Finding cheap stocks this late in the cycle is getting harder and harder. Index funds have bid up the prices of large-cap stocks to levels not seen since the tech bubble, while mid-cap growth stocks like Afterpay and Wisetech have been bid to dizzying heights. But attractive opportunities are still out there, if you look hard enough.

This week's guest on The Rules of Investing is Campbell Neal, Co-Founder, Managing Director, and Senior Portfolio Manager at K2 Asset Management. In this episode, Campbell identifies one ASX small cap that's on a PE ratio of 10, yields 8%, and has all the hallmarks of a "mini-Macquarie".

"I believe it's like a small Macquarie Bank. It's listed here in Australia ... The stock's done extremely well over the few years it's been listed. I think it's going to continue to grow."

Tune in below and you'll also hear which stocks he plans to short (when the time is right), and why he believes large-cap stocks are the most overvalued they've been for many years.

Time stamps

• 1:22 - How K2 Asset Management was founded
• 2:43 - A matter of expertise
• 3:17 - Why you should never be too big
• 5:59 - You have to be "somewhat indexed"
• 7:15 - Macro or purely bottom up?
• 8:17 - The M.O.V.E. process & the indexing bubble
• 13:32 - What value means to me
• 16:41 - Who is doing the valuation analysis?
• 20:15 - Should you pay up for growth?
• 21:42 - There are times when cash is king
• 23:27 - Some sobering stats from Goldman Sachs
• 25:18 - Waiting for the worm to turn
• 26:15 - Avoid permanent capital loss under all conditions
• 31:16 - A top idea on the short side
• 35:01 - Can Domino's business model keep delivering?
• 37:36 - The 'mini Mac Bank' from PNG
• 41:31 - Lessons learned from Axsesstoday
• 46:11 - How to be an equities investor late in the cycle
• 47:15 - The TINA conundrum ("There is no alternative")
• 49:32 - Campbell answers our three favourite questions.

Books discussed

• The Little Book of Value Investing by Christopher Browne
• John Neff on Investing by John Neff.

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