Let your winners run: AI, commodities, and emerging markets

The European banks and financials index has been the best performing index on the continent this calendar year (as at 26 May 2024). This is one of the "surprise" sector winners we've seen so far this year. In episode 30 of Stocks Neat, I chat to Harvey Migotti, portfolio manager of the Forager International Shares Fund, where we discuss broader portfolio performance, including some of these surprise sectors that have started contributing in 2024.

We go on to discuss AI related companies, China worries, plus overlooked opportunities in other sectors of the market.

The conversation then moves to portfolio management and how changing market perceptions of companies can influence how to know when to let your winners run and when to bank profits.

Timecodes

• 0:00 - Intro
• 3:25 - The first discussion centres on artificial intelligence, particularly the opportunities that lie in adjacent markets such as AI data centres (industrial company Vertiv (NASDAQ: VRT) mentioned), and how many of these have somewhat flown under the radar – there’s more than one way to profit from a theme (“in a gold rush, you invest in the pickaxe manufacturer”)
• 13:58 - Discussing the potentially higher returns on capital in the commodity space due to ESG and other factors. The particular focus is given to the copper story, its recent run-up to multi-year highs and the reasons driving this; a strong demand story stemming from a range of themes that all require copper (EVs, charging stations, data centres, grid capacity extensions)
• 15:58 - We then briefly consider Chinese demand worries and the strong growth of India – another China in the making.
• 18:20 - We also briefly talk about other sectors, including European Financials which has been the best-performing index in Europe.
• 19:53 - The final section of the podcast reflects on lingering market fragility and fear of sectors or themes that haven’t worked over the last decade, which continues to feed overreactions to pessimistic news flow. This has resulted in the momentum-driven market environment witnessed in recent times.
• 21:49 - This narrative makes it important to understand the type of businesses you own and how the market may perceive them differently down the track, particularly when the investment thesis goes to plan. These considerations can influence ‘letting something run’, and banking profits.

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