The Rules of Investing

Charlie Aitken has a simple investment philosophy: Build a concentrated portfolio of the world's best companies in structural growth sectors. And for this week’s Rules of Investing podcast, I had the rare opportunity to sit down with Charlie for 46 minutes to hear how this translates into practice. While the market grows anxious about the rapidly metastasising trade war, Charlie explained in our discussion how he sees it as a ‘tremendous opportunity’ to grow exposure to world-leading companies, and went on to nominate four such stocks right in the firing line right now. I really enjoyed recording this podcast in which we covered a great deal of other ground, including his transition into funds management, advice to his younger self, and why it’s ‘Australia for income - and global for growth’.

Guest: Ben Griffiths, Principal and Portfolio Manager of Eley Griffiths Group. When Isaac Newton first posited that an object in motion would stay in motion unless acted upon, he probably wasn't thinking of stock markets. But hundreds of years later, the same principle has been adapted for investors; or "the trend is your friend" as it's more commonly stated. While this rule of thumb can be pretty handy, there are rare moments in financial markets where everything can turn on a dime, and suddenly that trend doesn't look so friendly. George Soros called these times 'inflection points', and according to Ben Griffiths, Principal and Portfolio Manager at Eley Griffiths Group, we stand at one of these crossroads today. “It is classic exhaustion price action. Bulls aren’t sure if they’re convinced anymore, and bears are in the process of giving up after that strong run-up from December. It’s what markets do best at turning point; they confound the bulls, they trip up the bears, and they generally exhaust investors.” In this week’s episode of The Rules of Investing podcast, Ben explains why the Australian economy could be doing better than it seems, how he knew it was time to start buying shares near the bottom of the GFC, and three simple investing rules that’ve served him well.

Guest: Campbell Neal, co-founder, Managing Director, and Senior Portfolio Manager at K2 Asset Management. Finding cheap stocks this late in the cycle is getting harder and harder. Index funds have bid up the prices of large cap stocks to levels not seen since the tech bubble, while mid-cap growth stocks like Afterpay and Wisetech have been bid to dizzying heights. But attractive opportunities are still out there, if you look hard enough. This week's guest on The Rules of Investing is Campbell Neal, co-founder, Managing Director, and Senior Portfolio Manager at K2 Asset Management. In this episode, Campbell identifies one ASX small cap that's on a PE ratio of 10, yields 8%, and has all the hallmarks of a mini-Macquarie. "I believe it's like a small Macquarie Bank. It's listed here in Australia.... The stock's done extremely well over the few years it's been listed. I think it's going to continue to grow." Tune in to hear which stocks he plans to short (when the time is right), and why he believes large cap stocks are the most overvalued they've been for many years.

Guest: Dr Philipp Hofflin, Lazard Asset Management.

Guest: Garry Laurence, Portfolio Manager, Perpetual Value investors, I suspect, are born that way. It takes a particular type of person to be willing to stand out from the crowd, focus on the long term, and constantly be hunting for bargains. This week's guest on the podcast is precisely one of those people; Garry Laurence, Portfolio Manager of the Perpetual Global Shares Fund. Garry's been managing the Global Share's fund since inception in 2011 and was co-portfolio manager of the Asian Shares fund prior to that. In this week's episode, we'll discuss why value investing has struggled in recent years, the worst investment he ever made, and what he learned from it, and he discusses one underappreciated attribute to look for when assessing an investment.

It’s a rare opportunity to get to sit down with an economist of the calibre of Tim Toohey from Ellerston Capital. He was formerly the Managing Director, Chief Economist, and Head of Macro Strategy for Australia and New Zealand at Goldman Sachs, where he earned a reputation as one of Australia’s best macro forecasters. In 2017, he joined Tudor Investments’ star portfolio manager, Brett Gillespie, in setting up the Global Macro Fund at Ellerston Capital. So, when offered the opportunity to talk to Tim for the best part of an hour, I made sure to cover off all the big topics concerning investors today; Australian rates and consumers, Fed policy, the turnaround in China, and of course, the possibility of a housing-driven recession in Australia. Tune in to the latest episode of The Rules of Investing podcast below to hear his take on the world today.

Guest: Robert Millner, Chairman, Washington H Soul Pattinson. In the last 117 years, Australia has seen two World Wars, the great depression, introduction of the motor car, 30 Prime Ministers, and every year, Washington H Soul Pattinson (SOL) has paid a dividend. In this week's episode of The Rules of Investing, I sit down with Robert Millner, the longstanding Chairman of SOL. While SOL started life as a pharmaceuticals business, today it's a cornerstone shareholder in TPG Telecom, Brickworks, New Hope Corporation, and dozens of smaller companies. Over the last 40 years, total shareholder returns have compounded at a rate of 17.3%. This is a record that rivals that of some of the most well-known investors globally. Tune in below to hear his view on the future of coal and agriculture in Australia, why he's not interested in buying banks at current levels, and what he thinks has been the key to Soul Patts' success.

In late December of 2018, I received an email that caught me by surprise. It came from someone I’d never met with an unexpected proposition. The concept was to kick off 2019 with a constructive discussion between the Chief Investment Officers of Platinum Asset Management and Magellan Financial Group. I say ‘unexpected’ because the two firms are often viewed as rivals in the Australian funds management industry. In reality, many investors consider the strategies as complementary, and as we learn in the first instalment of a two-part discussion, they even share some common ground on where they are investing. Tune in as we take you inside the minds of Andrew Clifford and Hamish Douglass to explore their investment philosophies and discuss the challenges and opportunities that lie ahead.

