Latest / The Money Puzzle / Your Shares in 2025 - Part 2 : Top Picks

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Your Shares in 2025 - Part 2 : Top Picks · The Money Puzzle

0:10
Speaker 1: Hello, and welcome to The Australian's Money Puzzle podcast. I'm
0:13
Speaker 1: James Kirby, the editor at The Australian, and welcome again
0:16
Speaker 1: to our series of shows where we look at the
0:20
Speaker 1: outlook for two twenty five and if you've listened to
0:23
Speaker 1: the episode with Mark Docom of global X, basically we
0:27
Speaker 1: went around the world in thirty five minutes or so
0:30
Speaker 1: with Mark looking at the outlook for markets themselves, right,
0:33
Speaker 1: so we looked at the consensus viewers, what will happen
0:35
Speaker 1: on the ASEX, what will happen on NASDAK, what will
0:38
Speaker 1: happen on the big markets around the world. And today
0:41
Speaker 1: I want to zone in on the Australian market and
0:46
Speaker 1: the ASX. How did it do? What can we expect
0:49
Speaker 1: in the year ahead. My guest is jun Belieu. She
0:54
Speaker 1: has been on the show before. You would have known her,
0:56
Speaker 1: I'm sure from the Tribeca days. She is now the
1:01
Speaker 1: portfolio manager at a new operation called ten Capital, which
1:06
Speaker 1: kicks off this year, so it's going to be a
1:09
Speaker 1: special year for her. Always great to have you on
1:11
Speaker 1: the show. How are you going?
1:13
Speaker 2: I'm very girl.
1:13
Speaker 3: Thank you so much for having me. James were always
1:16
Speaker 3: lovely to talk about stock market.
1:18
Speaker 1: I'm sure you do. Well, look just before we start,
1:21
Speaker 1: so we listeners will have got good context from the
1:24
Speaker 1: show where we're basically we looked at the global performance
1:27
Speaker 1: and in isolation, the Australian performance of the AX looked
1:31
Speaker 1: perfectly good. I mean, it all looked very fine, but
1:34
Speaker 1: it was only it was way way behind the US market.
1:39
Speaker 1: But we've covered that issue. So just to look at
1:40
Speaker 1: the Australian market, it did very well. We're talking eighteen
1:44
Speaker 1: percent or so. The dividend yields something in the order
1:47
Speaker 1: of four exceptionally driven on this occasion by banks and financials,
1:56
Speaker 1: which was a surprise I expect for most people. Was
2:01
Speaker 1: it a surprise for you? I mean it seemed to
2:03
Speaker 1: me the consensus was from months and months cellier bank
2:05
Speaker 1: stocks and that that was wrong.
2:07
Speaker 3: Right absolutely now, I expected banks to do so well,
2:10
Speaker 3: particularly in an environment where we thought the economy is
2:14
Speaker 3: going to slow down. Surely the banks can help hold
2:17
Speaker 3: on to its you know, its glory when their profit
2:19
Speaker 3: margin the NIM has already peaked at the beginning of
2:22
Speaker 3: the year. Remember March quarter was pretty much the peak
2:25
Speaker 3: of the earnings, and then from their nons on its
2:27
Speaker 3: way down. But what has transpired is that the banks
2:30
Speaker 3: actually delivered best they expected profit clearly because our economy
2:34
Speaker 3: has remained reasonably resilient like around the world. And also
2:37
Speaker 3: which many didn't quite think about, is that the banks,
2:40
Speaker 3: you know, previous couple of years, they have provided a
2:44
Speaker 3: lot of provision, put a lot of provisions in their accounts,
2:47
Speaker 3: so that means when the economy is not as bad
2:49
Speaker 3: as they expected, they actually write the profit back. So
2:52
Speaker 3: that's why we actually had a lot of burnings upgrade
2:55
Speaker 3: for the banks at the same time, because economy is
2:58
Speaker 3: doing well, they got so much excess capital they were
3:01
Speaker 3: just paying our special dividend buying back their shares, so
3:04
Speaker 3: really boosted their earnings profile for the last twelve month.
3:08
Speaker 2: And that is too surprised of many.
3:10
Speaker 3: You know, at the beginning of the year, wellflore CBA
3:12
Speaker 3: was done that one hundred dollars and it continued rally
3:16
Speaker 3: on and it is incredible.
3:17
Speaker 1: It's been terrific. Obviously, it's about one hundred and fifty.
3:21
Speaker 2: That's right.
3:21
Speaker 3: I have an incredible performance for CBA, you know. I
3:24
Speaker 3: think that's one amazing thing. CBA is training at more
3:27
Speaker 3: expensive I think at least close a few weeks ago,
3:30
Speaker 3: more expensive there CSL.
3:32
Speaker 2: You know, CSL is our all.
3:34
Speaker 3: Time favorite, you know, long term growth company, and it's
3:36
Speaker 3: training chief of their CBA. So it's just seems to
3:39
Speaker 3: be a bit of disconnect at the moment.
3:41
Speaker 1: So whatever wants to know. Of course, that's the impossible
3:44
Speaker 1: question of what will happen in the future. But if
3:46
Speaker 1: we look at the performance of the market and we
3:49
Speaker 1: say it was I mean, first of all, the IT companies,
3:52
Speaker 1: but that's a very small sector from a market cap
3:55
Speaker 1: point of view, did best, and then they were at
3:57
Speaker 1: fifty percent or so, which is extraordinary. But Comewell Bank
4:01
Speaker 1: they virtually did fifty percent over the year did about
4:04
Speaker 1: forty something percent, which again is extraordinary. The financial stocks
4:08
Speaker 1: generally did thirty three percent or so. Would it be
4:13
Speaker 1: foolish for any of our listeners to think that those
4:18
Speaker 1: banks could continue on anything like that momentum? And what
4:24
Speaker 1: everyone says, you should sell the banks and the brokers
4:27
Speaker 1: have said this for six months and they've been wrong
4:29
Speaker 1: for six months, but maybe they will be right in
4:31
Speaker 1: the end. If we have CBA at twenty eight times,
4:35
Speaker 1: which is miles ahead of its usual eratio, are they
4:40
Speaker 1: vulnerable to a sell off.
