The biggest opportunity since the internet

The Rules of Investing

Livewire Markets

The internet changed the lives of every person reading this article (and everyone who isn't for that matter) and the fortunes of almost every business in the world. Today, all the largest companies in the world are internet businesses. The biggest media company is Facebook (or shall we call it Meta?), the biggest advertising company is Google, and the biggest retailer is Amazon. 25 years ago, these companies either didn’t exist, or were mostly unknown.

It might seem like the internet was a once-in-a-lifetime paradigm shift. And while it was indeed a true paradigm shift, it may not be once-in-a-lifetime.

According to Nick Griffin, Chief Investment Officer at Munro Partners, there’s another paradigm shift staring us all in the face: decarbonisation. And just like the internet changed our lives and our businesses, so will decarbonisation.

In this episode of The Rules of Investing podcast, he explains the size and scope of the opportunity, and shares one decarbonisation-exposed company that he believes is materially mispriced. We also learn how to avoid selling your growth stocks too early, and why he sold all the firm's positions in Chinese stocks such as Tencent and Ali Baba.

Full transcript provided below. 

Time stamps and topics discussed:

  • 2:06 - Lessons from the journey so far
  • 4:04 - Managing the downside
  • 6:23 - The end of growth? Maybe. But not the end of growth equities
  • 9:48 - Selling Apple too early
  • 14:18 - What Nick and the team do to avoid repeating this mistake
  • 16:10 - What defines a lose: a falling stock price, or an underperforming business?
  • 19:06 - Why he exited Chinese equities
  • 23:01 - Could other industries go the way of the (formerly) for-profit tutoring industry?
  • 25:25 - What it would take for Munro Partners to re-enter China
  • 26:38 - How HelloFresh is disrupting the biggest sector in retail
  • 33:29 - Which of the fund's Areas of Interest are offering the best prices currently? 
  • 35:57 - The areas with the best long-term growth prospects
  • 39:13 - A growth stock that's being mispriced by the market today
  • 42:14 - Nick answers our three favourite questions. 

Book recommendation:

  • The Great Disruption: Why the Climate Crisis Will Bring on the End of Shopping and the Birth of a New World, by Paul Gilding. Available on Amazon and Booktopia.


Hi, and welcome back. I'm Patrick Poke, and you're listening to The Rules of Investing. The Rules of Investing gets inside the minds of leading investors, economists and industry experts and it's brought to you by Livewire Markets.

Today's guest is Nick Griffin, founding partner and chief investments partner at Munro Partners. After a stint with Colonial First State, Nick upended his life and moved to Scotland, where he was a member of Deutsche Bank's highly rated oil and gas team.

Upon returning to Australia, he joined K2 Asset Management, where he was their head of international equities. In 2016, he and his partners founded Munro Partners, where their flagship global growth fund has just passed five years in existence, returning an impressive 16.8% per annum since inception.

In this episode, we learn how to avoid selling your growth stocks too early, why he sold all the firm's positions in Chinese stocks, such as Tencent and Alibaba, and he tells us about the biggest investment opportunity since the internet.

If you're an Apple Podcast or Spotify user, don't forget to subscribe to the podcast so that you don't miss an episode. Or, if you're a Livewire subscriber, hit the follow button at the bottom of this wire to be notified whenever I post content. Not a Livewire subscriber yet? Just head on over to It's free, easy to register and you'll get access to insights from the leading investment minds in the country. That's it for now; I hope you enjoy the show.

Hi Nick, welcome to the show. Good to be chatting with you again.

Nick Griffin

Thanks for having me, Patrick.

Patrick Poke

It's been a couple of years since we had you on. It was a fun chat the first time, so I thought it was about time that we had you back on, and got some of your latest views on the market.

I notice that you've actually just recently passed the five-year mark for the Munro Partners Global Growth Fund — pretty big milestone there — and you've managed to rack up some pretty impressive returns along the way: 18% per annum, or a little bit over, over five years. What have been some of the most unexpected surprises along the journey so far?


Thanks Patrick, and thanks so much for having us. So yes, we did just rack up our five-year anniversary, which was an exciting day for us, and, as you said, at 18% per annum. I suppose what was unexpected is that it actually worked out, I suppose. That the maths actually added up in the end.

It's funny when you look back at it, when we invest globally, when we look at our global growth funds, we sort of build research packs for every stock we invest in.

Every company has to pass a hurdle for investment. We have to be able to mathematically prove it can double within five years. So that's 100% return within five years, which roughly equals 15% per annum.

And our simple mantra is that earnings growth drives stock prices. So if the price/earnings can double in five years, we generally think the share price can double within five years. That's essentially what we try to prove with every single stock idea that ends up in the Munro Global Growth Fund. Obviously some work out, and some don't.

