In the world of investing, listed markets dominate the airwaves due to their ease of access, broker coverage and liquidity. For that reason, unlisted shares can often take a back seat.
But companies aren’t born on the listed markets. Many of the best opportunities exist in the unlisted, pre-IPO space.
Today’s guest is Dane Roberts – a portfolio manager at Fifth Estate Asset Management. Fifth Estate invest in pre-IPO, IPO, unlisted and listed microcap and small cap companies. Its first fund was launched in 2021, delivering 13.29% since then – impressive considering the extreme volatility of that period. That fund’s closed to new investment, but they’re about launch their second fund with much the same strategy.
In today’s episode, we discuss what it takes to invest in unlisted companies, how they compare to their listed peers, the outlook for unlisted stocks, and why now could be the perfect time to invest at the pre-IPO stage. 
Note: This interview was recorded on Friday May 5, 2023. 
Timestamps
1:49 - Birds-eye view of pre-IPO and IPO
4:00 - Liquidity in unlisted markets
6:00 - Debt vs equity
10:30 - The perfect time to put money to work
12:45 - Finding and filtering unlisted companies
15:30 - How unlisted assets are priced
18:40 - When should a company list?
22:20 - A company storming towards IPO
27:20 - Fund 2
30:24 - In it for the long haul
33:00 - Monetary policy on the street
35:40 - The comeback kid (ASX: NXT)
38:45 - An infrastructure company surrounded by moats

Is this the least crowded opportunity in the market today?

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, philosophy, and current take on markets. After launching in October 2017, there have been over 100 episodes published - you can access all content on Livewire Markets, Spotify and Apple Podcasts.

Business

Investing

Careers

Management & Marketing

Business News

Shopping

In investing, just as in love, trust is everything - and without it, you really don't have anything at all. 
It's for this reason that the Wilson Asset Management global equities team meets with more than 700 management teams across the world each year - including in the US, Japan, and Europe. In addition, they also meet with competitors and suppliers, as well as talk to current and past employees and industry experts. 
According to WAM Global (ASX: WGB) lead portfolio manager Catriona Burns, the team does this because trust in a company's management team is paramount. 

"Have they hit their targets? Have they done what they said? If we have any doubts on that trust factor, for us, that's completely a non-negotiable and we won't invest," she says. 
Burns is reading between the lines, and looking beneath the surface for red flags. And while management teams selling stock, poor track records and value-destructive deals can certainly be warning signs, she argues that alignment - and the lack thereof - can often be far more telling for the future direction of a company's share price. 
"Incentives drive outcomes... I can't tell you how many times I have seen incentives for management based on earnings per share growth," she says. 
 "Companies just chase acquisitions to meet earnings growth without thinking about the returns that are being generated on the dollars spent. That happens time and time again and is a massive red flag." 
In this episode of The Rules of Investing, Burns takes listeners through some of the companies that have managed to pass her filters, as well as why catalysts are so important for investors with a penchant for value. 
She also outlines why the listed investment company's growing annual yields won't be slowing over the next five years, what it's actually like on the ground in the US right now, as well as what the US election at the end of the year could mean for markets. 
Note: This interview was recorded on Tuesday 14 May 2024. 
https://www.livewiremarkets.com/wires/700-meetings-each-year-how-wam-global-uncovers-under-the-radar-stocks

700+ meetings each year: How WAM Global uncovers under-the-radar stocks

Time flies when you’re having fun! While the last five years have had plenty of ups and downs, they haven’t dented the enthusiasm and passion of small-cap fund manager Chris Stott from 1851 Capital.
Stott launched 1851 Capital in 2020, just before COVID-19 hit, wreaking havoc on the market and his portfolio. Since then, Stott has comfortably beaten his small-cap benchmark, growing the fund’s initial capital of $80 million to almost $500 million through a combination of inflows and capital growth.
Whilst there was some exuberance after the initial shock of the pandemic, the past few years have been far more challenging for small-caps investors.
“Over the past four and half years, the small-cap index has returned 3% per annum. If you look at the 30 years before we launched the fund, it was 10% per annum. So quite a significant underperformance, quite dismal in fact,” Stott says. 
However, late October 2023 marked a turning point and the small-cap index has recently entered a technical bull market, having rallied more than 20%. 
So where to from here and which companies does Stott believe can sustain the early track record that 1851 Capital has established?
In this episode of The Rules of Investing, Stott shares his lessons from starting a new fund, why he believes the bull run in small caps can continue and five of the stocks he is backing to deliver market-beating returns.
For those of you with a good memory, Stott was last on the podcast in June 2020, when he tipped NextDC (ASX: NXT) as the one stock he would hold if markets were to close for the next five years. Shares in NextDC have gained more than 75% over that time, and the company is now in the ASX100, forcing Stott to exit his position. Naturally, we’ve asked him for a fresh idea.
Note: This episode was recorded on Wednesday 8 May 2024. 
https://www.livewiremarkets.com/wires/chris-stott-s-5-high-conviction-stock-ideas-for-the-new-bull-market