4:42
Speaker 2: They are very vulnerable.
4:44
Speaker 3: Vulnerable not only to a market sell off, they're also
4:47
Speaker 3: vulnerable to a market rotation. So this is what everyone's
4:50
Speaker 3: talking about. Will be a big theme for twenty twenty five,
4:54
Speaker 3: you know, rotation intersectors, whether it's the small cap companies
4:57
Speaker 3: who has underperformed, or resources company, you know, or into
5:01
Speaker 3: some of the other cyclical industrial businesses. Banks since they
5:05
Speaker 3: done so well, they will be used as funding I
5:07
Speaker 3: don't know if you remember in twenty twenty four, perhaps
5:10
Speaker 3: in November, there was a couple of times or October November,
5:13
Speaker 3: there was a couple of days when the Resources company
5:15
Speaker 3: had a bit of rally because of China stimulus was
5:18
Speaker 3: coming through the day. BHP went up five percent, CBA
5:21
Speaker 3: was down five percent. It's a very clear genation and
5:25
Speaker 3: rotation that you can see. So I think it's very
5:27
Speaker 3: vulnerable to that. Now, putting aside those technical issues for
5:31
Speaker 3: you know, being used as a funding source, you know
5:34
Speaker 3: a little bit, I don't actually think that the CBA
5:37
Speaker 3: shares or the bank shares will collapse, because calling for
5:40
Speaker 3: the collapse of the bank shares really require a collapse
5:43
Speaker 3: of the you know, share market or the economy. I
5:46
Speaker 3: think economy is heading into an easy condition, easy financial
5:49
Speaker 3: condition in the next twelve month, because you know, we
5:52
Speaker 3: have interest rate slowly coming down, whether it's February or May,
5:55
Speaker 3: it's coming through. And then we have the you know,
5:58
Speaker 3: the economy is not doing too badly, so I don't think.
6:00
Speaker 3: I think the fundamental is strong for the share market.
6:03
Speaker 3: So that means that banks will hold these value but
6:05
Speaker 3: maybe it won't go up, you know, I don't think.
6:07
Speaker 3: And you'll get another force if you sayll a fifty
6:09
Speaker 3: percent out of the banks. I think at best they
6:12
Speaker 3: probably do, you know, high single digit sort of return.
6:15
Speaker 3: Even that, I think it's a bit of a struggle.
6:16
Speaker 3: Probably admit to high single digit return. Share market itself though,
6:20
Speaker 3: I think, actually, well looks reasonably strong. It should do
6:23
Speaker 3: better than the banks. And then the leadership, you know,
6:25
Speaker 3: they say who's going to be the best sector? Is
6:28
Speaker 3: going to be something else other than the banks and
6:31
Speaker 3: take them take the market much much higher.
6:35
Speaker 1: So there the consensus is pretty mild, isn't it. For
6:39
Speaker 1: the A six the consensus is that it's going to
6:41
Speaker 1: do four or five percent in the twelve months. Some
6:44
Speaker 1: there's people that are both sides of that and maybe
6:48
Speaker 1: eight nine percent is more like an average year total return. Well,
6:53
Speaker 1: have you a number of yourself in your university, you
6:56
Speaker 1: have a number you're working on.
6:58
Speaker 3: Yeah, I think I would do double digit. I think
7:00
Speaker 3: market condition looks pretty good, you know. I know our
7:02
Speaker 3: market has done well in the last couple of years,
7:05
Speaker 3: you know, all double digit returns, but really coming off
7:08
Speaker 3: you know, a low base, and looking into next year,
7:10
Speaker 3: you know, I do think that our market is actually
7:13
Speaker 3: they call it a cyclic call market. We our resources
7:16
Speaker 3: have yet to perform. Look at the share price performers
7:18
Speaker 3: HV has gone down thirty percent, the CVA has gone
7:21
Speaker 3: up fifty percent. That kind of disparity is very strange,
7:24
Speaker 3: very rare to take place in the share market. So
7:27
Speaker 3: we do think the next year, you know, we have
7:29
Speaker 3: a lot of those bigger, you know, companies that will
7:32
Speaker 3: take the leadership and that will deliver.
7:34
Speaker 2: Return for the market.
7:35
Speaker 3: You know, usually at this point of the market cycle,
7:38
Speaker 3: we do see very good driver because you know, you
7:42
Speaker 3: just have the rate cut, so you have all the
7:44
Speaker 3: businesses that sort of lag behind started catching up. At
7:47
Speaker 3: the same time you have the tech businesses that's already
7:49
Speaker 3: done quite well. But I think because the interest rates
7:52
Speaker 3: coming lower, the evaluation will continue to be supported. So
7:55
Speaker 3: valuation is not a problem. So you know, it's positive
7:58
Speaker 3: for most of the actors going higher.
8:02
Speaker 1: Okay, just to cover off on what actually did occur
8:06
Speaker 1: in twenty twenty four and which to me, I'm not
8:08
Speaker 1: surprised by the it doing very well. The financials. I am,
8:14
Speaker 1: like everybody else, surprised that people would value the banks
8:21
Speaker 1: so highly because the banks basically were treading water. I mean,
8:25
Speaker 1: with the exception of CBA, the big banks weren't trading
8:27
Speaker 1: water for years and years. But the third strong area
8:31
Speaker 1: was consumer discretionary of twenty six percent. I thought there
8:36
Speaker 1: was supposed to be very weak consumer sentiment out there.
8:40
Speaker 1: What happened there?
8:41
Speaker 2: I know, it's crazy, isn't there?
8:42
Speaker 3: Sometimes from outside and looking in look at the share market,
8:45
Speaker 3: thinking what are those crazy investors doing. We're in the
8:48
Speaker 3: consumer recession, and yet our retailers are hitting all time hi,
8:52
Speaker 3: our JB high fire, others which couldn't give enough of them.
8:55
Speaker 2: Look at what's happening.
