Warren Buffett famously said: “I buy on the assumption they could close the market the next day, and not reopen it for five years”. We asked Greencape Capital, NAOS, and Market Matters what they would buy today if they had to hold on until September 2022.
Short the whole market
James Gerrish, Market Matters / Shaw and Partners
We’re in the second-longest bull market in history, today clocking up 8 years, 6 months and 14 days. The US market has rallied 276% which is a big number and makes for good reading, however, statistics suggest that we’re extremely long in the tooth of this mature bull market, and we should expect, sooner rather than a later, a drop bigger than 20%.
There are lots of plausible reasons why this won’t happen – the mitigating factors that force investors to think ‘this time will be different’, however, the simple fact remains, markets repeat themselves because individuals/investors are people, and people make the same mistakes more than once.
If the ‘long cash and long caution’ trade unwinds as investors chase performance, pushing stocks into a meaningful top, likely to be in early 2018, look to buy the Strong Bear (BBOZ) from Betashares, and enjoy a leveraged ‘short’ exposure to the ASX 200. Importantly, profiting, or at least hedging a portfolio into market drops really only works if you’re nimble enough to change views, and look to buy quality stocks into the prevailing weakness.
CSL to cement its market leadership over 5 years
Matthew Ryland, Greencape Capital
Greencape would welcome the ASX being shut down for 5 years as fundamental investing would come to the fore rather than short term noise. Before any such closure, we’d be sure to own CSL.
During the 5 years, we’d expect CSL’s differentiated strategy of expanding its plasma collection centre network will prove to be a wise allocation of capital. With IVIG and numerous other plasma derived products seeing continuous demand globally, CSL will cement its market leadership.
During the 5 years, we’d also expect a number of innovative products being launched. One such product is CSL112 which reduces the incidence of cardiovascular events after heart attacks. On a 5-year view, we’d expect this very valuable product (on some estimates worth $40 per share!) to be through its final Phase 3 trials.
MNF’s software to deliver most of the earnings growth
Ben Rundle, NAOS Asset Management
MNF Group is a global provider of telecommunications products and software who own and operate their own Voice over IP (VoIP) network. The company often gets placed in the ‘telco’ category on the market, however it is the high margin software add-on products where a lot of the earnings growth will come from.
They recently announced an exceptionally strong result, with EBITDA up over 34% for the year due to excellent growth within their domestic wholesale business and wins within the government space.
The next 12-24 months could well shape up to be some of the strongest yet, with excellent momentum both globally and domestically as shown through the amount of phone numbers ported in FY17, a full year’s contribution from Conference Call International, and a full year’s contribution from the Point of Presence (POP) facility which opened in Hong Kong during the year. The business has an impressive track record of management execution and capital allocation and we think it is a stock that will be significantly higher in five years time.
When short-sellers get it wrong:
We asked our panellists which stocks the short sellers may have got wrong, Their answers include one of most shorted stocks on the ASX: (VIEW LINK)
The most crowded trades on the ASX
We also asked our panel what the most crowded trades in the market are: (VIEW LINK)