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Trumped or stumped…your sharemarket dilemma · The Money Puzzle

0:10
Speaker 1: Hello, and welcome to the Australians Money Puzzle podcast. I'm
0:13
Speaker 1: James Kirby. Welcome aboard everybody. Now, for investors in shares,
0:18
Speaker 1: the single biggest question I believe this year is how
0:22
Speaker 1: you as an investor deal with the market, the share market,
0:27
Speaker 1: the global market under the influence if you like, of
0:30
Speaker 1: the US and Donald Trump. And if you get this right,
0:34
Speaker 1: I think you will win in the market, as has
0:37
Speaker 1: been the case for some time now since the election
0:39
Speaker 1: of Trump. And if you get it wrong, your share
0:42
Speaker 1: portfolio I think would be something of a sorry sight
0:47
Speaker 1: in a few months time. And the same goes for
0:49
Speaker 1: people who are professionals in the market, who are specialists
0:52
Speaker 1: in the market. And my guest today is a specialist
0:56
Speaker 1: in the market. It's Nick Griffin. He is the co
0:59
Speaker 1: founder and chief investment officer at the Monro Group. The
1:04
Speaker 1: Monro Group is a fund manager has about six billion
1:06
Speaker 1: dollars under management at the moment. It's an active manager.
1:10
Speaker 1: They are stock pickers. They select a relatively small amount
1:13
Speaker 1: of stocks and go with it. How are you, Nick?
1:16
Speaker 2: Good? Thanks James yourself?
1:17
Speaker 1: Good? Thank you. Nice to have you on the show.
1:19
Speaker 1: It's a funny thing as we sit here midyear, mid
1:22
Speaker 1: calendar year on the show for all the dramas, and
1:26
Speaker 1: I imagine a lot of traders or lost a lot
1:29
Speaker 1: of money. But for all the dramas, things have almost
1:32
Speaker 1: back to where they started. On Trump. By that I
1:35
Speaker 1: mean shares. They're not greatly up or greatly down on
1:40
Speaker 1: the market so far, but that's by no means indicates
1:44
Speaker 1: that Trump has settled down. Is Trump and his administration
1:48
Speaker 1: and their activities do they really, to a large extent
1:54
Speaker 1: director affect how your outcomes will be this year and
1:57
Speaker 1: going forward?
2:00
Speaker 2: So great question, and yes, they obviously have some influence.
2:03
Speaker 2: We have a tagline at Monroe Partner's which is called
2:05
Speaker 2: invest in the Journey. We run global equity products that
2:09
Speaker 2: invest in global growth companies, so any company outside of
2:11
Speaker 2: Australia that we think can grow over time. And it
2:14
Speaker 2: has been a journey in the first half of the year,
2:16
Speaker 2: that's for sure. What we're seeing here is the share
2:19
Speaker 2: markets sort of get used to the way Trump does business,
2:23
Speaker 2: which is to, you know, do something really big and
2:25
Speaker 2: see what breaks and then roll it back. We sort
2:28
Speaker 2: of should know this because that's what he did last
2:30
Speaker 2: time as well. But ultimately it's important for all the
2:33
Speaker 2: listeners to remember that ultimately that the global equities and
2:37
Speaker 2: stocks generally follow their earnings. And so what you've really
2:41
Speaker 2: got to analyze out of Trump is he doing anything
2:43
Speaker 2: that's going to change the earnings outlook for these companies.
2:46
Speaker 2: And I would argue in some cases that's correct. Yes,
2:49
Speaker 2: you know, if you're affected by tariffs, your earnings will
2:51
Speaker 2: be affected. If you're expecting an economic recovery this year,
2:55
Speaker 2: that may not happen. But in other cases, like for instance, Microsoft,
2:58
Speaker 2: you know is a good example, it's not really going
3:00
Speaker 2: to change how much money Microsoft's going to make this year,
3:02
Speaker 2: and it's probably not going to change what they're going
3:04
Speaker 2: to make next year. And so many people have used
3:07
Speaker 2: this volatility as an opportunity to invest in things that
3:10
Speaker 2: they feel confident to get to grow earnings regardless of
3:12
Speaker 2: the environment. That's sort of how i'd frame the discussion.
3:15
Speaker 1: Well, I see you as a fund manager, and I
3:17
Speaker 1: see and you are an active fund manager. I won't
3:20
Speaker 1: say old style, that's not because that's probably not what
3:23
Speaker 1: you want to hear, but you're an active fund manager, right,
3:26
Speaker 1: So your proposition to the investor is, look, I'm going
3:29
Speaker 1: to charge you a fee and if I outperform beyond
3:33
Speaker 1: what my benchmark is, I'm going to charge an extra
3:36
Speaker 1: fee performance fee, and I am going to select from
3:39
Speaker 1: you know, thousands and thousands of stocks a relatively small
3:42
Speaker 1: amount twenty to forty in your two big funds, and
3:46
Speaker 1: you have to come with me, as you say, on
3:49
Speaker 1: this journey. This area has been a minefield of recent times,
3:54
Speaker 1: and the big names that we all knew, Midgellen and Platinum,
3:58
Speaker 1: they've all come undone to the uninitiated, you're doing something
4:03
Speaker 1: awfully similar, but you are growing and have had good results,
4:07
Speaker 1: particularly since your inception. So what is your approach? What
4:12
Speaker 1: is your could you try and to steal your distinct
4:14
Speaker 1: approach why you've managed to grow when others around you
4:19
Speaker 1: are struggling.
4:21
Speaker 2: Yeah, thank you for the opportunity. So I think a
4:24
Speaker 2: lot of people look at the share market the wrong way.
