Luke Smith: This commodity will grow 10x in 10 years

The Rules of Investing

Livewire Markets

It’s been a crazy year for virtually every asset class. Commodities have been particularly interesting, though, because earlier this year, when most everything was selling off, commodities went on a bull run! 

It’s a highly volatile sector, exposed to just about every macroeconomic variable there is, so investing in it takes a unique skill set. But as you'll learn, it's a first-order beneficiary of the big trends that will define markets over the coming decades. And that means massive returns. 

In today's episode of The Rules of Investing, Livewire's David Thornton is joined by Luke Smith from Ausbil Investment Management. Luke runs Ausbil’s Global Resources Fund. The fund invests in natural resources companies using a top-down and bottom-up approach. It also goes short to help manage risk.  

Luke explains why he's so bullish on battery metals, how the decarbonisation supercycle will pull commodities along for the ride, the mismatch between the bearish micro-narrative surrounding China and what he's seeing at the micro level, and how he finds companies with relative value. 

Note: this episode was recorded on Thursday November 11, 2022. 


Timestamps

  • 1:20 - Ausbil Global Resources Fund
  • 4:10 - High demand, low supply in battery metals
  • 9:30 - Falling demand in the West, accelerating demand in the East
  • 10:15 - Macro fears distracting from micro strength
  • 11:50 - Positioning through the commodities bull market
  • 12:40 - Lacking investment in new supply
  • 13:30 - Lithium spodumene price goes 25x
  • 16:00 - Lithium, Cobalt and Copper are key for electrification
  • 18:30 - Energy was on a tear before Russia-Ukraine
  • 19:00 - Don't write off fossil fuels
  • 20:50 - Separating signals from noise
  • 24:00 - Don't be negative in a negative market
  • 30:00 - Don't equate Aussie EV penetration with demand for electrification
  • 32:00 - As relative value shifts, so should your exposures
  • 37:00 - Commodities fundamentals are stronger than the macro narrative
  • 41:08 - Betting against the market in 2020
  • 43:10 - A Decarb stock for the bottom drawer
Commodities
Don't let the macro outweigh the micro: How a commodities fundie picks his winners

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This information has been prepared for general use only and does not take into account your personal investment objectives, financial situation or particular needs. Ausbil is the issuer of the Ausbil Australian Active Equity Fund (ARSN 089 996 127), Ausbil Australian Geared Equity Fund (ARSN 124 196 407), Ausbil Australian Emerging Leaders Fund (ARSN 089 995 442), Ausbil MicroCap Fund (ARSN 130 664 872), Ausbil Australian SmallCap Fund (ARSN 630 022 909), Ausbil Balanced Fund (ARSN 089 996 949), Ausbil Active Dividend Income Fund (ARSN 621 670 120), Ausbil Australian Concentrated Fund (ARSN 622 627 696), Ausbil Active Sustainable Equity Fund (ARSN 623 141 784), Ausbil Global SmallCap Fund (ARSN 623 619 625), Candriam Sustainable Global Equity Fund (ARSN 111 733 898), Ausbil 130/30 Focus Fund (ARSN 124 196 621), Ausbil Long Short Focus Fund (642 635 498), Ausbil Global Essential Infrastructure Fund – Hedged ARSN 628 816 151), Ausbil Global Essential Infrastructure Fund – Unhedged (ARSN 628 816 151), Ausbil Global Resources Fund (ARSN 623 619 590) and MacKay Shields Multi Sector Bond Fund (ARSN 611 482 243) (collectively known as ‘the Funds’). The information is given by Ausbil Investment Management Limited (ABN 2676316473) (AFSL 229722) (Ausbil) and has been prepared for informational and discussion purposes only and does not constitute an offer to sell or solicitation of an offer to purchase any security or financial product or service. Any such offer or solicitation shall be made only pursuant to an Australian Product Disclosure Statement or other offer document (collectively Offer Document) relating to an Ausbil financial product or service. A copy of the relevant Offer Document may be obtained by calling Ausbil on +612 9259 0200 or by visiting www.ausbil.com.au. You should consider the Offer Documents and the target market determination which is available at www.ausbil.com.au/invest-with-us/design-and-distribution-obligations/fundtmds. This information is for general use only and does not take into account your personal investment objectives, financial situation and particular needs. Ausbil strongly recommends that you consider the appropriateness of the information and obtain independent financial, legal and taxation advice before deciding whether to invest in an Ausbil financial product or service. The information provided by Ausbil has been done so in good faith and has been derived from sources believed to be accurate at the time of completion. While every care has been taken in preparing this information. Ausbil make no representation or warranty as to the accuracy or completeness of the information provided in this presentation, except as required by law, or takes any responsibility for any loss or damage suffered as a result or any omission, inadequacy or inaccuracy. Changes in circumstances after the date of publication may impact on the accuracy of the information. Ausbil accepts no responsibility for investment decisions or any other actions taken by any person on the basis of the information included. Past performance is not a reliable indicator of future performance. Ausbil does not guarantee the performance of any strategy or fund or the securities of any other entity, the repayment of capital or any particular rate of return. The performance of any strategy or fund depends on the performance of its underlying investments which can fall as well as rise and can result in both capital gains and losses. Livewire gives readers access to information and educational content provided by financial services professionals and companies ("Livewire Contributors"). Livewire does not operate under an Australian financial services licence and relies on the exemption available under section 911A(2)(eb) of the Corporations Act 2001 (Cth) in respect of any advice given. Any advice on this site is general in nature and does not take into consideration your objectives, financial situation or needs. Before making a decision please consider these and any relevant Product Disclosure Statement. Livewire has commercial relationships with some Livewire Contributors.

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The Rules of Investing is one of Australia's top investing podcasts. We interview the leading investment minds from Australia and overseas to better understand their processes and philosophy. After launching in October 2017, there have been over...

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