Chris Stott’s 5 high conviction stock ideas for the new bull market

The past six months have been golden for investors, with everything from equities to gold and even Bitcoin enjoying stellar runs. And if risk assets are not your bag, then there have been juicy yields on offer across a range of cash and fixed-income asset classes. 
Animal spirits woke from their slumber in late October 2023 when the Fed effectively claimed victory in the fight against inflation. Markets have been led to believe that rate cuts are a forgone conclusion in the year ahead, and participants have been piling into risk assets accordingly. 
Christopher Joye, portfolio manager and chief investment officer at Coolabah Capital Investments, says that markets have become so complacent that they appear to be completely ignoring a growing set of data suggesting that the path forward might not be smooth.
Most notably, the resurgent inflation data coming out of the US is causing interest rate cut expectations to be dialled back and kicked down the road. When asked what he thought investors were getting wrong about markets today, Joye was quick to call the dichotomy between what the economy is suggesting needs to happen with interest rates and market expectations.
“If this strong data keeps coming through then hold onto your hats because the world is not priced for this risk. Make no mistake, there is no margin for error in listed equities. There is no margin for error in venture capital, private equity, zero in crypto, in commercial real estate, nothing,” Joye argued.
Tune in to the latest episode of the Rules of Investing, where Livewire’s James Marlay ask Joye about his views on the outlook for both the US and Australian economies, the three risks he is watching and where he sees value in Australian residential real estate.

Christopher Joye: No margin for error for risk junkies craving rate cuts

Quality growth stocks, those with fortress balance sheets, impressive moats, structural tailwinds and top-notch management teams, have had a stellar run recently. Take Goodman Group (ASX: GMG) for example, which has risen 66% over the past year. Or Megaport (ASX: MP1), up over 252% in 12 months alone. 
If you're like this anonymous writer, you've probably started to ponder whether it's time to trim some of your winning positions and take some profits. 
And according to TMS Capital's Ben Clark, we may have just reached that point. 

"A lot of investors are trying to chase a very small number of stocks in Australia because of the AI trade," he says. 
"And I'd just be a bit wary about that because although those companies absolutely should benefit, it's just how quickly those benefits flow through and whether the market has just got a bit ahead of itself in terms of the benefits that will come through in the medium term." 
In this episode of The Rules of Investing, Clark sits down with Livewire's Ally Selby for a conversation on all things artificial intelligence, growth investing and holy grail stocks. 
He shares where he is putting some of the firm's dry powder to work, a few reasons why investors should feel optimistic about the outlook for markets, and whether he would be buying the AI behemoths both globally and locally today despite their stellar runs over the last six months. 
Plus, Clark shares why the tables may be turning once again for out-of-love growth darling CSL (ASX: CSL). 
Note: This episode was recorded on Tuesday 9 April 2024. 
Timecodes: 
0:00 - Intro 
1:54 - Ben Clark's outlook for the remainder of 2024 
4:17 - Record cash holdings in the US and what this means for markets 
6:51 - Why Aussie investors are also holding a lot of cash 
7:39 - The most common question Ben Clark is hearing from clients 
10:01 - The takeaways from Ben's trip to SXSW in the US
12:13 - Learnings from a private meeting with a Google executive 
15:11 - The outlook for Microsoft (NASDAQ: MSFT) and Google (NASDAQ: GOOGL)
16:25 - Can the momentum continue for global AI winners like Nvidia (NASDAQ: NVDA) 
19:17 - The ASX-listed stocks that directly benefit from AI 
23:17 - Why some of these stocks' share prices may have gotten ahead of themselves
24:30 - Holy grail stocks - and why Brickworks (ASX: BKW), WiseTech (ASX: WTC), REA Group (ASX: REA) and CSL (ASX: CSL) make the cut 
29:32 - Where Ben Clark has started to take profits 
31:28 - And where he is putting that cash to work 
36:11 - One thing the market is getting wrong today 
38:03 - Lessons for growth investors from the 2022 bear market 
42:59 - A stock to buy and hold for the next five years

Is this the least crowded opportunity in the market today?

Download our free app to listen on your phone