4:26
Speaker 2: A lot of people sort of and a lot of
4:28
Speaker 2: those companies you mentioned, they would look at the share
4:30
Speaker 2: market and basically say, this is what we think the
4:33
Speaker 2: global economy is going to do, and we want to
4:36
Speaker 2: be overweight certain countries because that country's economy is going
4:38
Speaker 2: to do better and this other country economy is can
4:41
Speaker 2: do worse, and this sector will be better, and this
4:43
Speaker 2: sector will do worse. And we would say that's just
4:45
Speaker 2: all noise and probably, quite frankly, a bit of a
4:48
Speaker 2: waste of time. The reality is, in our opinion, the
4:51
Speaker 2: equity market is made up of very few great companies
4:54
Speaker 2: and thousand thousands of mediocre ones. The reality is the
4:58
Speaker 2: S and P five hundred is not actually the it's
5:00
Speaker 2: the best five hundred companies in the United States, and
5:03
Speaker 2: it's made up of these exceptional businesses that are doing
5:06
Speaker 2: exceptional things, and that exceptional things that they do create
5:11
Speaker 2: strong earnings growth, and their earnings growth creates share price growth.
5:14
Speaker 2: So when we look at the world, what we're trying
5:16
Speaker 2: to do for our clients to say, we have the
5:18
Speaker 2: entire world to choose from. There's more than thirty thousand
5:21
Speaker 2: listed companies. We're going to do our best effort to
5:23
Speaker 2: pick the most exceptional twenty to forty that we think
5:27
Speaker 2: we can buy at good valuations, that they think can
5:29
Speaker 2: grow structurally sustainably over a long period of time.
5:32
Speaker 1: So you're you're a bottom up, well, it's very much
5:35
Speaker 1: bottom up and very much what you described that you
5:37
Speaker 1: don't make is top down. Okay, so you're associated you've
5:41
Speaker 1: had a good run beyond doubt by being involved in
5:46
Speaker 1: the Magnificent seven stocks and they did very well for you.
5:50
Speaker 1: If we take a long period of time in the
5:52
Speaker 1: last few years as IF fund manager, that's what allowed
5:55
Speaker 1: you to grow. And they are the outstanding sort of
5:59
Speaker 1: champions of you. Like all of the arguments you're making,
6:02
Speaker 1: will they continue to be.
6:06
Speaker 2: Yeah? And so to do this well, what you should
6:09
Speaker 2: do is not look at the economy or the sectors,
6:11
Speaker 2: look at the big structural changes and who's going to win.
6:14
Speaker 2: So that's what we do. We try and identify the
6:15
Speaker 2: big structural changes and you identify who win. You talked
6:18
Speaker 2: about the Magnificent seven. They are the big digital winners. Okay,
6:22
Speaker 2: So everybody on this phone call remembers, you know, when
6:25
Speaker 2: we used to read newspapers on the train. We don't anymore.
6:28
Speaker 2: We read our phone and generally we're looking at Facebook
6:30
Speaker 2: or Instagram, or we're looking at Google, etc. And so
6:33
Speaker 2: they have structurally won from digital advertising. There's no reason
6:36
Speaker 2: why that one continue. They've structurally won by the shift
6:39
Speaker 2: to the cloud. So anybody who hosts anything in the
6:42
Speaker 2: cloud has to host it at three companies. Amazon Google
6:45
Speaker 2: or Microsoft. They're the only cloud providers on the planet.
6:48
Speaker 2: And so what's generally happening here is digitalization is creating
6:52
Speaker 2: network effects around these companies, and they become the advertising
6:56
Speaker 2: company for the world, they become the software company for
6:58
Speaker 2: the world. And so all they're doing is taking share
7:02
Speaker 2: from Channel seven, Channel nine, Fairfax, et cetera, and bring
7:05
Speaker 2: that back to the US. So coming back to my point,
7:07
Speaker 2: they're not really linked to the US economy. They're linked
7:10
Speaker 2: to the point that digital takes share.
7:11
Speaker 1: From their their global they're global and they're base in
7:15
Speaker 1: But I actually when I was asking you at the
7:17
Speaker 1: start that Magnificent seven, they're all in your top what
7:20
Speaker 1: top ten? Would that be fair?
7:21
Speaker 2: Not all of them? No, So we would own four
7:23
Speaker 2: of the seven today. And so we like in Video
7:26
Speaker 2: a lot, we like Meta a lot, we like Amazon
7:29
Speaker 2: a lot, and we like Microsoft a lot.
7:31
Speaker 1: Okay, Okay, So tell us that's who you like. And
7:34
Speaker 1: maybe we could have guessed that to some degree. When
7:37
Speaker 1: I looked at the top holdings in the fund, there
7:39
Speaker 1: were some names that weren't at all tech or digital
7:43
Speaker 1: that you like. Give us an example of some of those.
7:46
Speaker 2: Yeah, So if you're investing in structural changes. There's lots
7:48
Speaker 2: of structural changes in the world. They don't necessarily have
7:51
Speaker 2: to be tech. The really simple one for the last
7:53
Speaker 2: decade is being cashed to card. You know, you can
7:55
Speaker 2: invest in MasterCard or Visa slightly taking but the reality
7:59
Speaker 2: is everybody on this this podcast doesn't use cash anymore.