And the rest is, how do you work out the ones that are going to work out and do well, and how do you remove the ones that don't? But ultimately you should be able to construct a portfolio that does roughly 15% per annum through that time horizon, and that's effectively what happened. And obviously, there's lots of bumps and twists and turns along the journey.

The maths prevails in the long run. If the earnings grow, then the share prices will grow and the share prices will follow the earnings over time and that's what happens. So I suppose the biggest surprise is that our maths was right and our risk-management controls worked along the way to remove the losers and focus on the winners, and ultimately drive ourselves towards that double-digit return target, which is what we managed to achieve.


You managed to do all that without — correct me if I'm wrong — without any negative years as well. How do you actually manage that downside? Obviously, everybody likes 15% per annum returns. I'm sure we'd all love to double our money every five years. But doing so without significant draw downs and negative years is a pretty hard task. What are some of the downside protection measures you used to achieve that?


It's an important point you make. As we pass our five years, we're actually doing a rebranding at the moment, Patrick. And that rebranding will probably be out by the time this recording is out. And we have a new catch phrase that Taylor and Bianca and Jon have come up with here at Munro Partners, which is called Invest in the Journey. It is always a journey.

The path to 15% per annum returns, unfortunately, is not a straight line. I wish it was. But it's just not. For every company you invest in, there are twists in the tale as to how it gets to where you get to. And then along the way, there are also the market gyrations that we deal with.

Part of our success here at Munro Partners is we do run the Munro Global Growth Fund, which is Australia's only absolute-return, global growth investment company. It's our best global growth ideas, but with some downside protection tools. And these are things like the ability to short-sell. The ability to hold up to 100% cash. The ability to buy put options on the market. The ability to manage the currency.

So what all those tools do is just smooth the journey for your clients. Ultimately, those tools have helped us through periods like COVID, et cetera. But also, and fundamentally, the companies were investing and were being driven by these big structural changes that are happening in the world. And those structural changes are ultimately driving their earnings growth, regardless of what happens in the world. Regardless of the political situation or the interest-rate situation.

E-commerce will take share from regular commerce regardless. Cloud computing will take share regardless. And ultimately, it's the quality of the companies that we're investing in and the earnings growth that they're producing that the market will keep coming back to over time.

And everything else is just short-term bumps that we do make an effort to manage, but really, at its core, it's the quality of the companies you invest in and your ability to manage your risks around the ones that you've got wrong along the way.


We've seen a lot of macro commentators and value investors this year, Jeremy Grantham for one example, who has been calling the end of the growth era. A lot of it is centred around inflation increasing, and the long outperformance that growth has seen; historical outperformance of value. Why do you think that global growth remains the place to be in the years ahead?


We're talking about growth equities here, not GDP growth. Importantly, it is the lack of GDP growth that is creating this good environment for global growth equities, because it is the low-growth world we live in and the low interest-rate world we live in that does create this good environment for growth equities.

So we're not going to say that's not true — that is true. That's been with us for a while now, and if you were to pose me a scenario where interest rates were going to go up dramatically or inflation was going to run rampantly out of control and we saw interest rates of three, four, five percent again, then I would agree — global growth equities will struggle through that transition period of interest rates going from one to five. That is true.

But if you just take a bigger step back, the reason why we're in this period, and the reason why this period exists — is more prevalent today than it's ever been — is that interest rates are low because there's too much debt in the world. We racked up a lot of debt during the financial crisis. We never paid it back. And so we can't actually cope with rates being higher.

We just had the COVID crisis, and we've racked up even more debt, and so now we can't even cope with rates going to 3%. So yes, there's a scenario where rates could go back up to say one to three, and cause a little bit of volatility, but this concept that interest rates are going to get to five, six, seven percent, I find very hard to believe. Because ultimately you'll end up in a big recession and rates will go back down again.

So the first thing you have to do is, are you comfortable with the interest-rate environment, and I'd say broadly we are. The second thing you have to point out is that ultimately, we are in this low-growth environment because we are reaching the ends of what the world can create in terms of growth. So we can't lower rates much lower.

And we're effectively in this low GDP environment. And from that point of view, most of the companies that we're investing in and most of the profits that we're making are out of things that are going through a transition, either the smart-phone transition or the cloud-computing transition or the energy transition. And those opportunities will continue to present themselves, and they'll continue to present themselves because we know that technology's getting faster. We know that we need to build these transitions at a faster and faster rate.

From our point of view, the environment for growth equities is as exciting today as it was when we started, as it was 10 years ago, and that's because we know that computing power will accelerate from here, and we know that the energy transition is on our doorstep.

So provided you take that step back and you're comfortable with the overall environment, these opportunities have presented themselves for decades now, and will continue to present themselves into the future, and our job as your global growth investor is to go and find them.