8:56
Speaker 3: Is that it goes down to the very cross of
8:58
Speaker 3: the you know, of the share market. Investor git mok
9:00
Speaker 3: investor always look forward twelve months, so we are buying
9:03
Speaker 3: future earnings, so we are sort of looking trying to
9:06
Speaker 3: look through that. You know, if the crystal ball, as
9:08
Speaker 3: say in twelve month, look in twelve month, consumer hopefully
9:11
Speaker 3: will be doing better our interest rate, our interest rate
9:14
Speaker 3: will probably be already on the way down. At the
9:17
Speaker 3: same time, for some of the retailers, you know, your
9:19
Speaker 3: earnings will start to recover from you know, a trough
9:22
Speaker 3: that that's taking place somewhere between now and you know,
9:26
Speaker 3: the next few months, so you know, earnings on the
9:28
Speaker 3: way up. So you know, potentially for retailers, you will
9:31
Speaker 3: be in the Ernie's upgrade cycle because as a consumer
9:34
Speaker 3: comes through, you know, your operating leverage is positive operating leverage,
9:38
Speaker 3: things always turn out to be better they expected.
9:40
Speaker 2: Maybe then they'll have special dividend and all of that.
9:42
Speaker 3: So you're at the beginning of that multi year upgrade
9:46
Speaker 3: cycle for the retailers. So they may look expensive at
9:49
Speaker 3: the moment, but looking forward twelve months, their earnings will grow.
9:53
Speaker 2: Their multiple will you.
9:54
Speaker 3: Know, not multiple expension is actually not multiple expension, it's
9:57
Speaker 3: more Ernie's will grow better than expected, and then with
10:00
Speaker 3: the interest rate, your value will expand. Valuation will expand,
10:04
Speaker 3: so hence why we're all rushing into those Put that aside, though,
10:08
Speaker 3: what are you know? It sounds like the these days,
10:11
Speaker 3: the cyber weekends you know has done, is doing incredibly
10:15
Speaker 3: bigger and bigger every single year.
10:16
Speaker 2: So there's a lot of optimism.
10:20
Speaker 1: Yeah, Black Friday, yeah.
10:21
Speaker 2: Yeah they call they got all the names back Fridays.
10:23
Speaker 1: Cyber Monday, yeah, that's right.
10:25
Speaker 3: Yeah, so it's getting bigger and bigger. You know, I
10:28
Speaker 3: myself hit the shops that couldn't it looks like Boxing day,
10:31
Speaker 3: say oh, and just people everywhere. So I the feedback
10:34
Speaker 3: is that incredibly strong every single year. Might be a
10:36
Speaker 3: bit of softness into Christmas, but you know what we
10:39
Speaker 3: think is going to you know, deliver a strong February result,
10:43
Speaker 3: you know, as a result of that for a certain category.
10:45
Speaker 2: Of course, it's got to be selective.
10:47
Speaker 3: You know, the apparel's bit weaker, but electronics, consumer electronics
10:50
Speaker 3: is strong.
10:51
Speaker 2: So this is.
10:51
Speaker 3: What's happening now. Put these cyclical components aside. There is
10:55
Speaker 3: also an undertoe. It's about consumer electronics of the replacement
10:59
Speaker 3: cycle of the AI enabled devices. Now, I think it's
11:03
Speaker 3: still early days, but PC replacement cycle has been running
11:07
Speaker 3: very long dated now, so we're due for a pickup
11:10
Speaker 3: in replacing PC at the same time you got all
11:13
Speaker 3: these new devices coming out with AI. I do think
11:15
Speaker 3: that it's JB hi FI or type enormal or persume
11:19
Speaker 3: electronics space is at the you know, sort of the
11:22
Speaker 3: early stage of that adoption phase which you will drive
11:25
Speaker 3: a lot of growth organic growth of the next five
11:27
Speaker 3: years or so.
11:29
Speaker 1: Okay, dorees the AI. It's the concept behind your thinking
11:33
Speaker 1: that the arrival of the AI devices accelerates the replacement cycle.
11:40
Speaker 3: So the idea is, you know, I think there's a
11:43
Speaker 3: lot of excitement about it, but at this stage we're
11:46
Speaker 3: still waiting for First of all, they're quite expensive, you know,
11:48
Speaker 3: we're waiting for the price deflation to come through. As
11:51
Speaker 3: you know with the consumer electronics products that as the
11:54
Speaker 3: price become cheaper, the adoption increases significantly. So and that's
11:58
Speaker 3: when actually mass market and j be high by these
12:00
Speaker 3: retailers make a lot of money.
12:02
Speaker 2: So the price is still too high.
12:03
Speaker 3: And then I think the product itself at this stage
12:07
Speaker 3: is not yet to steal that differentiated They just added
12:10
Speaker 3: you know, the sering, the talk and everything else, so
12:12
Speaker 3: you still didn't need a bit more so but that's
12:14
Speaker 3: definitely coming through, but it's just going to take a
12:17
Speaker 3: bit more time. That's your Probably next twelve month we'll
12:19
Speaker 3: see more definitive trend and then in the following five
12:22
Speaker 3: years you'll see a lot.
12:23
Speaker 2: More of it.
12:25
Speaker 1: Okay. It reminds me of the sort of golden age
12:26
Speaker 1: of the iPhone when they came through the first time
12:28
Speaker 1: as well. But that's basically the whole promise of the Internet,
12:32
Speaker 1: the promise of the mobile Internet, the singular product. Okay, yeah, yeah, yeah,
12:37
Speaker 1: very interesting. Okay, Well, take short break. We'll be back
12:39
Speaker 1: in a moment. Hello and welcome back to The Australian's
12:54
Speaker 1: Money Puzzle podcast. I'm James Kirkby. I'm talking to June
12:57
Speaker 1: Bailu who has been on the show before. She's now
13:00
Speaker 1: at ten Capital and she's talking to me and you
13:05
Speaker 1: about Australian stocks in the year. Head and stay with us, folks,
13:09
Speaker 1: because we are if you can think, if you think
13:11
Speaker 1: about it, we are making our way through, right. So
13:12
Speaker 1: we're conceptually getting down through the sectors and then we're
13:16
Speaker 1: going to look at the stocks as much as we can.
