Investors ask themselves many different questions when considering an investment thesis; how fast can the company grow? How expensive is it? How good are the management? But one question they often fail to consider is, 'am I wrong?' Troy Angus, Head of the Australian Equities Fund at Paradice Investment Management, says it’s important for investors to always consider the counter factual.
“When a stock goes up, and you don’t own it, prima-facie, you’re wrong. You should be constantly reassessing the investment case and wondering, ‘what did I get wrong here?”
This is a question they were forced to ask themselves again recently, as expensive technology stocks on the ASX have continued to rally.
Hear the rest of the story in this week’s episode of The Rules of Investing podcast. He also shares one thematic that’s a major beneficiary of recent policies, and his preferred exposure to that theme.
- 2:02 – Troy’s story: from Darwin to London
- 4:42 – The Paradice history and philosophy
- 6:44 – What does the perfect investment look like?
- 7:45 – How does a large-cap strategy compare to small and mid-ones?
- 9:23 – Where are we on the boom and bust curve?
- 12:50 – Are equity prices reflecting our current reality?
- 15:10 - The disconnect between equity and credit markets
- 16:44 – The significant changes Troy’s made in his portfolio recently
- 22:08 – Is it a good idea to chase momentum stocks?
- 23:55 – IDP Education: are the headwinds currently reflected in the share price?
- 27:23 – What to expect from oil markets
- 31:06 – The enduring challenges faced by the financial industry
- 33:33 – An investment Troy favours over the medium to long-term
- 39:32 – Troy answers our three favourite questions
Currently credit markets imply the SP500 should be about 10% lower
Gold historically has had periods where it very significantly outperforms the SP500
Newcrest (yellow) in USD has underperformed its rival, Newmont (white)
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Very useful information without all the jargon. Thank you.
Given the level of quantitative easing, do you expect a currency crisis in mid term and how do you think it will unfold?
Thanks for the question Timothy, I'll pass it on to Troy and get back to you.
Hi Timothy A currency crisis is not our base case for developed market currencies. Currencies are relative stores of value so their value depends on the relative interest rate differentials and terms of trade between two nations like say Australia and the USA. So if both nations Central Banks are engaged in balance sheet expansion (Quantitative Easing) in equal proportion then the FX rates may not change much. Given almost every Central Bank in the world is expanding their balance sheets currencies in aggregate are being devalued versus real assets such as gold and property. So as the supply of paper money increases (QE) investors look to alternative assets, and gold in particular, as a store of value to protect against currency devaluation. This is why we like gold.