One of the common pitfalls, I guess, for growth investors is selling too early, whether it be Afterpay, Amazon, Bitcoin, even Uber. I'm sure anybody who's been around markets long enough has probably got a story of the one that got away. It's particularly important I guess, for someone like yourself, where you've got these companies that can grow for long periods of time.

Before we get into the how and the why of it, I was hoping you might be able to give us a bit of a story perhaps, of one from your past where you have let it go too early. What's one that got away for you?


Oh, there's so many. I'll give you a really simple one, okay? And that may help people understand the story and how these transitions work. So if we just take a big step back and maybe it comes back to your question around why growth will continue to work, is what a lot of people have missed in the last two decades, or at least particularly in the last decade. This comes back to your Jeremy Grantham comments.

People, big macro guys, they always like to sit there and say, "The macro economy's going to do this and that's going to effect the equity market this way." Does that make sense? And they'll just say, "Inflation's going to do this and the equity market's going to do that." And broadly, on a short three to six month view, maybe even on a 12 month view, that could be correct.

But what they consistently miss is that the equity market is not actually the economy, okay? The equity market is the top 500 companies in the United States. It's the top 200 companies in Australia. And these companies are growing vastly superior than say your average small business or pizza shop on the corner or pharmacy business.

And they're managing to do this usually in the last decade or two via digitalisation. Digitalisation is effectively allowing companies to grow well beyond their borders, and well beyond the country that they live in, and well beyond all these other places. A classic example is in Australia. Afterpay, an online buy-now, pay-later in Australia, and then they take it to the US and it works. They take it to the UK and it works. And so it goes from effectively to less than $1 billion to $14 billion in a very short space of time.

On a much grander scale, that's effectively what Google's been doing since its IPO (initial public offering). Google's effectively gone from $50 billion to $2 trillion. And continuing to grow share. People are just missing this fact that these companies are growing beyond their borders because of digitalisation.

And as they grow because of digitalisation beyond their borders, it's beyond what most normal people who look at the market think about when they say, look at CBA or BHP. People have just completely missed these mega caps. And over the last decade, I've had so many conversations with people as to how big could these companies get, and we'll just pull out the spreadsheet, and say, "Well, mathematically, they can get considerably bigger from here, because there's still so much areas for them to grow to."

Biggest miss, or one we got off too early, was probably Apple. We found it in 2009 at 15 times earnings. The iPhone had just come out. Nobody thought the iPhone was going to be a big deal — they thought it was a niche product.

A bit like people think about Tesla today. And ultimately smartphones took share from feature phones. Up they grew, and you rode this smartphone cycle for Apple for the best part of seven years.

We owned it from 2009 to 2016, and we sold it in 2016. We'd made about six or seven times our money. We thought we'd ridden that whole S curve of disruption of smartphones and what we missed was that Apple would use that software to move into payments. That ecosystem was so much stickier than anyone thought about. And all the other things that they could drag into it.

That's a classic example where we've got off a little bit early. I think we missed the last 200%, unfortunately, which would have turned it from a seven bagger into a 21 bagger, if you do the maths. So from that point of view, that would be the one that we got off too early. And that's not a mistake we're planning on making with something like Google, for instance.

Which, would you believe it, even after 20 years since its IPO, or nearly 20 years since its IPO, was one of our best performers this year. And I find it staggering that people still can't value Google properly today versus its potential growth. And this year is just a classic example of that.


What is your process for selling stocks so that you avoid getting sucked into that trap? How do you prevent yourself from falling into another Apple situation?


I think it's important to think about what your one-year price target is and what your five-year price target is. So we would set a five-year price target and it would roll going forward every five years. And your one-year price target is, is this company just a bit ahead of itself? And so the important thing to remember is companies get ahead of themselves all the time.

They've had a huge run and you feel like you've got to sell some and maybe you should sell a little bit. But if your five-year price target still has upside, ie, there's still areas for this company to disrupt, then don't get off just because the company's a bit ahead of itself.

And often you'll find yourself, "I'm going to sell it because I'm worried about interest rates. Or I'm worried about inflation. I'm worried about Donald Trump."

That's got nothing to do with whether Apple or Google or Afterpay or Amazon is going to continue to execute. These companies are just there executing every day. So their share price is just a reflection of that. And so it's important to remember that there are only a few winners. Your job is to find those few winners and run them for long periods of time. Your other job is to recognise when you've got a loser really quickly and avoid it. That's the pure art of what you're trying to do day-in, day-out, every day.

And when you're running those winners and they're winning, if the facts haven't changed, you don't need to change your view. Valuation is important, but it's not the be-all and end-all on a very long-term view, if that makes sense. So you can manage volatility, that's fine, but don't completely sell out of a stock just because you're worried about something that has nothing to do with whether that company has finished executing on its opportunity. If the facts haven't changed, don't change your view.