8:02
Speaker 2: They benefited from that. But another great example for US
8:04
Speaker 2: has been security. We've been investing in, for instance, European
8:08
Speaker 2: defense companies for more than three years because we felt
8:10
Speaker 2: that the war would cause a structural shift in defense spending,
8:13
Speaker 2: and that's what's happened the Ukraine War. Yes, and we've
8:17
Speaker 2: invested in things like homeland security, so we own companies
8:21
Speaker 2: like Axel and Motorolo solutions that you help police with policing,
8:26
Speaker 2: help with body cameras, et cetera, et cetera. So all
8:29
Speaker 2: of these areas are basically you're basically trying to identify
8:32
Speaker 2: the area structural change and identify the winner. Healthcare is
8:35
Speaker 2: another obvious area where we've goun things like Lily and
8:38
Speaker 2: Orice that producers and Munjara. So these are big structural
8:42
Speaker 2: changes that occur in the world, and as a global investor,
8:44
Speaker 2: we can identify the change and investor benefit for our clients.
8:48
Speaker 1: How do you get an edge on that you're sitting
8:50
Speaker 1: in Australia, how do you say that drug in that
8:53
Speaker 1: big farmer company is going to be the one that
8:56
Speaker 1: moves the dial. And what competitive advantage could you possibly have.
9:00
Speaker 2: That's a great question. So what we think and Monroe,
9:03
Speaker 2: in case you don't know, is a word for Scottish mountains.
9:09
Speaker 2: Mountains over three thousand feet of Monroe's and I spent
9:12
Speaker 2: a lot of my career living and working in Edinburgh,
9:15
Speaker 2: and if you go to other places in the world
9:17
Speaker 2: like Edinburgh, there are fund managers who sit in a
9:19
Speaker 2: very far away place in the world and take long
9:21
Speaker 2: term views of the world. When I looked at those
9:23
Speaker 2: fund managers, that's what we wanted Monroe to be in Australia.
9:25
Speaker 2: So we have roughly thirty one people here in Melbourne, Australia,
9:28
Speaker 2: and we are just trying to solve one problem. Who
9:30
Speaker 2: are these exceptional companies We look in these areas of
9:33
Speaker 2: structural growth and obviously we do heaps of research and
9:35
Speaker 2: we travel extensively.
9:36
Speaker 1: Okay, so your cultural training was in that well that
9:40
Speaker 1: Scottish Aberdeen, Scottish widows, Bill Gifford, whoever. They're all in Edinburgh, Canny.
9:47
Speaker 1: We know that, but that's your cultural context, correct.
9:51
Speaker 2: Yeah, And so the word Monroe is you know, a
9:53
Speaker 2: bit of homage, because that's how we want it to
9:54
Speaker 2: be like them. And so to answer your question specifically,
9:57
Speaker 2: we travel a lot, we talk to everybody in an area,
10:00
Speaker 2: so we might know the whole world well, but these
10:03
Speaker 2: areas of structural growth, we know them really well. And
10:05
Speaker 2: so next week I'm off to see these states. I'm
10:08
Speaker 2: off to see in Video Gain. I've been going to
10:10
Speaker 2: see in Video for six years now. We've owned the
10:12
Speaker 2: company since twenty eighteen. Every time we speak to them,
10:15
Speaker 2: they tell us what they're doing. Every time we go back,
10:17
Speaker 2: they're roughly achieving what they say. And so this just
10:20
Speaker 2: comes from experience and research quite frankly, just extensive research
10:24
Speaker 2: to help you find those few winners.
10:26
Speaker 1: And you find getting in front of the companies still
10:30
Speaker 1: very important. Do are you sitting face to face?
10:34
Speaker 2: Sitting face to face for the companies and also with
10:36
Speaker 2: their customers. So in in videos case, for instance, their
10:40
Speaker 2: biggest customers are other companies we own, like Meta and
10:43
Speaker 2: Google and Amazon. And they will tell us that in
10:45
Speaker 2: Video's the best chips. They've been telling us in Video
10:47
Speaker 2: is the best chips for ten years. So that just
10:50
Speaker 2: checks out what the other companies told you. And this
10:52
Speaker 2: is just again but I come back to the first point.
10:55
Speaker 2: Different to our peers. This is all we're trying to solve.
10:58
Speaker 2: We're not trying to solve the economy. I'm not trying
11:00
Speaker 2: to solve what French retail sales are doing. I'm just
11:03
Speaker 2: trying to solve who are the big structural winners and
11:05
Speaker 2: as over time we just the more we do it,
11:07
Speaker 2: the better we get at it.
11:09
Speaker 1: Okay, all right now. One of the things I'm really
11:11
Speaker 1: interested and hear your view, which seems to be the
11:14
Speaker 1: big question for the Australian investor this year and the
11:16
Speaker 1: big question for the big super funds this year, and
11:18
Speaker 1: they're talking about it on stage and they're giving different answers,
11:21
Speaker 1: is whether you should stick with the US, whether after
11:24
Speaker 1: all these years, it can keep doing what it's doing
11:28
Speaker 1: because it's been so good. And there's been some big
11:30
Speaker 1: fund address saying we're coming back to Australia, some saying no,
11:32
Speaker 1: we're sticking with the US. They've been tested, that's for sure.
11:35
Speaker 1: I want to come back to that after a break. Hello,
11:47
Speaker 1: Welcome back to the Australian's Money Puzzle podcast. James Kirby
11:50
Speaker 1: here talking to Nick Griffin of the Monroe Partners Investment Group,
11:56
Speaker 1: specialist really in global investing, offshore investing with a well.
12:00
Speaker 1: As he's explaining the first part of the show, he's
12:03
Speaker 1: really interested as picking companies bottom up based on their
12:07
Speaker 1: numbers and their promise, if you like, of a structural
12:10
Speaker 1: change which gives them a leap in profitability. I mean,
12:14
Speaker 1: obviously you mentioned the video. Why wouldn't you. That's the
12:17
Speaker 1: one that's everyone's favorite right now and it's staying up,
12:20
Speaker 1: which is fascinating. But Nick, what about that issue then
12:23
Speaker 1: that how could the US possibly continue to return the
12:28
Speaker 1: level of returns. It's not that it's been better than
12:30
Speaker 1: the ASEX, like it's been multiples better than the ASEX
12:33
Speaker 1: for years and years. Do you think that's forever now?
