Regal's King and Aitken talk retirement, the ASX and the trade he's watching now

There are few figures more influential in Australia's investment scene than Phil King. The co-founder of Regal Funds Management has spent more than 40 years in the game and established himself as a genuine institution.

In a recent episode of Regal's From The Control Tower, Phil King and Charlie Aitken sat down to discuss King's decision to retire after 20 years at Regal and the themes from reporting season. 

On the ASX and reporting season 

King says investors have finally become accustomed to increased volatility around reporting season, but what is surprising this time, is that it doesn't always arrive. 

"It's an interesting time because last year, we saw extreme volatility, and that's probably when people were not expecting it," he said. "But now, sometimes when people are expecting the volatility, we don't always see it. It's a real mixed bag."

"Sometimes we see stocks move hugely, and then the next day they can bounce back. And so I don't think people always know what to expect."

For King and Regal, it's meant remaining disciplined on what they can control.

"We stay focused on the fundamentals, and we try not to get whipsawed around by one-day moves."

He says the obvious story from reporting season is how local earnings are lagging global peers. 

"The big theme coming out of reporting season is that, excluding resources, there's not much earnings growth in Australia," he said. "And that's in stark contrast to the US, where we're seeing unprecedented earnings growth." 

"That US earnings growth, which has never been higher apart from coming out of a crisis, is really turbocharging the US market, and we certainly think that could continue. Whereas I think the returns in Australia will be disappointing until the resource sector really takes a step forward and leads the market higher." 

Aitken says that reporting season has seen the "dominoes start to fall" on the passive bubble that has grown on the ASX, but King believes the bubble could simply be moving. 

"CBA (ASX: CBA) is probably the bellwether for the passive bubble," he said. "And we didn't always know what the catalyst was going to be to burst that bubble."

"The fact that the housing market is now slowing, I think is just going to put these banks under a lot of pressure. And we're seeing CBA fall away a bit. Companies like BHP (ASX: BHP), which is now, as you highlighted, a lot bigger than CBA, are starting to lead the market higher. And we certainly see that will continue."

"One of the things we said about the passive investing is, it can be a bit of a bubble, it's a cycle. And as the money flows in and CBA outperforms, it attracts more money and it keeps driving itself forward." 

"And on the flip side, once it starts underperforming, the money starts flowing away, and it can keep going down. I certainly think that's what's happening at the moment."

One theme they're watching closely is copper, and Aitken says King texted him at 5 o'clock on a Saturday morning about the copper price. 

"Maybe we're watching it too closely, but I think it's going to be higher in a year and a lot higher in a few years," said King. "It seems to be breaking out at the moment. It's very exciting. We've got lots of copper exposure in the portfolio, so I think it's going to be a good time ahead." 

Equities

BHP could double CBA's market cap. Regal's Charlie Aitken explains why

View

On retirement 

On his decision to retire, King says he believes the firm is in a great position and the team has never been stronger.

"It's not a decision that came lightly for me," he said. "In some ways, Regal's been my baby for 20 years. But at some stage, you've got to let the kids leave the house, and I think now's the time."

While he's officially stepping down, he won't actually be leaving the business until June 2027, and will slowly transition to retirement over that time. 

"It's been a wonderful ride. And I look forward to what comes next. But I'm not done yet. I'm still on the tools and looking very much forward to the next few months."