You mentioned cutting your losers. For you, is a loser a stock that's losing money? Or as in the price is going down? Or are you more focused on what is happening inside the company? If you buy a company and it falls by 20% for no reason, is that something that concerns you? Do you want to buy more, or are you concerned that the price is falling?


It's a great question. It sounds really simple — to avoid the losers. To avoid the Blackberrys or the eBays or the Yahoos of the world. But at the time, they all seemed like a good idea. The reality is, is every single person listening to this podcast has a company that they've probably lost 80% on. They bought it at the time it was a good idea, it's currently sitting in the bottom drawer and they can't bring themselves to look at it. I can assure you fund managers are exactly the same.

You just need a process to recognise you've made a mistake. We use triggers or price as a way of recognising, so your point is very good. If a company falls 20% either from cost or from peak, you should review it — top to bottom review.

From our point of view, that triggers an investment review. We're not forced to sell the stock, but we're forced to completely review the investment case. "Is there something we've missed here?"

And if there's nothing we've missed, we'll decide to keep it. It's just the price has fallen 20% and it will be fine. But we can only keep it for 30 days and in 30 days time, we have to review it again. Thirty days time, you have to review it again. So as you keep reviewing it, you'll eventually realise, Blackberry is not the smartphone winner. The touch keyboard's not going to be the big winner. It's the touch screen.

Or that eBay doesn't have logistics in the back end, which is stopping it from being a good e-commerce provider. Eventually you'll find out what you've done wrong, and that has a twofold benefit. One, it allows you to step aside from the company that you don't think will end up being the winner. And two, it will then allow you to take that capital and go put it into Apple, or put it into Amazon. Or go put it into Afterpay or PayPal, et cetera.

Generally, whenever you do this, you're always looking in the right place — you just happened to pick the wrong company. There's nothing wrong with that — it happens all the time. It's mathematically impossible to be right all the time. The top 50 companies make up 50% of the entire return of the US stock market in the last 90 years. And in that time frame, 25,000 companies listed. So don't be ashamed that you've made a mistake. Just have a process for recognising it and moving on, because that will obviously then help you find your eventual winner. And that winner will run for a long period of time.

So that's what we do and that's the real trick to it, I'm afraid. That's the key. It's about running your winners and identifying your losers quickly and moving them on.


Easy to say, but difficult to do in practice.




China has been the source of a lot of news lately, regardless of whether you're in Australia or the US or what. But there's been another round of government crackdowns on tech companies, on education companies, on all kinds of things, not to mention the well-publicised relationship difficulties that we've been having with China. But one thing that stood out to me, despite you having a pretty broad global mandate, was that there was little, possibly no, exposure to China at all.

I couldn't see Alibaba or Tencent in your portfolios, which are usually popular ones with global growth investors. What is your reasoning for excluding this part of the market from your portfolio?


Great question, and topical. If you looked at this portfolio this time last year, Alibaba was the biggest investment in the portfolio. We had a 7.5 percent position and Tencent was in the top 10.

We have changed our view here, and I'll just talk you through why. From our point of view, it comes back to that trigger process. The initial sign that something was wrong, and many will argue there were signs well before that, was the pulling of the Ant IPO in December 2020.

It stopped the path to monetisation of our investment in Alibaba. That caused us to halve our position in Alibaba quite quickly, because the facts had changed. So we'll change our view quickly, and we did. After that then, it really was the trigger process.

As these companies triggered, on a 20% fall from peak, which they did (Alibaba did in February, and Tencent did in April), the price was telling us there was a problem. And the more we looked at it, the more we realised there was a problem. We did the reviews that we talked about. And the problem we had is we couldn't confidently say what the earnings of these companies were going to be in the long run. The regulatory process had gone to the point where companies were being investigated and fined, and paying the fine and thanking the regulator for fining them, all within the space of six weeks.

Tencent was announcing on their earnings call that they'd donated US$15 billion to a prosperity fund that the government had set up without really consulting us. And these are all things that we understand that they need to do to operate in the country, but it just meant that we couldn't actually work out what the earnings of the company were going to be in the long run.

The P/E becomes irrelevant if you don't know what the "E" is. Ultimately we stepped to the sidelines through March to May and we sold all the stocks, and since then others have come to the same conclusion. The calamities have increased. The regulation has increased, the earnings are harder to work out and people are leaving.

The last and most important thing I'll say here is, look, we are very positive on the Chinese economy. We are very positive on Chinese population growth, on urban wealth, and for a company like Starbucks or Nike, they will happily exploit that.

Our issue is mainly around the listed Chinese corporates that are ultimately being used to prop up other parts of the economy. From our point of view, our capital doesn't need to be there. We don't have to be in China. We have other opportunities we can invest in. And ultimately, we've just chosen to take it away and put it somewhere else.