12:39
Speaker 2: So from our point of view over the medium term
12:42
Speaker 2: the answers yes, over the medium term. Over the short term,
12:46
Speaker 2: I can see why multiples in the US might be
12:48
Speaker 2: too high and multiples in the UK and France are
12:51
Speaker 2: too low and they should converge with each other for
12:54
Speaker 2: a period of time, but in the end it's earning scritter.
12:57
Speaker 2: As I said before, the Drivestock prices, And if you
12:59
Speaker 2: want to invest in cloud computing, you have to invest
13:02
Speaker 2: in the US. If you want to invest in semiconductive development,
13:06
Speaker 2: you pretty much have to invest in the US. Outside
13:08
Speaker 2: oft SA Tearsom see in.
13:09
Speaker 1: Taiwan, there's the emergence of structural tariffs.
13:13
Speaker 2: Tariffs, and I agree that tariffs are an issue, but
13:17
Speaker 2: they are sort of a one time issue. So it's
13:19
Speaker 2: a one time cost to these companies that will that
13:21
Speaker 2: they'll deal with, but then they'll go back to doing
13:23
Speaker 2: what they do before, which is, you know, be positioned
13:26
Speaker 2: in these great areas. And it's not I want to
13:28
Speaker 2: be clear on the call, it's not the Australian's fault
13:31
Speaker 2: that this is happening in the US. It happens in
13:32
Speaker 2: the US not because they're smarter than US. It happens
13:36
Speaker 2: because they've just got more people and they've got more money.
13:39
Speaker 2: And so if you think about it, and I've said
13:41
Speaker 2: this example a lot, if Google was invented in Australia,
13:43
Speaker 2: it still wouldn't have won. But when Google's invented in
13:46
Speaker 2: the US, everyone looks at Google, so everyone has to
13:49
Speaker 2: be on Google. So everyone looks at Google, so everyone
13:51
Speaker 2: has to be on Google, and then Google becomes the
13:53
Speaker 2: dominant search engine in the world.
13:54
Speaker 1: Someone just reminded me the other day that the Australian
13:56
Speaker 1: company looks smart.
13:58
Speaker 2: Yeah poor.
14:00
Speaker 1: Once upon a time met a bit for Google one time,
14:03
Speaker 1: which would have been really good if Big got it.
14:05
Speaker 2: Yes, well, you can have a lot of funny at
14:07
Speaker 2: Alta Vista, ask Jeeves. Yeahoo, there was exortent. But now
14:10
Speaker 2: Google has a ninety seven percent market share. That's network
14:12
Speaker 2: effects at work. Microsoft does this as well. You're the
14:15
Speaker 2: biggest software company, so everyone uses Microsoft server and has
14:18
Speaker 2: to be on Microsoft server, news microphones Exactly. The same
14:21
Speaker 2: thing's happening at Netflix. And so these network effects around
14:24
Speaker 2: digitalization is concentrating wealth in companies that happened to be
14:28
Speaker 2: listed in the US. Why because they were. They have
14:30
Speaker 2: the biggest population based on money base to start with,
14:33
Speaker 2: not because they're smarter.
14:34
Speaker 1: Do you worry at all that the Trump and this
14:38
Speaker 1: is the second term of Trump, and it's stronger obviously
14:41
Speaker 1: than ever, more confident if you could imagine such a thing,
14:44
Speaker 1: but more confident in his position in power, do you
14:48
Speaker 1: worry that this core worry that the US itself, that
14:53
Speaker 1: it's bond market, that it's currency may be at a
14:59
Speaker 1: period where it's about to decline, Like all empires decline,
15:03
Speaker 1: nothing lasts forever, and it's an empire and it's the
15:05
Speaker 1: beginning of its decline, and Trump, in some ways is
15:08
Speaker 1: the personification of that. What do you say to that view.
15:11
Speaker 2: Of the world. That is a very good question. So
15:13
Speaker 2: I think we can all agree that these companies are
15:16
Speaker 2: clearly stronger and potentially more powerful and more likely to
15:19
Speaker 2: grow than say a French supermarket or a Japanese trading company.
15:23
Speaker 2: So I think most people can see that and they
15:26
Speaker 2: want to invest in the US. But the point you
15:29
Speaker 2: make is a good one. So, but the problem is
15:31
Speaker 2: what happens if the currency goes down? What happens if
15:34
Speaker 2: the bond market riots, etc. These are what we would
15:37
Speaker 2: call exogenous shocks. The currency is less of an issue
15:40
Speaker 2: because we can hedge that out for instance, and vice versa.
15:43
Speaker 2: A lot of these companies are foreign earners, so they
15:45
Speaker 2: actually end up their ownings going up as the currency
15:47
Speaker 2: going down. But the bond market things a big issue
15:50
Speaker 2: because if the bond market at it for in some
15:52
Speaker 2: point then that would cause you know, a significantly bigger
15:55
Speaker 2: economic slowdown, and I can see some reasons to diversify there.
15:59
Speaker 2: The only last thing I'd say is, look, obviously, people
16:01
Speaker 2: have been predicting this for twenty years, and that's twenty
16:05
Speaker 2: years of great returns they missed out on. It could
16:08
Speaker 2: and may happen one day, maybe today's day. Maybe it's not.