13:19
Speaker 1: So before we do that, everything you said, not everything
13:22
Speaker 1: you said, but substantially. What you said in the first
13:24
Speaker 1: segment did depend on the belief, if you like, that
13:30
Speaker 1: interest rates will drop in Australia next year. So that's
13:35
Speaker 1: absolutely crucial, isn't it to the outlooks put forward by you,
13:38
Speaker 1: went by by most of the market. Is it at risk?
13:43
Speaker 2: It is a risk, but it's a very small risk.
13:45
Speaker 3: Look, we have demonstrated, We've seen it again and again
13:48
Speaker 3: for decades. Right our capital flowies are connected globally. We're
13:51
Speaker 3: following very similar trends, even though they might be delays
13:54
Speaker 3: and timing and the like. So clearly, our interest rate
13:57
Speaker 3: never went up as much as the US, and then
14:00
Speaker 3: it took longer. So now going down, it's taking longer
14:03
Speaker 3: to come through as well. And you know, it's may
14:06
Speaker 3: not go go down as much as the US because
14:08
Speaker 3: we never went up that much, so, you know, but
14:10
Speaker 3: it's abound to take place. You know, our inflation number,
14:12
Speaker 3: it's already showing a similar trajectory as the US. But
14:16
Speaker 3: although US is actually gathering more momentum in terms of
14:19
Speaker 3: you know, falling interest rate, Arawan is a little bit
14:21
Speaker 3: more sticky. The latest job number is still looking a
14:24
Speaker 3: little bit too strong for our you know, our RBA.
14:27
Speaker 3: But you know, regardless, we think you know all of
14:29
Speaker 3: these you know, components in motion for a cut. Now
14:33
Speaker 3: the risk or the volatility will come though, is whether
14:36
Speaker 3: it's a February cut or is a you know, makeup.
14:38
Speaker 3: So you know, because the market participate just a few
14:41
Speaker 3: weeks ago or just you know, a month ago, was
14:43
Speaker 3: talking about potentially it's cut in February. If that takes place,
14:48
Speaker 3: you'll see market rally quite aggressively. And now you know
14:51
Speaker 3: the data after the job data, you know, markets pushing
14:55
Speaker 3: it out to.
14:55
Speaker 2: May, you know.
14:56
Speaker 3: So it's really about where the expectation is. So you
14:59
Speaker 3: will see share market go up and down based on
15:01
Speaker 3: the changes in that expectation. But regardless, interest rate will
15:05
Speaker 3: come down. Yeah, as with many other countries.
15:08
Speaker 1: Okay, so you are comfortable with that basic trend the
15:12
Speaker 1: abstrates have reached to peak in this cycle fault. Okay,
15:16
Speaker 1: I'd like to try and just if I could maybe
15:18
Speaker 1: just go through three sectors with you which are of
15:20
Speaker 1: great interest to all our listeners. So you talked about rotation,
15:25
Speaker 1: the obvious rotation. You know, if you're sitting in London
15:27
Speaker 1: looking at the Australian market, the dead obvious rotation is
15:30
Speaker 1: from banks to big miners php Reo fortce Kew is
15:36
Speaker 1: that the most likely scenario.
15:40
Speaker 2: It's a most likely scenario.
15:42
Speaker 3: And also into industrial, so where we have a bit
15:45
Speaker 3: of industrial sector as well, So that's the most obvious.
15:48
Speaker 3: And then the second one is obviously the large cap
15:50
Speaker 3: to small cap. So as you know, people get more
15:53
Speaker 3: comfortable into the smaller cap companies and most of the
15:55
Speaker 3: small company earnings have really been hurt by.
15:59
Speaker 2: High interest rate.
16:00
Speaker 3: With the interest rate definitively coming down, you should see
16:03
Speaker 3: that earning growth pickups significantly. Remember there are trophlearning and
16:07
Speaker 3: then going to next year the earning will grow significantly.
16:10
Speaker 3: So you know, so I think we will see that
16:12
Speaker 3: clear sort of movement.
16:13
Speaker 2: You know, large cap.
16:14
Speaker 3: Will underperform the small cap. Yeah, so that's going to
16:17
Speaker 3: take place in the next two months.
16:18
Speaker 1: Okay, when you say small cap, but I presume you
16:22
Speaker 1: have a definition. It can't be microcap. There's a lot
16:25
Speaker 1: of there's a lot of bad small caps out there
16:28
Speaker 1: as we know. Maybe the majority of them are a
16:30
Speaker 1: bad certainly the majority of them are ordinary in their history.
16:34
Speaker 1: Is what do you how do you approach that sector
16:37
Speaker 1: which is so diverse and so large, roughly two thousand
16:40
Speaker 1: stocks out there, even in Australia.
16:41
Speaker 3: Yeah, you're absolutely right. Small cap is an index. It's
16:44
Speaker 3: actually full of danger. It's very important to actually stay
16:47
Speaker 3: to quality. You know, there might be the very top
16:50
Speaker 3: tier of the small cap that you often looking at,
16:53
Speaker 3: and you know the minute you go smaller, you required
16:56
Speaker 3: to be very close to the management. Now, the opportunity,
17:00
Speaker 3: I guess in the next twelve month is finding some
17:02
Speaker 3: of those companies a little bit smaller but have been
17:05
Speaker 3: forgotten by investors because whether interest rate too high, whether
17:09
Speaker 3: that you know, it's just that environment that has hurt
17:11
Speaker 3: the share price performance microcab we'd expect that to perform
17:15
Speaker 3: as well in when the small caps started to do better.
17:18
Speaker 3: There's a lot of interest they're flowing down into microcabs.
17:21
Speaker 3: So structurally we think that the overall did go smaller,
17:24
Speaker 3: they should do better. Now put one conditional disclaimer in there, though.