Will we come back? Maybe. We'd be looking for a lot more clarity on this regulatory situation and it really comes down to these checks and balances that you'll get with a US company, or a UK company or Australian company, but you won't get in emerging markets and right now, you particularly don't get it in China. So from that point of view, we've moved on.


We saw in the for-profit tutoring industry. Basically a whole industry got turned from a for-profit industry to a not-for-profit industry overnight. Do you have concerns that could happen to other industries as well? Or do you think that's probably a fairly localised thing that won't spread?


I think my concern is I have absolutely no idea, Patrick. The reality is, the people who are invested in that industry would have told you two weeks before that they will never do this, and then they did it. From that point of view, my big insight on China is even the people on the ground often don't really know what's happening.

But what I do know is that they can do it, and they have done it. They've done it to the education industry. That was a big shoe to drop, and obviously we were out of the investments by then. The second thing they've done is obviously with Macau, with the review of the leases. People who know the area well will tell you this is just the way that they move forward. And I have sympathy with that view. I have complete sympathy with that view.

It is an emerging market. We just need to respect that, and respect that this is how they feel the stones as they cross the river, in the Chinese proverb I suppose is the one that they use. We're just a global fund. We don't have to be invested there. We felt the risk/reward was not good at the time, and stepped to the sidelines. It doesn't mean we won't come back, but I suspect a lot of people will come to the same conclusion as us. Including local money in China.

So put it simply, right? If you do that to the education sector, or you do that to the Macau sector, why is foreign capital going to go to China? It's not. It's going to leave. And even domestic capital's going to leave.

Just have a think about your property prices in Sydney and Melbourne. If you're a Chinese person who's done well and your business got wiped out overnight, I'd suspect you're going to try and leave.

I think a lot of capital's going to leave China and we just want to be out of the way while that happens. In the end, I still see very strong prospects for the economy and very strong prospects into the future. I think it's very unfortunate this has happened. We're incredibly disappointed. We were very excited about our investments in China, but the facts, as I pointed out, have changed. And so we've changed our view. That's why we stepped to the sidelines.


What would you want to see before you re-entered that geography?


I would like to see some sort of checks and balances. From our point of view, as problematic as the investment in Facebook is, and two years ago we probably did talk a lot about Facebook, the reality is Facebook can appeal to the courts if the FTC (Federal Trade Commission) tries to break them up. Facebook can appeal against its fines. Facebook has won cases against the DOJ (Department of Justice). Google has won cases against the DOJ.

There is a two-system segmented government in the US. There are the courts that you can use as a facility if the legislature legislates against you. It's highly unlikely that's ever going to happen in China, but you would like to see some process of being able to appeal these situations. And some elements that our capital will be looked after if we put it there.

At the moment, that's not there. The only other thing that could happen is it gets so priced in that you end up buying it anyway, because the marginality suggests that the capital has to come back there. And I'm sure some people will do that. We'd rather miss the first 20% than try and predict that.


Let's talk a little bit closer to home. Since we last spoke, face-to-face, not for a podcast, I have been converted to HelloFresh. So thank you for that. I'm now a keen customer, despite my initial scepticism.

One of the things that I'm curious about is competition. As much as the product is brilliant, what is stopping a company like Woolworths or Coles from jumping into the market, taking advantage of their scale and distribution? Or your overseas equivalent, your Tescos in the UK, or Walmart in the US. What's stopping those companies from jumping in and gobbling up HelloFresh's business in much the same way Microsoft did to Netscape or the like?


I agree. It's important to stress that HelloFresh is just one idea in the fund. It's got a bit of attention because everyone's ordered the product and has a view on whether the sweet potato they got was a good one or a bad one, or whether they're happy with what's going on. And I understand the problem; the company is having some logistical difficulties at the moment, like everyone is. So people probably aren't having as good an experience as they might have had over the years.

I think the best way to think about is a bit like Amazon. When we look at HelloFresh, we look at the largest part of e-commerce that's not been disrupted yet, which is groceries.

If you think about e-commerce, first thing you probably bought online was a piece of electronics or maybe a toy, or even a DVD. Something like that would have been the first things you bought online.

And then over time, you got used to buying other things online. So you eventually started buying clothes online. When you first started doing it, you're like, "Ugh, it doesn't fit. I can't return it." And then you got used to doing that, and then now, you even buy furniture online. You buy car parts online. And so the one that hasn't disrupted yet is groceries.

Until 2019, only 3% of all groceries were sold online in the United States. And it's the biggest market of the lot. it's over $1 trillion. So we were looking for a way to disrupt groceries. The thing you have to get your head around, HelloFresh is not a subscription meal service. I know that's what it is, but it is effectively just another way of ordering your groceries online.

So rather than ordering all your groceries online like you get delivered, you order these meal plans that ultimately take away the wastage and make your daily food shop, quite frankly, more simple. And if you speak to anybody who's a user, they say, "I like it, because I don't have to think about what I'm going to cook for dinner tonight." That's essentially why they like it. It's about convenience, not cost.

