SUMMARY KEYWORDS
stocks, inflation, Australia, interest rates, stock pickers, moving, starting, index, growth stocks, cost, companies, inflation pressures, technology, talk, transitionary, informational purposes, podcast, increasingly, discount, prices
SPEAKERS
Daniel Grioli, David Paradice
Daniel Grioli 00:05
So these high profitability with a moat and reinvestment opportunities are these companies still out there or are they getting harder to find?
David Paradice 00:15
The vow heart of the bottom with technology market is becoming increasingly efficient. I do think so it's becoming increasingly impatient, someone speaks and that information is at every single tips. And there's lots of people doing doing what we do. But it is hard for individuals to compete with us. I do feel that this change made the sector way. I have been possibly a lot of people. Because please, blog and some number of fans leaving Australia, otherwise you're leaving Australia or otherwise following up, because it's it's top business visa, there's a big focus on cost in place. Whereas, like, we will, that we will focus should be on what net returns that we had. And when you get this focus on costs, what happens is everything starts going towards what it will benchmark returns, but there are stocks out there that should be worth more than what someone is paying because as part of the index, and that does create opportunities for investors. So active invest over the last couple of years. And this is for all related interest rate related solution writing down what tax credits, there is growth stocks, while the more expensive stocks are wise around the markets random moved up. But when they start moving up in the economy stocks, maybe then you might find that some of the cyclical stocks will start moving up, but because they're not being an index, right, they won't be buff so so you will find that the epic stock pickers right, looking at things with their own mispricing, and one of those Miss prices come around, because all the passive money which is going like that continues to go into the stocks that are popular, they keep on going up the index is just keep going up and people keep on investing in stocks. And that does learn about less popular stocks built on backwards options. Back to stock pickers like ourselves.
Daniel Grioli 02:48
A few minutes ago, when we were talking about quality growth stocks, you mentioned that they're getting a little bit more expensive, and that that's been helped by falling interest rates. And there's been a lot of talk over the last few weeks about inflation, possibly being more persistent than we had thought. We see the US Fed chair is no longer using the term transitory to describe some of the inflation pressures that they're seeing in the US. So do you think we are at a point where for the first time in what is it 40 odd years, inflation may be starting to rise and persist? And if so what might that mean for stocks?
David Paradice 03:33
I know I think there's a possibility of that and I think the transitionary word is probably taking that out it's probably the right thing to do. In the 1960s rates to go sorry motion up to 6% very quickly and then came back down. And I think that that's maybe what some people are thinking in Australia we are saying that low interest rates combined with the pandemic of left lead to victory the good storm with us but as housing and current supply issues that commodity doesn't matter what it is when you're building a house you're trying to ship around. Everything has gone through and through the roof you know containers have gone through as of 2000 and it has those container every everything is is motoring so even for example. We can't, people can't get started. So for example, you, we saw recently was in America. I went to go to a restaurant shut on a Sunday is a good start. Now supposedly that has cost the US GDP $32 billion last year. But of course what happens is that has this I think we're really getting on to get Blaber technology companies in Australia having a massive problem trying to recruit people, and starting salaries have gone through the roof. And given Australia has been stopping migration because of the COVID thing, then what's happening is, you know, the Australian Council would have got these guys migrate got to come to Australia, they're actually now work overseas. So that's means that course, you know, when they're going down the road to go to the supermarket, or how's the weather is the lemonade stand to the country they're in. So, it has a multiplier effect on us, but it is inflation. When you get obviously inflation, you start getting into trades now, and you are seeing you are seeing that happening in various indices, indices around the world and bond REITs, bond yields and long term bond yields are moving out. And now it's it's it is quite concerning. And it does, it does actually change. Stock valuations. In, as I've said before, interest rates when interest rates are going up inflation, when inflation is going up, interest rates go up. And what happens is when when a lot of people look at technology stocks, for example, they will do what they do cause a discounted cash flow with a look at the the cash of a company moving out for growth rate on that, then they'll discount it back to dollars and allow the interest rate these on discount means the higher the value of inflation for outside people discounted cash flows further, then those particular growth stocks will get picked on their valuation. And the economy is picking up and prices going in there. And companies like for example, hotels, which have a big cost base, they'll benefit inflation on hotel rooms, but of course labor will guard back costs by service companies. Generally the cost base will work better. So no, I think I think it's an issue. It could, it could be an issue.
Daniel Grioli 07:29
This podcast is for informational purposes only. It does not constitute financial advice or take into account the particular investment objectives, financial situations or needs of individual listeners. listeners should consider whether any opinions or recommendations in this podcast are suitable for their particular circumstances. And, if appropriate, seek professional advice including tax advice.