17:29
Speaker 3: You remember when we talked about interest rate. We're not
17:31
Speaker 3: sure if it's February or May, and you know that
17:33
Speaker 3: expectations might move, so based on that, the volatility we
17:38
Speaker 3: will see particularly will occur in the small end because
17:41
Speaker 3: these companies are very leveraged to interest rate cut. Yeah,
17:45
Speaker 3: so when you start changing that, you know, whether it's
17:47
Speaker 3: may or it makes a big difference to their earnings.
17:50
Speaker 3: So these share prices can move by a low, large,
17:53
Speaker 3: big wave.
17:54
Speaker 1: So yes, so even more volatile than usual with that
17:57
Speaker 1: perception that their day is coming, but we don't quite
18:00
Speaker 1: know when it is because we don't know when the
18:01
Speaker 1: red cuts will come. Okay, So two other sectors. One
18:05
Speaker 1: was healthcare. Now, healthcare has been terribly disappointing, hasn't it.
18:11
Speaker 1: And I know that. I mean at one stage, I
18:12
Speaker 1: think you were quite keen on Ramsey and that's really
18:16
Speaker 1: been a disappointment. The whole area has been a disappointment.
18:21
Speaker 1: I don't know if we could ever recover really as
18:23
Speaker 1: a viable area for listed stock investment. What do you think?
18:28
Speaker 2: I think the healthcare is interesting.
18:30
Speaker 3: It used to be our growth leader, right, so when
18:32
Speaker 3: you want to buy growth company back then, we didn't
18:34
Speaker 3: have a big tech space. We didn't have many tech choices.
18:37
Speaker 3: All we ever do is buy CSL by the large
18:41
Speaker 3: healthcare company. But they have really disappointed our healthcare company.
18:45
Speaker 3: It's partly because of the labor you know, the you know,
18:48
Speaker 3: the inflation first of we had the labor shortage, and
18:51
Speaker 3: healthcare businesses our labor businesses heavy businesses, right, and they
18:54
Speaker 3: really struggled to find people. And now the inflation that's
18:57
Speaker 3: coming through the labor force. Most of those costs actually structural,
19:02
Speaker 3: you know, because there's been a lot of nurses leaving
19:04
Speaker 3: the industry and you know, so they we have found
19:07
Speaker 3: that all of these businesses now really structurally have higher costs.
19:10
Speaker 3: And for a place like private hospitals, actually it structurally
19:14
Speaker 3: cost is higher. You know, unless government can come through
19:18
Speaker 3: try and help in the way. It almost seems unsustainable
19:21
Speaker 3: in the way. But put that aside, I think, you know,
19:23
Speaker 3: healthcare sector is still very defensive sector. It's going to
19:26
Speaker 3: struggle in the environment where you know, risk goes, so
19:30
Speaker 3: where everyone want to go smaller, want to buy companies
19:32
Speaker 3: that more leveraged to the to the upswing in the
19:35
Speaker 3: economic activity. Because remember healthcare doesn't affect get affected by
19:39
Speaker 3: the economic activity. Even economy picks up, people don't go
19:42
Speaker 3: to doctors more. So I think in that environment they
19:45
Speaker 3: sort of status quo. That's right, it's status quo. So
19:48
Speaker 3: you know, the only thing we know is that you know,
19:50
Speaker 3: potentially you have you know Ramsey, what we're hearing things
19:54
Speaker 3: that's been so poor it's actually doing a little bit better.
19:57
Speaker 3: But it's not economically sensitive. It's more of a value
20:01
Speaker 3: stock that's for the long service. Well now resme. On
20:03
Speaker 3: the other hand, we actually think that looks okay, you know,
20:06
Speaker 3: and it's gone through crisis with a GLP what but
20:09
Speaker 3: now it's looking better.
20:11
Speaker 1: Okay, okay, we come to individual's stalks and minute. Let
20:13
Speaker 1: me just do one more sort of sector with you,
20:15
Speaker 1: which is reads property trusts. So it looks as we
20:20
Speaker 1: speak that is the disappointment of the year was in
20:25
Speaker 1: property trusts. Was in Digico. Only two weeks ago people
20:29
Speaker 1: were I have people writing into money Puzzle furious that
20:33
Speaker 1: they didn't get stuck on the float. But now they're
20:37
Speaker 1: probably not furious because they would have lost money as
20:40
Speaker 1: we speak in December. So tell me about property trusts.
20:45
Speaker 1: It seems to me the properly trusts have been skewed.
20:48
Speaker 1: The notion of a property trust has been skewed. We
20:50
Speaker 1: have Digito, which is a play on AI. We have Goodman,
20:53
Speaker 1: which is a play on technology logistics and AI. And
20:57
Speaker 1: properly trusts in the sense of a property landlord. I
21:03
Speaker 1: don't know if they really I think to some extent,
21:06
Speaker 1: even the figures for last year, which were reasonable for
21:10
Speaker 1: something of a recovery for a rates in Australia, Yeah,
21:13
Speaker 1: it's of seventeen percent, which is you know, bany on
21:16
Speaker 1: with the market. Okay, so it did the market no better,
21:18
Speaker 1: no worse. What do you think the outlook is for
21:21
Speaker 1: twenty twenty five and does the presence of Digitico and
21:25
Speaker 1: Goodman sort of disturb or mislead us to some degree
21:29
Speaker 1: about property trusts.
21:31
Speaker 3: I think it's a really good question. I do think
21:33
Speaker 3: the property trust will do okay. You know when we
21:35
Speaker 3: start cutting rates. I know they've done reasonably okay, in line.
21:38
Speaker 2: With the market.
21:39
Speaker 3: But once the race does start getting caught, so we
21:41
Speaker 3: will see. What's the main thing is that we will
21:43
Speaker 3: see improvement in the market transaction. One of the biggest
21:46
Speaker 3: thing is that the property a special commercial property. They're
21:49
Speaker 3: not selling and they're not transacting. The buyer don't want
21:51
Speaker 3: to sell at this price, and then you know the
21:53
Speaker 3: seller sorry sell it, or the driser vine. So it's
21:56
Speaker 3: coming in the middle. So with the rates coming down,
21:58
Speaker 3: it absolutely make the valuate should stack up. If anything,
22:01
Speaker 3: we actually still start to see quite a lot of
22:04
Speaker 3: commercial property market like Cyney is actually improving, you know.