Amazon was exactly the same. We spent a decade telling people, e-commerce is not about price, it's about convenience. It's about getting something to your door, on time, ready, fresh, ready to go. In Amazon's case, it was one-day Prime. That's all HelloFresh is doing.

So yes, you're right, lots of other people could do it, but they're not going to do it as well as the leader does, because they don't have the distribution centres that they built, they don't have the facilities, they don't have the ability to throw capital at it, to create the experience that you're getting, to create the network effects that will create what happens.

I'd argue Woolworths and Tesco are just as good a chance of being able to do it as David Jones and Myer were of setting up a decent e-commerce business to compete with Amazon. In theory, they could have. They had just as good a chance of doing it, because logistically they've got stores. They need people walking around the stores, picking up the things, putting them in the boxes, whereas HelloFresh has an automated line.

HelloFresh knows this, so they just spend more money than everyone else to make sure they win. This is the Amazon model and HelloFresh is just doing it to groceries and so that's why we like it.


It reminds me a lot of the old disruptor's dilemma, where a company doesn't want to disrupt its old business in order to get new business, or to prevent a new disruptor from taking their business.


It's partly that, but it really just comes down to the way you're set up. In Australia, it's hard to get your head around, but if you go to Ontario, for instance, in Canada, has four large distribution centres encircling city of eight million people, and those four large distribution centres is within 40 minutes of every house in Ontario.

This basically means when you order something, it's packed up, ready to go within six hours. And then it just takes another six hours or 12 hours to get to you. That's one-day shipping, done, okay? If you do the same thing from a JB Hi-Fi, or a Best Buy, or a physical retailer, their inventory is stuck in stores all over Ontario. Or JB Hi-Fi, their inventory is stuck in stores all over Melbourne. They can't physically get it to you.

They can do click and collect, which I think is a great idea and is a great way of fighting back against a logistics player like Amazon. But that's essentially how they're doing it. And HelloFresh is the same. So if you started ordering your meal kits off Woolworths, ultimately they'd have to use the store to fulfil it, and that would be people walking round the store. Or, they have to build a whole new fulfilment centre, which they haven't built yet.

So HelloFresh just got the lead, which gives you the customer satisfaction, which gives you more customers, which gives you a bigger lead, which gives you the customer satisfaction, which gives you more customers, which gives you a bigger lead, which allows you to spend more money. And that's just the Amazon model.

We've seen it time and time again in technology. We're hopeful it will work out with HelloFresh. It's important to remember it's a small company. It's a competitive field, but it's only a 12 billion euro company today.

A couple of 33 year olds are running it. Started it straight out of school in Germany. They've beaten off hundreds of meal kit suppliers to be the number one in the world today, having delivered the first 10 boxes themselves. It's just a great story. But it's important to remember, coming back to what I said before, the runway in front of it is ginormous. It's the biggest town in the world.

Obviously other people will win. We don't expect HelloFresh to win it all itself. It only has to win a very small amount to be successful from here. We're not saying Woolworths and Coles won't do it, but we're just saying HelloFresh will take share. And it only has to take a little bit of share for the investment to be incredibly successful, because it's actually number one in what it does in 14 countries around the world.

So it's got another 14 countries, at least, to go to. And more share to take. So from that point of view, that's why we like it. It's got this huge runway in front of it. Facts haven't changed, still the leader. Competition will come, but they can all win together. And it's not expensive, so that's why we like it.


Over the last six months or so, at various stages there have been a lot of different sectors and stocks sold off, particularly if you're going back earlier this year. A lot of growth sectors were selling off. I'm curious which of your areas of interest are now giving you the best hunting grounds for new opportunities in light of some of those more attractive prices.


Last year was a very strong year for us, and I think the fund did more than 40% last year. So this year is very much that mid-cycle transition year as we tighten rates, and there are inflationary pressures. And all these things are going on which are causing volatility in a number of our stocks throughout the year. And this growth/value stuff that you've been talking about earlier.

If you take a longer term view and decide that the rates environment should stay reasonably stable and we are in a low-rate environment, and ultimately I get the inflation story, but ultimately it should be transitory in the future.

Then, and even if it's not, like even if rates do back up and it creates this big correction, ultimately it's important to remember, interest rates don't change who wins and loses in the long run, they just change the price you pay for them. So these movements are creating opportunities for the winners, because the winners will still be the winners. It's just a function of what price you buy them at.

From our point of view, the two areas I'd point you to where there's been volatility this year but we're actually just getting to the point of acceleration, which is when we get really excited, would be the climate area of interest. This is the energy transition. The de-carbonisation of the planet is clearly accelerating. These stocks had a huge run last year as Joe Biden got elected, and they really paused a bit this year.