16:11
Speaker 2: But obviously that's something we're watching very closely. But fundamentally,
16:15
Speaker 2: the corporates in the US are growing faster, they're more dynamic,
16:19
Speaker 2: they're more advantaged, and so ultimately we prefer at least
16:21
Speaker 2: having at least a good chunk of our money there
16:23
Speaker 2: because the companies we like the most there.
16:25
Speaker 1: Okay, all right, well, fairly for some support for the
16:28
Speaker 1: US market there, Okay, while we have you. For anyone
16:32
Speaker 1: that's listening to you, what they love to hear from
16:35
Speaker 1: someone like you is what you see as hotspots and
16:39
Speaker 1: black spots basically in the coming year, well, this particular climate,
16:44
Speaker 1: this market, what are the sort of companies and you
16:48
Speaker 1: have to some extents illustrated what you do like, what
16:50
Speaker 1: you've always liked. Is there anything new that are a
16:54
Speaker 1: new theme that you are keen on and are there
16:57
Speaker 1: themes that you keep away from?
17:00
Speaker 2: Great And so just to clarify the last question, it
17:02
Speaker 2: doesn't mean we don't just invest outside the US. We do.
17:04
Speaker 2: We do. We do like companies like TSMC, for instance,
17:08
Speaker 2: in Taiwan. And I already talked about European defense stocks earlier.
17:11
Speaker 2: So if we can find structural growth in other parts
17:13
Speaker 2: of the world, by all means, we'll invest in Okay,
17:16
Speaker 2: going forward, this is an exciting time and I know
17:19
Speaker 2: Trump is causing volatility, and I know it's hard to
17:22
Speaker 2: keep track of. But in the background we have the
17:25
Speaker 2: emergence of AI, and so artificial intelligence, we think is
17:28
Speaker 2: probably going to be the biggest structural change in the
17:29
Speaker 2: next decade. This is the fourth tectonic shift in computing,
17:33
Speaker 2: if you think about it. So we went through a
17:34
Speaker 2: mainframe era, we went through a PC era, we went
17:37
Speaker 2: through a mobile era. We're now in an AI era.
17:40
Speaker 2: And so what's going to happen is you're going to
17:41
Speaker 2: connect every device on the planet to the Internet, and
17:43
Speaker 2: AI is going to process that data to give us
17:45
Speaker 2: better outcomes. The beauty of AI, which is really interesting,
17:48
Speaker 2: is it doesn't just affect software and consumer application and
17:52
Speaker 2: infects things like autonomous driving, robotics, like drug discovery, and
17:56
Speaker 2: like security. And so we are finding today companies that
18:00
Speaker 2: can harness this technology are seeing a massive structural shift
18:04
Speaker 2: in their ownings growth at a big structural shift in
18:06
Speaker 2: the attractiveness of their product.
18:08
Speaker 1: Can you give me an example of somebody.
18:10
Speaker 2: Yeah, So I'll give you a couple of examples. So
18:12
Speaker 2: one example i'd mentioned is again those security companies I
18:15
Speaker 2: talked about before. So if you're a company selling security cameras,
18:17
Speaker 2: for instance, you sell security cameras, you can now put
18:20
Speaker 2: software on those security cameras, and you can identify who's
18:23
Speaker 2: at your front door. You can identify threat detection faster
18:26
Speaker 2: and better, and so you sell hardware and now software
18:29
Speaker 2: and software. That's quite frankly, everyone is cool. Everyone's podcast
18:33
Speaker 2: can see is quite useful. That would be one example.
18:36
Speaker 2: If you think about medical technology or MRI technology, you
18:39
Speaker 2: can now get an MRI and potentially identify cancer.
18:43
Speaker 1: Two years earlier diagnostics acceleration.
18:46
Speaker 2: Yeah, and so you basically and everybody would know that
18:50
Speaker 2: finding cancer earlier is obviously what we'd all like to
18:52
Speaker 2: do to stay live longer. So there's a general benefit
18:55
Speaker 2: for using the technology and a reason why people would
18:58
Speaker 2: pay for it. In both those examples, those would be
19:00
Speaker 2: two i'd give you off the bat. But the last
19:02
Speaker 2: one is obviously software. You know, we can summarize this podcast.
19:06
Speaker 2: You can drop it into a GPT and it'll just
19:08
Speaker 2: tell you what the summary was without having to listen
19:10
Speaker 2: to the whole thing. You can summarize the good parts.
19:13
Speaker 1: If you do that, yeah, you're going to miss jokes.
19:16
Speaker 1: Tell me about what you don't like.
19:19
Speaker 2: So what we don't like. So honestly, just mediocre companies.
19:25
Speaker 2: I'm not saying they're bad. I'm just saying that they're
19:28
Speaker 2: stuck in competitive industries that that ultimately I don't have
19:33
Speaker 2: an edge versus say someone else who's looking at it.
19:35
Speaker 2: So i'd give you an example here is like banks.
19:38
Speaker 2: I mean banks are great and obviously in Australia they
19:40
Speaker 2: have done well, but they're not growing that much and
19:43
Speaker 2: you rely on interest rates in the economy and a
19:45
Speaker 2: whole bunch of things that I have a view on,
19:46
Speaker 2: but I don't have an edge. I've got an edge
19:48
Speaker 2: on AI I think we do, and that's how we're
19:50
Speaker 2: making money. Other areas would be you know, a consumer
19:54
Speaker 2: fashion is hard like, it's hard. I'm not very fashionable,
19:58
Speaker 2: but I have people on my team who are fashionable.