22:07
Speaker 2: Quite rapidly.
22:08
Speaker 3: Then that net absorption is actually very strong in the
22:11
Speaker 3: Sydney market and Melbourne we've seen early signs of improvement.
22:15
Speaker 3: So you know, I do think the property fundamentally will improve.
22:18
Speaker 3: But there is still a lot of stock sitting in
22:20
Speaker 3: the private market that we're waiting to be sold. So
22:22
Speaker 3: you know, we just need the rate cut to come through,
22:25
Speaker 3: so that will the overall sector looks okay, but it
22:27
Speaker 3: has to for investors.
22:29
Speaker 2: You need to focus on value.
22:30
Speaker 3: Aside from Goodman that's a different story, but everything else
22:33
Speaker 3: you've got to focus on value because I do think
22:35
Speaker 3: the value end of the property market will do better
22:38
Speaker 3: than the you know, the more expensive part of it.
22:40
Speaker 2: Goodman Group is different.
22:41
Speaker 3: It's almost like you've got you almost have that next
22:44
Speaker 3: lego growth of the data centers. So you know, so
22:47
Speaker 3: a lot of investors we just keep that as part
22:49
Speaker 3: of our portfolio. It gives that whole data center exposure.
22:52
Speaker 3: Great you know, management being running great industrial portfolio and
22:56
Speaker 3: you know we trust them can do a great job.
22:58
Speaker 3: And the new the pipeline is coming through is incredible,
23:01
Speaker 3: so we will keep that in the portfolio.
23:03
Speaker 2: Did you go. It's interesting, right, And you're absolutely right.
23:06
Speaker 2: They trying to structure this deal.
23:08
Speaker 3: First of all, if the deal was not shown to
23:10
Speaker 3: most of the people, most of the institutional manager didn't
23:13
Speaker 3: really get meetings with men with the management. You know,
23:15
Speaker 3: one of the big things for investors to invest money
23:18
Speaker 3: is that we're going to meet the management. We have
23:19
Speaker 3: to you know, get comfort and then so we can invest.
23:22
Speaker 3: They want to structure in a way like TUYG, where
23:25
Speaker 3: it'situtional investor gets zero holding and then give it to
23:27
Speaker 3: retail so hopefully there'll be enough you know, interest to
23:30
Speaker 3: buy them. But when you don't have meetings for an
23:32
Speaker 3: institutional investor who is going to support the share price
23:34
Speaker 3: when it was so, I think that's a misstep on
23:37
Speaker 3: their sides. I think they were very confident it will
23:40
Speaker 3: get away, but unfortunately this one was overplayed.
23:43
Speaker 1: Okay, very interesting. Okay, folks, We're going to take a
23:46
Speaker 1: short break and we will be back talking about individual stocks.
23:48
Speaker 1: It will not be advice, if we won't even be recommendations,
23:51
Speaker 1: but it would be individual stocks, which I'm sure it'll
23:53
Speaker 1: be very interested in. Okay, back in the moment, Hello,
24:07
Speaker 1: and welcome back to the final segment of our special
24:10
Speaker 1: show today on Australian shares. We've been talking about the sectors.
24:15
Speaker 1: We've been talking about opportunities and risks coming up in
24:18
Speaker 1: twenty twenty five, and now I just want to talk
24:21
Speaker 1: to Junebilu about specific stocks. Always a tricky area, right,
24:25
Speaker 1: but let's talk about them. If we look at the
24:27
Speaker 1: four banks, it would seem to me that they are
24:31
Speaker 1: all slightly overpriced, and CBA is exceptionally overpriced. I am
24:38
Speaker 1: only reporting. I'd be like what Booker analysts are saying, right,
24:43
Speaker 1: and they're saying the fair value on Combank is about
24:46
Speaker 1: one hundred dollars. It's at about one hundred and fifty dollars.
24:49
Speaker 1: I mean, that's like fifty percent overvalued if that's true,
24:52
Speaker 1: and it happens to be the most important stuff probably
24:54
Speaker 1: in the market. Right we put BHP to one side.
24:56
Speaker 1: It is certainly the most important income stock. So if
25:01
Speaker 1: what's your approach to bank stocks this year?
25:04
Speaker 3: Look, I think the bank stocks that it's very hard
25:07
Speaker 3: to hold them at this price, you know, to be honest,
25:09
Speaker 3: I think when the market, we expect market to be
25:12
Speaker 3: struggled in twenty twenty five, and that's not going to
25:15
Speaker 3: be led by banks, you know, We're going to put
25:17
Speaker 3: money towards other businesses that share price will go higher
25:20
Speaker 3: with the banks itself. You know, CBA traditionally for a
25:23
Speaker 3: good quality bank should be trading at about seventeen times.
25:27
Speaker 3: It's trading at twenty eight. Every metric you cannot justify,
25:30
Speaker 3: you know, So to us, it's very hard to hold
25:33
Speaker 3: those businesses much rather to put money into something else,
25:36
Speaker 3: you know, as you know traditionally, so as a fund manager,
25:38
Speaker 3: our performance is judged against the benchmark, which is for me,
25:41
Speaker 3: it's ASEX two hundred. So we need to buy companies
25:44
Speaker 3: that are better than what Airsex two hundred does, and
25:46
Speaker 3: banks certainly is not going to do that this year.
25:49
Speaker 1: Okay, Now let's talk about on the other side that
25:52
Speaker 1: the miners, I mean, the obvious ones are the big three, Real,
25:55
Speaker 1: PHP and Force squ very much despite their best efforts
26:00
Speaker 1: and all the talk about future facing metals and battery metals,
26:04
Speaker 1: still very much are in our companies, still very much
26:06
Speaker 1: dependent and arn Or still very much dependent on China.
26:09
Speaker 1: So to me, that seems may be their obvious rotation,
26:12
Speaker 1: but it's there's a risk there. That's a that's more
26:16
Speaker 1: elevated than perhaps is obvious because it's so focused on
26:19
Speaker 1: one metal, which is arn ore, and that metal is
26:21
Speaker 1: so focused on the on China's so far on successful
26:26
Speaker 1: attempts to restimulate its economy.