But ultimately, the opportunity is still very much in front of them. So the climate area would be one I'd flag. And the other one that's actually done well this year, but has struggled a bit recently, but again we think is on the cusp of acceleration, not deceleration, would be the semiconductors. The semiconductor space is probably, as we move into 2022, an area where you're going to see significant earnings surprises into the future. And the stocks are not expensive from our point of view.


Taking a slightly longer term perspective, not so much looking at the volatility that we've seen in the last year or so, but more just thinking about the next five, 10, 20 years, which of the areas of interest do you think have the biggest growth opportunities ahead of them?


The answer is the same as the last one. It is the climate and the semiconductor. The other area, obviously, is payments, where there is a lot of disruption occurring at the moment. We're sort of at this hand-off of fintechs, where cash just disappears altogether. There are a lot of interesting fintech companies coming along. And that takes you into cryptocurrencies and all these other things.

There's obviously a lot going on in payments, there's a lot going on in de-carbonisation and then there's the semis. Clearly de-carbonisation is the big one.

Let's just talk about that one specifically. I talked about Apple as the first smartphone coming along in 2008, and where that's taken us to. Back then, we were investing in Apple and smartphones were 10% of all phones sold in the world. Feature phones — Nokias, Ericssons — were like 90%.

As we see here today, electric cars are roughly 3-5% of all cars sold in the world today. Renewable energy is less than 20% of all electricity generation globally, and electricity is actually only 25% of the energy mix. So if you truly want to de-carbonise the planet, ie, get to net zero by 2050 and that's the goal, then electricity as just a share of our energy generation has to more than double, ie, oil has to be replaced with electricity, if that makes sense, to power all these electric cars.

And then renewables' share of electricity has to go from 20% to 80%. Some simple maths tells you you're getting between an eight and a 16-fold increase in renewable energy over the next 30 years. There are a plethora of investments you could look at here. Whether it's wind-turbine generation, OEMs (original equipment manufacturers), or whether it is solar equipment, or whether it's the semiconductors. If you think about the net-zero objectives that a BHP is putting in here in Australia, how on earth are they going to do this?

They need to retrofit their buildings to be net zero, they need to change their lights, they need to fix up their heating, ventilation and cooling systems. Then you just overlay that across every company on the planet that is all committing effectively to the same goal. So it's an easy goal to say, and an incredibly hard goal to do.

I'd just leave you with this: we think it's roughly a $30 to $50 trillion expense to de-carbonise the planet. And that's a $30 to $50 trillion revenue opportunity for the companies that can provide these solutions.

This has potential to be as big an opportunity as the internet was for the last 20 years. That's the one that we sit and look at today, and go, "This is what excites us about the next 10 years of doing our job."


Could you tell us about a growth stock that you think is being materially mis-priced by the market today? Just give us a rundown of why you're attracted to it and what they do.


I'm going to combine the two I talked about here, so semiconductors and climate.


Sounds perfect.


As you solve climate, for instance, we all know it's going to involve a lot of electricity, as I said, and it's going to involve a lot of battery power. Lots of people are looking at lithium that goes into batteries, or nickel, or battery manufacturers or Teslas, et cetera. Probably the most overlooked area of what's going to solve this is power semiconductors. There are semiconductors that sit at the core of how you transfer power; how you take power from one place to another. How do you take from a battery manage that power load into driving a drive chain, if that makes sense.

You used to have these cheap components that would sit inside a fridge, or they'd sit inside an electronic toy, for instance, that ran off batteries. And now they've got to sit inside these really big things like electric cars or electric buses, or battery-powered renewable energy facilities, so their total addressable market is effectively exploding.

The companies that make these things, there's four of them in the world. And the biggest one is in Germany, called Infineon. That's probably the one I'd mention today. But there are other ones. And they make these power semiconductors. They're really hard to make; it's a very complicated process. And one has to pretty much be fitted in every solar, every wind turbine, every electric car on the planet.

Everyone's reading about the semiconductor shortage in the world today and thinking it's a short-term thing, and we don't think it is. To give you an idea, if you speak to Infineon, the semi content that would go into a normal internal combustion engine car would be $160 per car. The semiconductor content that goes into an electric vehicle with some autonomous driving features will be $1,600.

As we go through this transition, you're effectively going to get a 10-fold increase in their addressable market and Infineon is the best of these players, and trades at roughly 26, 27 times earnings. But some of their smaller players in the place only trade at 15, 16 times earnings. They've become the weapons manufacturers in the war or the shovels in the berm.

So if you believe in de-carbonisation and you don't want to get hung up on some solid-state battery concept or some electrical vehicle manufacturer that doesn't produce a car, and you just want to buy the shovels in the berm, the biggest shovel on the whole planet is Infineon and it's listed in Germany. That would be the one I'd point to.