20:00
Speaker 2: But fashions change and so it's hard to get a
20:02
Speaker 2: three to five year viewpoint. We've got some companies in
20:05
Speaker 2: this area that we like, but it is harder those
20:08
Speaker 2: And you know, I think you know, things like airlines
20:10
Speaker 2: and stuff are rather anything that's a highly competitive industry. Lastly,
20:14
Speaker 2: anything you know that the Chinese get into. If the
20:17
Speaker 2: Chinese turn up, generally the profits leave.
20:19
Speaker 1: That sounds like the car. That sounds like that sounds
20:21
Speaker 1: like cars.
20:22
Speaker 2: Yeah, cars, Cars is a terrible business, you know, basically
20:26
Speaker 2: margins disappearing at speed in a massive technology race, environmental race.
20:30
Speaker 2: It's hard and all these national champions that are quite
20:34
Speaker 2: frankly going to disappear.
20:35
Speaker 1: Okay, thanks cars, fashion companies. You heard it here first,
20:41
Speaker 1: all right, I have some actually very I've kept a
20:43
Speaker 1: couple of questions off my sleeve for you, Nick, and
20:46
Speaker 1: the fact the very first one is on airlines. So
20:49
Speaker 1: we will be back in a moment with some very
20:52
Speaker 1: good questions for me. Hello, oh, and welcome back to
21:00
Speaker 1: the Australian's Money Puzzle podcast. I'm James Kirby and I'm
21:04
Speaker 1: talking to Nick Griffin, fund manager at Monroe Partners, specialist
21:09
Speaker 1: in overseas investing, primarily the US, but oh anywhere in
21:12
Speaker 1: the world that he thinks he can find value over
21:15
Speaker 1: and above what your ETF is going to do. And
21:19
Speaker 1: your premise, Nick, which I didn't give you a chance
21:21
Speaker 1: to explain, obviously, I mentioned that you have fees. But
21:24
Speaker 1: your proposal, obviously is you're going to beat the benchmark
21:27
Speaker 1: being probably been the Mogen Standy Capital Internationally INDICX or whatever.
21:31
Speaker 1: And to what extent have you managed to do that?
21:34
Speaker 2: So in our call long any product the manner of
21:37
Speaker 2: concentrated Global Growth Fund, which is our relative return fund,
21:40
Speaker 2: we've made it by five percent per annum since.
21:42
Speaker 1: In such Okay, all right, very good. Now, question Anthony.
21:46
Speaker 1: I am interested in the airline sector. This is on
21:49
Speaker 1: the ASEX I hold Quantus and they have had a
21:51
Speaker 1: great recovery, Anthony, they have had a great recovery. I
21:54
Speaker 1: had no idea. I hadn't watched them. You know, everybody's
21:58
Speaker 1: obsessed with them during the allen joyce Vanessa Hudson. Maybe
22:02
Speaker 1: you know it was a nice time to come in
22:03
Speaker 1: to take over an airline in any event, I mean
22:06
Speaker 1: quite just has tripled since the bad days of COVID,
22:09
Speaker 1: and it's one of the better stops of the year. Now,
22:11
Speaker 1: Anthony's question is this, what is your investment take on airlines?
22:19
Speaker 1: And I mean he mentions obvious things nick like like
22:23
Speaker 1: the price of aviation fuel, currencies, conflagrations around the world.
22:27
Speaker 1: But in passing there on the second segment of the show,
22:30
Speaker 1: you basically said you didn't like airlines.
22:33
Speaker 2: Yeah, I'd put this, Yeah, so I'd put this in
22:35
Speaker 2: the you know, it's in the hard camp because you
22:38
Speaker 2: need to I think the viewer poses the question, Well,
22:42
Speaker 2: you need to understand what's happening with fuel, you understand
22:44
Speaker 2: what's happening with demand, you need to understand what's happening
22:46
Speaker 2: with interest rates. These are things that are notoriously hard
22:49
Speaker 2: to predict. And I'm not saying it's a bad investment,
22:52
Speaker 2: and value investors could look at it and you can
22:55
Speaker 2: trade it really well. I would just prefer to say that,
22:58
Speaker 2: you know, software is going to be an increasing share
23:00
Speaker 2: of my wallet over a long period of time, and
23:03
Speaker 2: Microsoft's probably going to get it. And I just think
23:05
Speaker 2: that's an easy event and a longer term bet. And
23:07
Speaker 2: so I just encourage people to say, just as a screen,
23:11
Speaker 2: if you're looking at a company and you can't tell
23:14
Speaker 2: with extreme confidence what the earnings are going to be
23:16
Speaker 2: three years from now, that it's probably not investment. It's
23:19
Speaker 2: a train.
23:20
Speaker 1: Do you actually believe someone sits in front of you
23:24
Speaker 1: and says our earnings in three years time should be X.
23:26
Speaker 1: Do you really take that seriously?
23:28
Speaker 2: I think from many companies in the world you can
23:30
Speaker 2: actually and this is where it helps to be global.
23:32
Speaker 2: You can actually predict that they're in such a strong
23:35
Speaker 2: competitive position and you know that demand will grow. You
23:38
Speaker 2: can predict that whether you want to pay them multiple
23:40
Speaker 2: that you have to pay for it to get that.
23:42
Speaker 2: It's a different story.
23:43
Speaker 1: So this will be utility types companies, and I don't
23:45
Speaker 1: by that, I don't necessarily mean pipelines. I would imagine
23:49
Speaker 1: Amazon to some extent is utility type.
23:50
Speaker 2: Tru fact, Amazon is a good example of this. Amazon's
23:53
Speaker 2: a good example of this. TSMC is a good example
23:56
Speaker 2: of this. Companies that live in industries where they're oligobalistic, monopolistic,
24:01
Speaker 2: you know the industry's going to grow, and yes there
24:03
Speaker 2: might be bumps, but you can say with a reasonable
24:06
Speaker 2: amount of confidence over the next three to five years,
24:08
Speaker 2: that the earnings are going to be significantly higher, and
24:10
Speaker 2: then you're just going to get her out in the multiple.