26:29
Speaker 2: Yeah, your concern is very much right.
26:31
Speaker 3: We've seen China tried over the last year and a
26:33
Speaker 3: half try to stimulate its economy and it hasn't happened.
26:36
Speaker 3: My view is that, look, give how you know, given
26:38
Speaker 3: how much it's underperformed, and China continuously coming up with
26:43
Speaker 3: new stimulus, they will just keep trying until they get
26:46
Speaker 3: it right. So we know, if you're better, if you're
26:49
Speaker 3: not buying those businesses, you're betting against China not able
26:52
Speaker 3: to get there, and it's very hard. You know, China
26:54
Speaker 3: has a lot of you know in reserve and eventually
26:56
Speaker 3: they'll get there. You're betting against its policy direction in
26:59
Speaker 3: the old days, and you know you'll lose money. So
27:01
Speaker 3: my view is that given the value presents of those
27:03
Speaker 3: big miners, it does look like it's got a very
27:06
Speaker 3: strong upside from here now. But you're very right, it's
27:09
Speaker 3: very much depends on if the stimulus can reignite that
27:13
Speaker 3: consumer confidence that corporates in China, and so I'll take
27:16
Speaker 3: it for that space. Is that we moving into slowly
27:20
Speaker 3: moving into larger miners. Don't go to the exotic ones
27:23
Speaker 3: because these are the ones that don't make money when
27:25
Speaker 3: the commodity price is weak. You much rather stay, you know,
27:28
Speaker 3: with the larger diversified names that BHP real simply because
27:32
Speaker 3: they got copper. They got quite a lot of other
27:34
Speaker 3: commodities which world will need. So, you know, so the
27:37
Speaker 3: less que to what.
27:39
Speaker 2: May or may not go right or within China. That's
27:41
Speaker 2: how we see it.
27:43
Speaker 1: We should talk about lithium obviously being such an obvious
27:47
Speaker 1: So that's an obvious calamity. It was extraordinary, really, wasn't it.
27:50
Speaker 1: What happened to the lithium price, which which it fail.
27:54
Speaker 3: Look, it just simply comes on down to Initially there
27:56
Speaker 3: was a lot of demand going to ev and the
27:59
Speaker 3: projection for evil production and demand is enormous.
28:02
Speaker 2: At the same time, lithium was actually even though.
28:04
Speaker 3: It's found everywhere in the world, but it's actually very
28:06
Speaker 3: difficult to pull it out. So we had a couple
28:08
Speaker 3: of company try very hard to pull it out. Meanwhile,
28:11
Speaker 3: there's this supply and demand, so there's just not enough
28:14
Speaker 3: lithium for the production of the battery and going into
28:16
Speaker 3: the EV. And then since then we had a lot
28:19
Speaker 3: of production coming through with seeing Australian companies of shore
28:22
Speaker 3: companies with a lot of lithium production come through, and
28:24
Speaker 3: at the same time, demand for EV actually hasn't grown
28:27
Speaker 3: as much as we expected, you know, the instead of
28:30
Speaker 3: growing EV, it's so the usage for hybrid you know,
28:32
Speaker 3: for the battery is less than what we expect. So
28:35
Speaker 3: hence why we started having that sort of collapse in
28:37
Speaker 3: the lithium market.
28:38
Speaker 2: Now where we are.
28:40
Speaker 3: At the moment, lithium price even though it looks like
28:43
Speaker 3: it that has found the bottom, but we're still having
28:46
Speaker 3: supply you know, coming on at this price, which is
28:48
Speaker 3: a concern because you want to see supply pulling the
28:51
Speaker 3: pulling the supply at this price so that means, you know,
28:54
Speaker 3: the price will go higher and that means everyone can
28:56
Speaker 3: make a bit more money for those lithium producers, and
28:58
Speaker 3: it's not happening at the moment.
29:00
Speaker 2: Demand side. China's actually doing okay.
29:02
Speaker 3: It's European market, it's actually pretty tough for the evs
29:06
Speaker 3: you know, sell through. So I think that market is
29:08
Speaker 3: still very tough for you. Look at the list of
29:10
Speaker 3: lithium companies. If you put today's spot rate lithium into
29:14
Speaker 3: their ship into the earnings, they still come down grade.
29:17
Speaker 3: Ernie still come down grade quite a big way. Whereas
29:19
Speaker 3: you compare to the iron ore miners you put today's price,
29:22
Speaker 3: they actually come upgrade. I think in the case of
29:25
Speaker 3: Bullski it's come upgrade thirty forty percent in terms of earning.
29:28
Speaker 3: So I think you want to sit in a company
29:30
Speaker 3: where Ernie's going to get upgraded then downgraded.
29:33
Speaker 1: Right, okay, And that test you towards the big miners
29:36
Speaker 1: at this point, the big diversified miners. Okay. I was
29:39
Speaker 1: looking at something. I was just thinking about the private
29:41
Speaker 1: equity boom and how they come in and they cherry
29:43
Speaker 1: pick our market. And I was looking at Bain Capital,
29:46
Speaker 1: which has now bought Virgin Alliance. It has bought in
29:52
Speaker 1: Synia the old IF financial services group, and so it
29:56
Speaker 1: comes in and it picks off these kind and it
29:58
Speaker 1: bought STA Care Services. That's so diverse, isn't it? If
30:03
Speaker 1: you were But that's a big time stock picking. Can
30:06
Speaker 1: you tell us some of that? It doesn't matter in
30:08
Speaker 1: sector agnostic? Are there certain stocks that you are particularly
30:13
Speaker 1: enthusiastic about this year.
30:15
Speaker 3: And look, I think there are many companies who we
30:18
Speaker 3: always be in a portfolio with a bit of everything.