Excellent. That brings us to the end of the main part of the interview. But as you may remember from our last appearance on the show, I have three favourite questions that I like to ask every one of my guests, and if you've got another 10 minutes or so to hang around now, we can jump into those.

First of all, tell me about a book that's been influential on your investment philosophy. What did you like about it?


Last time I gave you The Second Machine Age, which I think is the best book on digitalisation to look at. Some of these books are 10 years old, but they still very much predict what was going to happen. And to get your head around digitalisation and those concepts, it very much helped me at the time, five or six, or 10 years ago. And that's well worth a read.

The book I just recently finished is The Great Disruption by Paul Gilding. This was written five or six years ago, and really flags how the world is going to cope with de-carbonisation and how the climate change agenda is going to be pushed on us.

So again, this is to try and help us understand the concepts of how we're actually going to get to this net zero and what's actually going to be required.

I think it's a helpful read just to take the completely different point of view, to help people understand how big this task is, how important it is to do, and how hard it's going to be to get done. And I think it frames some of the investment opportunities that are going to appear there, both on the long side, but also the things to avoid.


That book was The Great Disruption by Paul Gilding. It's got a long subtitle: Why the Climate Crisis Will Bring on the End of Shopping and the Birth of a New World. That other book, if you didn't catch it, was The Second Machine Age. Another one with a nice long subtitle: Work, Progress and Prosperity in a Time of Brilliant Technologies. That one's written by Andrew McAfee and Erik Brynjolfsson.

As always, I'll put a link in the wire to this podcast to those two books, both on Amazon and Booktopia. So if you're looking for those, didn't catch the name, weren't sure how to spell it, just jump on, navigate to the wire for this podcast and you'll see the link in there.

Could you tell us about your biggest gain or loss? What were the most valuable lessons that you took from the experience?


The biggest winner for the Munro Global Growth Fund since inception is Amazon. And it's our biggest winner of all time. When we bought Amazon, it was roughly $400 a share, and that's just under 1000% ago now. We actually thought we'd missed it. It had already gone up a lot. It was already a very, very expensive company. People thought it didn't make any money. This is back in 2013.

We built a very detailed model, and I think for people listening, there is a huge benefit in building a financial model on a company.

The financial model on Amazon we built at the time showed us that this company was still very much at the start of its journey, not at the end. And we talked about investing in the journey and so ultimately that got us to buy the company at $400.

And that financial model we've now updated every quarter for the best part of nearly a decade now. It's the most profitable spreadsheet I've ever built. That financial model helps you understand how these companies continue to grow at the rate they grow at, which confounds people all the time, and it also helps you understand the cashflow and how they're funding it. For everyone investing, you want to be able to get to the point where you can build at least a financial model to prove what is the potential upside.

Like what could this actual company be worth, not next year, but at some point in the future, and once you do that, you'll be able to hold your view a lot better on that journey that we talked about at the start of the podcast.


I have one more question for you. But before I ask it, I always like to insert a little bit of a disclaimer. Don't try this at home. I'm not actually suggesting to anybody that you should go out there and put all of your money in a single stock and forget about it for five years. This is supposed to be a bit of an exercise in long-term thinking, and hopefully a little bit of fun.

So with that being said, if markets were going to close for the next five years, starting from tomorrow, and you could only own shares in one company, what would it be?


It's always a tough question, this one, Patrick.


That's what I'm aiming for.


It's done well recently, but I'm going to say it again, and you've probably heard me talk about it before: ASML. It's a company we've owned since day one in the Munro Global Growth Fund. It's a Dutch company that makes lithography equipment. Lithography equipment is effectively what's driving the shrink in semiconductors, which is what's driving all human progress on the planet today. So as semis shrink, we continue to be able to do more things with them. Obviously, things like artificial intelligence, voice recognition, this podcast, et cetera, et cetera. And so at the moment shrink is getting very, very hard.

There's a handful of companies that control this process. Companies like ASML, that does the lithography, and TSMC that does the foundry, and Samsung that does the foundry.

The reason why I say ASML is it's the one company that no one can live without at the moment. It's the one that allows these transitions to continue. We like to call it the most important company in the world that no one's ever heard of.

It's had a good run lately. Maybe not on a six-month view, but on a five-year view, this company has a monopoly on what it does, and all human progress will not continue without them. And you can buy all of that for 34 times earnings today. And so that's why we put ASML.


Excellent. Well, Nick, thanks for taking the time to chat with us today. Always enjoy hearing your insights about what's happening in the world of technology and global growth. So thanks for taking the time out of your day.


Thanks very much for having me, Patrick. And I appreciate the interest.


Well, that's the end of the show. If you made it this far, I hope that means you enjoyed it. So please follow us on Apple Podcast or Spotify. Or, if you're a Livewire reader, give this wire a like. Thanks for tuning in.

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