24:12
Speaker 2: And the multiple is a different conversation, but that's more
24:14
Speaker 2: of an investment. The ones where you can't predict it,
24:17
Speaker 2: you're ultimately trading. And that's okay. People are really good
24:20
Speaker 2: at that, and other people did. It's just not how
24:22
Speaker 2: we do it.
24:22
Speaker 1: The problem with bottom up investing is the course that
24:25
Speaker 1: the on four that the black swan, the thing you
24:28
Speaker 1: can't see coming. Like you mentioned t SMC and I'm
24:31
Speaker 1: sure our listeners know that's Taiwan, the key semi conductor
24:34
Speaker 1: company in the world, based in Taiwan. I'm sure it's
24:37
Speaker 1: earnings are great, it's in Taiwan. There's political risks there.
24:41
Speaker 1: Do you how do you factor that in?
24:43
Speaker 2: Yeah, so obviously that's something I didn't say. I want
24:45
Speaker 2: to say you sit here with confidence and say you
24:47
Speaker 2: think that's going to happen. It doesn't mean it's going
24:49
Speaker 2: to happen.
24:49
Speaker 1: And of course we presume you don't know the future.
24:52
Speaker 2: But there's plenty of companies you can sit here today
24:53
Speaker 2: and you say I can't actually predict this, but I'm
24:55
Speaker 2: going to invest anyway, that's what we don't do. So
24:58
Speaker 2: this is what we think will happen. So I mean,
25:00
Speaker 2: Taiwan does not get invaded, semikin demand's going to go up.
25:03
Speaker 2: TSMC's a monopoly and their earnings will go up all
25:06
Speaker 2: over time and probably double over the next five years.
25:08
Speaker 2: But obviously things can go wrong, and that's what liquidity
25:12
Speaker 2: is for. That's what things like stop losses are for,
25:15
Speaker 2: and because sometimes you're going to make mistakes and you
25:17
Speaker 2: should be obviously aware of that.
25:19
Speaker 1: Actually, the next question is on stop losses, which again
25:22
Speaker 1: I've curated especially for you, Huie. He says capital protection
25:26
Speaker 1: and position sizing is often mentioned as having a large
25:29
Speaker 1: impact on investor returns. I was hoping you could discuss
25:33
Speaker 1: the use of stop losses for your average investor. Now
25:36
Speaker 1: here's something really interesting, Hue. And of course, as always, folks,
25:39
Speaker 1: none of this is advice information, only that Nick I
25:44
Speaker 1: saw reports a few months ago. I knew you. I
25:46
Speaker 1: knew as a fund that you guys were well into
25:48
Speaker 1: the US, and then I saw how the Trump there
25:51
Speaker 1: was the Trump sort of scare, if you like. In
25:54
Speaker 1: when was it February when the market's really tumbled when
25:57
Speaker 1: he launched the tower. He launched the tower. Really, I
26:01
Speaker 1: saw where you had stop losses and at one stage
26:04
Speaker 1: that allowed your That meant your cash, which I imagine is
26:07
Speaker 1: normally sitting at something like five to ten percent in
26:10
Speaker 1: your funds, blew up to thirty percent of your fund
26:14
Speaker 1: So I expect that was useful as long as you
26:17
Speaker 1: applied it very smartly. Afterwards, I don't know how you did,
26:21
Speaker 1: and I know, and I think it's worth putting on
26:22
Speaker 1: the record that this last quarter, I mean, you haven't
26:25
Speaker 1: matched the index in this quarter for because whatever you're
26:29
Speaker 1: up to strategically, which I'm sure you're hoping will work
26:31
Speaker 1: out better. But that's worth putting on the table in
26:33
Speaker 1: an event for a Hue Week about stop losses. They're useful.
26:37
Speaker 1: Can you explain, if you would, what you think about
26:39
Speaker 1: them for the every day investor who's listening to the show.
26:43
Speaker 2: Yeah. So it's a great question, and it's very misdute. Okay,
26:45
Speaker 2: So if you think about it, you're trying to find
26:47
Speaker 2: the top twenty to forty companies in the world, and
26:49
Speaker 2: you're looking at the universe of thirty thousand. Let's take
26:52
Speaker 2: it statistically, you're probably going to make some mistakes. In fact,
26:55
Speaker 2: take it to the bank. You are going to make
26:56
Speaker 2: some mistakes. Every investor will, and to listening to this
27:00
Speaker 2: podcast has probably got a company that they owned that's
27:03
Speaker 2: sitting in the bottom drawer that they've lost ninety percent
27:05
Speaker 2: of their money on and they can't bring themselves to
27:07
Speaker 2: look at it. Seemed like a good idea at the time,
27:09
Speaker 2: but they just and then they just kept hanging on
27:11
Speaker 2: and hang in. We all o that, and trust me,
27:14
Speaker 2: it's easy to do. So what a stop loss does
27:17
Speaker 2: is you just basically pick a number minus ten, minus twenty, whatever,
27:21
Speaker 2: and you force yourself to look at the company. So
27:24
Speaker 2: you don't have to sell it. You just force yourself.
27:26
Speaker 2: We force ourselves to repitch the investment case. And when
27:29
Speaker 2: we repitch that investment case, we say, has anything changed?
27:32
Speaker 2: And if nothing's changed, then you know our mass is
27:34
Speaker 2: still right. We're still happy to own the company. But
27:37
Speaker 2: often if you force yourself to look at it before
27:39
Speaker 2: it turns into ninety percent, you might recognize that actually
27:42
Speaker 2: something's changed. And in this case it was tariff's tariffs changed.
