:01:39,160 Speaker 2: and just all around good corporate governance, the difference is 41 00:01:39,200 --> 00:01:41,959 Speaker 2: even more stark. So low quality companies have outperformed high 42 00:01:42,040 --> 00:01:45,039 Speaker 2: quality by forty percent in the last six months. And 43 00:01:45,080 --> 00:01:47,240 Speaker 2: that's the most extreme move we've seen in thirty years. 44 00:01:47,319 --> 00:01:51,160 Speaker 2: So this dash for trash, as the market calls it, 45 00:01:51,400 --> 00:01:54,040 Speaker 2: has left quality companies behind and left them looking very attractive. 46 00:01:54,720 --> 00:01:56,760 Speaker 1: Why is healthcare so unloved right now? 47 00:01:57,960 --> 00:01:59,720 Speaker 2: Yes? Well, you and I talked about this back in July, 48 00:01:59,760 --> 00:02:03,360 Speaker 2: and very quickly. US overall debt levels are about one 49 00:02:03,400 --> 00:02:05,040 Speaker 2: hundred and twenty PvE percent of GDP, and the US 50 00:02:05,120 --> 00:02:08,440 Speaker 2: healthcare expenditure is a key component of that. So the 51 00:02:08,520 --> 00:02:11,960 Speaker 2: US spends about twice the OECD average. And remember that's 52 00:02:12,000 --> 00:02:14,280 Speaker 2: about five trillion dollars, and about a trillion of that 53 00:02:14,440 --> 00:02:19,760 Speaker 2: is wasted on administrative bloat and unnecessary complexity. And the 54 00:02:19,800 --> 00:02:21,960 Speaker 2: Trump administration rightly so it was trying to crack down 55 00:02:21,960 --> 00:02:23,800 Speaker 2: on some of that wastage and the very high drug 56 00:02:23,840 --> 00:02:27,840 Speaker 2: prices the US charges, and that's caught up all of healthcare. 57 00:02:27,840 --> 00:02:29,520 Speaker 2: And it's wake not just the companies that are part 58 00:02:29,520 --> 00:02:32,320 Speaker 2: of the problem, like farmer companies that charge high drug 59 00:02:32,360 --> 00:02:35,760 Speaker 2: prices or administrative companies that are part of that bloat, 60 00:02:35,880 --> 00:02:38,440 Speaker 2: but in some cases the companies that are part of 61 00:02:38,440 --> 00:02:41,120 Speaker 2: the solution as well, those those companies that have products 62 00:02:41,120 --> 00:02:43,560 Speaker 2: that cut costs and shortened hospitals to stay. So that's 63 00:02:44,080 --> 00:02:46,600 Speaker 2: that's allowing the sort of the opportunity there at the moment. 64 00:02:47,000 --> 00:02:48,480 Speaker 1: One of the facts that you've thrown at me, which 65 00:02:48,520 --> 00:02:50,480 Speaker 1: I find quite alarming, is that forty percent of the 66 00:02:50,560 --> 00:02:53,480 Speaker 1: US market value is in ten stocks. Now, how risky 67 00:02:53,600 --> 00:02:55,040 Speaker 1: is that for passive investors? 68 00:02:55,840 --> 00:03:00,040 Speaker 2: Yes, forty and ten stocks, thirty percent and five. And 69 00:03:00,600 --> 00:03:03,160 Speaker 2: we know that that the AI boom has driven investors, 70 00:03:03,160 --> 00:03:05,720 Speaker 2: at least initially towards the MAG seven. The MAG seven 71 00:03:05,960 --> 00:03:09,200 Speaker 2: accounts for seventy five percent of market returns, eighty five 72 00:03:09,240 --> 00:03:12,360 Speaker 2: percent of the growth and profits, and ninety five percent 73 00:03:12,520 --> 00:03:15,160 Speaker 2: of the growth and capital expenditure in the US at 74 00:03:15,200 --> 00:03:17,480 Speaker 2: the moment. So that's all the expenditure going on data centers. 75 00:03:18,000 --> 00:03:21,119 Speaker 2: So you compare that with so that's the highest ever 76 00:03:21,400 --> 00:03:23,880 Speaker 2: I guess going back two hundred years that forty percent, 77 00:03:24,400 --> 00:03:27,400 Speaker 2: and the dot com boom that number was barely thirty percent. 78 00:03:27,480 --> 00:03:31,520 Speaker 2: So if you invested in a passive fund that replicates 79 00:03:31,520 --> 00:03:33,280 Speaker 2: the US stock market and you're hoping to get a 80 00:03:33,280 --> 00:03:36,440 Speaker 2: diversified exposure to five hundred companies, you could be in 81 00:03:36,480 --> 00:03:38,440 Speaker 2: for a rude shop because if anything goes wrong with 82 00:03:38,440 --> 00:03:40,240 Speaker 2: one or two, or god for bit, a handful of 83 00:03:40,280 --> 00:03:43,520 Speaker 2: those huge AI focused companies, you won't be getting a 84 00:03:43,680 --> 00:03:46,400 Speaker 2: diversified sort of passive exposure at all. 85 00:03:46,440 --> 00:03:50,040 Speaker 1: What does all of this mean for investors more broadly, Well. 86 00:03:50,000 --> 00:03:51,920 Speaker 2: I think all these issues were interrelated. So the AI 87 00:03:51,960 --> 00:03:55,560 Speaker 2: boom meant these megacat companies with the prime beneficiaries, initially 88 00:03:55,640 --> 00:03:57,280 Speaker 2: because they were the only ones that could afford the 89 00:03:57,320 --> 00:03:59,360 Speaker 2: massive infrastructure spin you and I have spoken about a 90 00:03:59,360 --> 00:04:02,120 Speaker 2: few times, and then more recently this FOMO has risen 91 00:04:02,240 --> 00:04:04,600 Speaker 2: and the market's got on frothy. Investors have been chasing 92 00:04:04,640 --> 00:04:08,360 Speaker 2: lower and lower quality companies, for example, tech companies that 93 00:04:08,720 --> 00:04:12,200 Speaker 2: say they do AI with no profit, and as a corollary, 94 00:04:12,560 --> 00:04:16,159 Speaker 2: typically high quality companies like healthcare and many others have 95 00:04:16,320 --> 00:04:19,440 Speaker 2: not only been left behind, they've actually been sold down 96 00:04:19,480 --> 00:04:22,040 Speaker 2: as a funding source for the foray into risky and 97 00:04:22,120 --> 00:04:24,760 Speaker 2: risky of tech. So if you're an active stock picker, 98 00:04:24,839 --> 00:04:27,479 Speaker 2: the opposite of a passive investor, there are some pretty 99 00:04:27,480 --> 00:04:28,679 Speaker 2: exciting opportunities around. 100 00:04:29,200 --> 00:04:30,520 Speaker 1: Sam. It's good to talk to you, and it's good 101 00:04:30,520 --> 00:04:32,760 Speaker 1: to have you back in Auckland, Sam Dickey of Fisher Funds. 102 00:04:33,800 --> 00:04:36,960 Speaker 2: For more from Heather Duplessy Allen Drive, listen live to 103 00:04:37,080 --> 00:04:40,119 Speaker 2: news talks the'd be from four pm weekdays, or follow 104 00:04:40,160 --> 00:04:41,920 Speaker 2: the podcast on iHeartRadio.