Guests: Tom King, OAM; Simon Holmes à Court. When Al Gore’s “An Inconvenient Truth” was released 13 years ago, it brought the issue of climate change to the fore of people’s minds around the world. It might surprise you then, that the effects of greenhouse gasses have been known since 1896. However, despite the huge progress made over the last decade or more, the IPCC Fifth Assessment Report released in 2018 showed that at the current rate, warming will reach 1.5 degrees by 2052. Avoiding this will require the largest globally-synchronised effort the world has ever seen. This week’s guests on The Rules of Investing are Tom King OAM, and Simon Holmes á Court. Tom is the co-founder of Nanuk Asset Management, which is focused on investing in industries that contribute to improving global sustainability and efficiency. Simon is an energy transition specialist who founded Australia’s first community owned wind farm and is a senior adviser to the Climate and Energy College at the University of Melbourne. In the latest podcast, we debunk some common myths about the role of solar and wind in the energy grid, discuss the investment case for sustainability, and why some people still deny the science of climate change.

This week’s guest on the podcast is Jeff Cole, Founder and Director of The Center for the Digital Future, and a member of the investment committee for the E&P Global Disruption Fund. While Jeff’s is far from a household name, his work has been at the core of the media industry over the past three decades. He founded the World Internet Project 19 years ago and has presented his insights to the White House, the FCC, and the Department of Defense. He's testified before congress, he's held a joint press conference with President Bill Clinton, he even produced two films with Vice President Al Gore. This week on The Rules of Investing, we'll discuss the current media landscape in Australia and how it's changing, the bleak future for employment, and what went wrong for MoviePass, which caused its parent company to fall more than 99.999%.

Guest: Marcus Padley, Director, Marcus Today. Popular wisdom from the likes of Warren Buffett, Jack Bogle, and Burton Malkiel (author of A Random Walk Down Wall Street) states that it's near-impossible to consistently time the market, so why even try? Just buy and hold for the long term, and collect your dividend cheque every six months. Marcus Padley, Director of MarcusToday, disagrees. "You can't just sit in the market long-term, which is what everybody wants you to do. You have to time it." Marcus points out, that the average annual capital return over the last 75 years, after inflation, taxes, and costs is close to zero. In this week’s episode of The Rules of Investing, he explains his process for getting the timing right, why he thinks the housing market is close to the bottom, and his top candidates to surprise to the upside this reporting season.

Guest: Jeremy Cooper, Chairman of Retirement Income, Challenger Ltd. 10 years ago, Jeremy Cooper, now Chairman of Retirement Income at Challenger, Chaired the Federal Government’s Super System Review, commonly known as the Cooper Review. With the final report from the Banking Royal Commission due to be released in a couple of days, we took the opportunity to talk to Jeremy about the current state retirement in Australia. “Retirees are well aware of increasing life expectancies, and we’re in an environment where self-provision is the order of the day. There are not a lot of people who aspire to living solely on the aged pension. So, they’re underspending – they’re being too frugal. They’re doing this because in our system, we’re effectively asking them to self-insure.” In this episode of The Rules of Investing, we discuss what worked and what didn’t from the Cooper Review, his take on the Banking Royal Commission, and the investment risks that matter to retirees.

Guest: Patrick Poke, Editor, Livewire Markets Host: Arik Star, Portfolio Manager, Ellerston Capital In little over a year since launching The Rules of Investing podcast, Patrick Poke has published 28 podcasts with Australia’s best fund managers, getting an average 4,000 listens per show, and racking up a remarkable cumulative 5.2 years of listen time. After such a strong first year, it struck me that as the interviewer, Patrick only gives listeners a taste of his passion and knowledge of the subject matter. So to change things up a bit, and to kick off the podcast for 2019, I suggested we put him in the hot seat, and arranged for a former guest on the show to ask the questions. Thanks to Arik Star, Portfolio Manager at Ellerston Capital, who has done a sterling job of putting Patrick through his paces in this special episode of ‘The Rules of Investing’! We hope you enjoy

Guest: Andrew Clifford, Chief Investment Officer, Platinum Asset Management. Host: James Marlay, co-founder, Livewire Markets. If you’d invested $20k with Platinum Asset Management when the firm opened in 1995 you’d be sitting on around $320k today, a return of ~12.6% per annum*. However, the journey to these returns may have tested your nerves. The active style at Platinum means that periods of exceptional performance are, at times, accompanied by periods underperformance versus the market. Right now, is one of those periods for Andrew Clifford and the team at Platinum. In this exclusive interview, Clifford takes you inside the investment process at Platinum and applies it to the challenges of today’s volatile environment.

Guest: Chris Stott, former CIO of Wilson Asset Management. Host: James Marlay, Executive Director & Co-founder of Livewire Markets. At age 37 Chris Stott has called time on his investment career at Wilson Asset Management. Given the current state of markets I took the opportunity to have one final chat to hear his views on the year ahead. He presents a bearish outlook for the Australian economy fuelled by falling house prices and weak consumer sentiment. But that doesn’t mean you can’t find good companies to invest in and make a return... Tune in to hear about the attributes that Stott seeks out in difficult markets, lessons from his best and worst trades and one last call on a stock that can deliver regardless of the economic backdrop.