27:45
Speaker 2: The tariff policy was much worse than everyone predicted, including us,
27:48
Speaker 2: And if that has changed, for the company, and that's
27:51
Speaker 2: going to change the earnings, then you should change your view.
27:54
Speaker 2: And so what we're trying to do there is it's
27:57
Speaker 2: a reaction function. We're trying to force ourselves to look
27:59
Speaker 2: at it quickly to change our view. And you made
28:01
Speaker 2: the point earlier. You know, there was eleven search engines once,
28:05
Speaker 2: and I could have been sitting here with my Yahoo
28:07
Speaker 2: stock saying, yeah, who's going to be the one. It's
28:09
Speaker 2: going to be the one. But eventually, at some point
28:11
Speaker 2: it would have stopped out or stop lost. I would
28:13
Speaker 2: have forced myself to look at it. I would have
28:15
Speaker 2: gone I probably shouldn't be in Yahoo, and then I
28:17
Speaker 2: probably would have ended up at Google. So not only
28:19
Speaker 2: does it not only does it force you out of
28:21
Speaker 2: your mistakes, it can often force you towards the winner
28:24
Speaker 2: that you missed the first time.
28:25
Speaker 1: Right. And the stop loss is where you see to
28:27
Speaker 1: the broker, if this stock goes under fifteen percent from
28:31
Speaker 1: where it is, or pick a number ten twenty percent,
28:34
Speaker 1: sell it.
28:36
Speaker 2: So that's a direct that's how it can be interpreted.
28:40
Speaker 2: But that's not what we do. So we're not forced
28:42
Speaker 2: to sell it, We're just forced to review it.
28:44
Speaker 1: Okay, So an alarm bell rings for you.
28:47
Speaker 2: And our alarm bell rings. Yes, and we're reviewing it
28:49
Speaker 2: and then we can keep it. If we all decide
28:51
Speaker 2: to keep it, we can keep it, but we can
28:52
Speaker 2: only keep it for thirty days, and then you have
28:54
Speaker 2: to review it again. And then in thirty days time,
28:56
Speaker 2: you have to review it again, and eventually you realize
28:59
Speaker 2: the mistake, you mate. And I think the simple way
29:01
Speaker 2: to think about this, James, is, Look, the reality is
29:03
Speaker 2: people spend all their time doing research buying stocks, and
29:07
Speaker 2: then they buy them, but they don't do the same
29:09
Speaker 2: amount of research when they're selling stocks. They just assume
29:12
Speaker 2: every one of them is going to be great. But
29:14
Speaker 2: statistically we know that's not what's going to happen. So
29:17
Speaker 2: your cell decision is as important as your buy decision.
29:19
Speaker 2: And so all we're doing is putting some discipline around
29:22
Speaker 2: that rather than just assuming everything's going to be fine
29:25
Speaker 2: the whole time, because as you pointed out earlier, everything's
29:27
Speaker 2: not going to be fine the whole time. You know,
29:29
Speaker 2: and you know, BlackBerry wasn't the smartphone winner, and eBay
29:32
Speaker 2: wasn't the e commerce winner, and you know, and the
29:35
Speaker 2: list goes on, and so you just got to be
29:37
Speaker 2: wary that you're looking in the right place, but you
29:39
Speaker 2: made a mistake, Accept the mistake, and go find the
29:42
Speaker 2: next one. Otherwise it just sits in your bottom drawer,
29:45
Speaker 2: it's away at your head, and it's stopping you from
29:46
Speaker 2: making your next best decision. When mistakes is part of
29:50
Speaker 2: this business. Everyone makes them, including us.
29:52
Speaker 1: So it sounds like you think it's a damn good
29:54
Speaker 1: idea really for someone like all the Hueyes of the
29:57
Speaker 1: world out there to actively have stop last positions on
30:00
Speaker 1: on not on all stocks, I imagine, but on volatile stocks, correct.
30:04
Speaker 2: I think all you're saying is the price is potentially
30:07
Speaker 2: forcing you to say question your view now often most
30:11
Speaker 2: of the time, we decided to keep it Amazon, we've
30:13
Speaker 2: owned for a decade. It would have stoped lost twenty
30:16
Speaker 2: times over that period, and we never sold it. We
30:19
Speaker 2: kept it the whole way. In Video, we've owned for
30:21
Speaker 2: six years. It would have stoped lost twenty times over
30:22
Speaker 2: the whole period, but we forced ourselves to requestion the
30:25
Speaker 2: investment case and forever Nvidia, I can assure you there's
30:28
Speaker 2: another five that didn't work out like that, where the
30:31
Speaker 2: stop loss saved us a lot of money.
30:33
Speaker 1: Okay, terrific, very good, I'm very interesting. I think we
30:36
Speaker 1: leave it there.
30:36
Speaker 2: Nick.
30:37
Speaker 1: We haven't had you on the show before. I'm delighted
30:38
Speaker 1: we did hope to have you on again. Thank you
30:40
Speaker 1: for your time.
30:41
Speaker 2: Thanks very much for having me.
30:43
Speaker 1: Lovely to have you Okay, folks, keep the emails rolling.
30:46
Speaker 1: Love to have some more on the markets too, because
30:49
Speaker 1: we've been distracted by other issues of late particularly super etc.
30:53
Speaker 1: But hey, you know you make your money in the markets.
30:56
Speaker 1: Let's have some questions the money puzzle at the Australian
30:59
Speaker 1: dot com dot Hey, you talk to you soon.
31:03
Speaker 2: Servan