30:21
Speaker 3: So we've got a bit of growth company. So Premedicus
30:23
Speaker 3: will be our top pick within that name. You know,
30:25
Speaker 3: we think every portfolio should have one, and that's around
30:28
Speaker 3: for Medicus. Every portfolio you have one, and that just
30:31
Speaker 3: it's one of those companies you keep in your bottom
30:33
Speaker 3: drawer and let a compound for you over the year
30:35
Speaker 3: after year. And then we think other parts of portfolio
30:38
Speaker 3: you might have a bit of value, you know, something
30:40
Speaker 3: that might come through, you know in senior as you
30:42
Speaker 3: talk to. We thought that was a value stop for us.
30:44
Speaker 3: And now ban is bidding for the business. That share
30:47
Speaker 3: price done very well. There's another one we really like,
30:50
Speaker 3: which is Treasury, why we actually liked for quite some
30:52
Speaker 3: time and now unfortunately the share price hasn't worked because
30:56
Speaker 3: you know, whenever investor here about China China exposure, don't
31:00
Speaker 3: want to invest in it. But the company business itself
31:02
Speaker 3: is doing quite well. And remember they had the tariff
31:05
Speaker 3: removed from them not very long ago, probably you know,
31:07
Speaker 3: six eight months ago, and they just started going back
31:10
Speaker 3: into China is selling very well. So you know that
31:13
Speaker 3: business training on less than twenty times less than twenty
31:16
Speaker 3: CBA twenty eight and it's going to growth that boudigit
31:19
Speaker 3: and it's got a luxury brand, which is the pen Fall.
31:22
Speaker 3: You know, it's actually just sitting there looking extremely attractive
31:25
Speaker 3: to those private equity players, you know, and our view
31:28
Speaker 3: is that's not going to sit.
31:29
Speaker 2: Here for very long.
31:30
Speaker 1: They had a bid some years ago, didn't they treasure once?
31:34
Speaker 3: Yeah, that's right, and there's been a lot of interest
31:37
Speaker 3: in the market for this business.
31:39
Speaker 1: Okay, can I just run through a couple of quick
31:42
Speaker 1: ones with you CSL. In fact, CSL has been pretty
31:45
Speaker 1: disappointing for quite a long time now. There's virtually no dividend.
31:49
Speaker 1: The share price has really been drifting for I don't
31:52
Speaker 1: know two years. Do you think this year is there
31:54
Speaker 1: any prospect that it will return to the stock it
31:57
Speaker 1: was really.
31:59
Speaker 3: I think it will be a mid range stock now.
32:01
Speaker 3: It's not going to be the market leader in growth
32:03
Speaker 3: because now we have YCE Tech zero, we have the
32:06
Speaker 3: new contenders to be the leader in growth where CSL.
32:09
Speaker 3: The challenge is because it you know, cyclically it would
32:13
Speaker 3: do double digit growth for the next couple of years
32:15
Speaker 3: because earning was depressed because of high you know, difficult
32:18
Speaker 3: to clip blood and you know all that COVID impact
32:20
Speaker 3: And now next couple of years looks good, but that's
32:22
Speaker 3: cyclical recovery.
32:23
Speaker 2: Beyond that, for.
32:24
Speaker 3: A growth company, you need more structural taiale with they
32:27
Speaker 3: haven't got the next product, then the B four purchase
32:30
Speaker 3: haven't demonstrated it's the next leg of growth. So we
32:34
Speaker 3: kind of just have a bit more uncertainty of what's
32:36
Speaker 3: beyond in the next you know, beyond three years.
32:39
Speaker 1: Okay, yes, they had some disappointing products which determinate basically
32:44
Speaker 1: or they didn't go ahead with Yes, all right, now
32:46
Speaker 1: we should just cover the bases here. Traditionally people would
32:49
Speaker 1: always have had the big retailers. We did talk about
32:52
Speaker 1: consumer statements. I was interested how enthusiastic you were, even
32:55
Speaker 1: knowing that consumers discretion had gone off by twenty five
33:00
Speaker 1: percent or so last year. You think there's a lot
33:02
Speaker 1: of energy yet in that spaces there are particular stocks
33:05
Speaker 1: that shine for you. Yeah.
33:07
Speaker 3: Absolutely, I think there's a lot of energy into that space.
33:09
Speaker 3: In fact, I think investors should buy on the dip
33:11
Speaker 3: for any of those companies look good quality ones. We
33:14
Speaker 3: like JBHII into this environment. We like the smaller some
33:17
Speaker 3: of the smaller cab retailers, you know, we like flight Center,
33:21
Speaker 3: you know, we like Axteller, we like Nick Scally.
33:24
Speaker 1: You know.
33:25
Speaker 3: I think that a lot of those businesses represent Preaty
33:28
Speaker 3: coage earnings upgrade cycle.
33:29
Speaker 2: You know, should we headed into this environment?
33:33
Speaker 1: Okay, all right, very good. I'm sure people are taking
33:37
Speaker 1: loads of notes, and I would say listeners that though
33:41
Speaker 1: we're talking to an exceptional fund manager, it is one
33:43
Speaker 1: fund manager's view and nobody knows the future. But it's
33:46
Speaker 1: been a terrific distillation. And very good of you to
33:49
Speaker 1: come on the show and I give your outlook on stocks,
33:52
Speaker 1: because not everybody is brave enough to actually name stocks
33:55
Speaker 1: one by one, and often you're straining to get someone
33:57
Speaker 1: to even mention one. So terrific. And thank you of
34:00
Speaker 1: look with your new venture in the year ahead.
34:02
Speaker 3: Thank you so much, Thank you for having me. I
34:03
Speaker 3: always love to talk about stock anytime with great to.
34:07
Speaker 1: Have you on this show. And that was June Belu
34:10
Speaker 1: from ten Capital Folks. Ten Capital, that is her new outfit.
34:13
Speaker 1: She is a fund manager which has its branching out
34:16
Speaker 1: on her own in her own units this year twenty
34:18
Speaker 1: twenty five. And we do wish you the very best,
34:20
Speaker 1: and we wish you the very best. And I hope
34:22
Speaker 1: that was very useful to you. I'm sure it was.
34:24
Speaker 1: I found it particularly interesting. Okay, we'll be back and
34:28
Speaker 1: be talking to you in the next part of the
34:29
Speaker 1: series in a couple of days