Mega-Brands: Investing in Mega Trends Through Mega Brands

Today I welcome back a former guest, Sharif Farha from Safehouse Capital in Dubai. We both manage consumer-focused portfolios and todays conversation we cover a host of brands and thematics.

We talked about the loathing of anything with the word "growth" attached to it and talk about why we own:

RH - Restoration Hardware & Amazon

Why Sharif likes and owns: Sony, Activision, Spotify, Universal Music, Crocs

We also talk about China Tech and his stakes in Alibaba, TenCent and TenCent Music.

https://www.safehousecap.com/

https://www.globalbrandsmatter.com/dynamic-portfolio

This is the audio version of our 2021 Brands Fund Letter. Welcome to Mr. Toads Wild Ride market in 2021.

I highlight the kind of market environment we had in 2021, what we see for 2022 and how we are positioned.

I talk about the spending categories we are invested in as well as which brands are the most relevant based on our analysis.

I talk about the distortions that have been created through Covid and what we see normalizing in 2022.

I show how the fund has performed in the 2 year stack of 2020 & 2021 - hint - we outperformed the S&P 500 ~575 bps annual due to a strong 2020 Covid stage 1 year. I compare the fund to the S&P 500 and a plain vanilla, traditional ETF-only blend which lagged the S&P 500 by roughly 300bps annual with this blend. The ETF’s & weights we used for this analysis are: SPY(15%), QQQ(25%), SPHD (20% - low vol, high dividend), IWS (5% - mid-cap value), IWP (5% - mid-cap growth), IWN (5% - small-cap value), VGK (5% - broad based Europe), GEM (5% - emerging markets), IWD (15% - large cap value). This is a fairly typical broad market portfolio using ETF's.

If you would like to read the commentary, please email me at [email protected] and Ill send you the PDF.

I will post the commentary on the www.globalbrandsmatter.com homepage soon.

Today, we have a spirited discussion with two well-informed METAVERSE investors and ETF product creators.

Sean Avory or Avory & Co and Will Hershey of Roundhill Investments join me to discuss the Metaverse, (META ETF via Roundhill) why it's being created and demands our attention and who likely benefits from its creation and evolution. We also talk about the video gamers and their role in the METAVERSE development as well as NFT's and crypto through blockchain development.

For more information about Sean and his high conviction equity portfolio go to https://www.avory.xyz/

For more information about Roundhill and all their ETF's go to: https://www.roundhillinvestments.com/

For more information about the global brands portfolios I manage with my partners at Accuvest Global advisors go to:  https://www.globalbrandsmatter.com/

For more information about the Dynamic Brands Fund we manage, go to: https://rationalmf.com/funds/rational-dynamic-brands-fund/

Today's conversation focuses on a recent report from MBLM.com called: Brand Intimacy - Covid Update.

I talk with Mario Natarelli, Managing Partner of Brand Design Firm MBLM.com. We discussed what his firm does with B2B and B2C brands, why it's important and how Covid has affected consumers and brand relevance & intimacy.  There were some very interesting changes with emotional bonds with certain brands and some behaviors will pivot back and others are changed forever. All of these will have major effects on a brands ability to navigate its industry. This was one of my favorite chats because I see so many brands that need so much help from firms like MBLM and Mario. So much to talk about.

Brands Matter

https://mblm.com/about-us/

https://www.globalbrandsmatter.com/

My conversation today is with Nathan Miller, the PM and creator of the Alpha Opportunities strategy that's now available via an active ETF with the symbol, "EOPS." 

For more information about the ETF, go to https://www.emles.com/etf/emles-alpha-opportunities-etf/

Conversation details:

Nathan's experience:

Focus:

Deep fundamental  value with a catalyst – Contrarian approach – Long/Short equity with options – Somewhat sector focused in old economy: Industrials/Cyclicals/Consumer/Retail – Primarily Mid-Cap Focused – Repeatable process – Look for asymmetric risk/reward opportunities and structure them correctly

Investors will recognize the company names and brands in our portfolio – many of them are actually category killers (they dominate their niche in their specialty retail category) – But buying them correctly is the secret sauce. The focus here is on permanent capital – A long term approach with a goal of maximizing returns over the course of the business cycle – allows Nathan to have a longer term time horizon. Nathan and his partners have have $100m invested in the strategy personally – 2/3 in public entity (EOPS) and 1/3 in a private hedge fund, both run with similar focuses.

Value focused (earnings yield) – and if we can find a catalyst that’s even better. We tend to look at normalized earnings over the cycle. Last year is a great example of how useful this can be – Earnings fell off a cliff, but the lack of earnings (or even negative earnings) were temporary in nature. Most analysts suffer from recency bias, we smooth out earnings and look at historical average (assuming a reversion to the mean) – What looked like 20x earnings 2020 earnings was actually only 3x-5x “normalized” earnings. Note: This works well in slower-growing industries like retail and industrials, less useful in VC / startup / high-tech.

We talk about Nathans views on the current market and why having portfolio flexibility is critical to generating great returns, particularly going forward. 

We talk about the flexibility to be short, use hedges to protect the long book and also generate alpha on the short side.

We also talk about being a value manager in a world where everyone wants go-go growth and why EOPS is a very unique and timely value focused strategy versus traditional value thats been lagging for a decade.

Emles Alpha Opportunities ETF, EOPS:

Today's conversation is a one-on-one chat with my co-Portfolio Manager on the Dynamic Brands Strategy, James Calhoun. James is a CFA and vital to all the macro and micro work we do at Accuvest. In our chat we talk about the current state of the economy, the potential risks going forward and the opportunities across the consumption theme and a recovering global economy. We talk specifically about our style factor work, his macro work on countries around the world and what part of the consumption thematic appears to be most attractive as we start the second half of 2021. 

In episode 12 I talk to Strategy Shares ETF's CIO & Senior Portfolio Manager, David Miller. David is a co-founder of Catalyst Funds as well as Rational Funds on the mutual fund side as well as Strategy Shares on the ETF business line.  Today we talk about 2 of Strategy Shares ETF offerings:

1. "HNDL" - Nasdaq 7HANDL Index ETF - a multi-asset high income portfolio that targets a 7% yield paid monthly.

The portfolio has 2 components:  1) The Core Portfolio - 70% allocation to U.S. aggregate fixed- income ETFs and a 30% allocation to U.S. large cap equity ETFs. 2) the Dorsey Wright Explore Portfolio consists of an allocation to ETFs in various U.S. asset categories that have historically provided high levels of income, using a tactical asset allocation methodology developed in consultation with Nasdaq Dorsey Wright Investment Research & Analysis that seeks to incorporate momentum, yield and risk

2. "GLDB" - Strategy Shares Gold-Hedged Bond ETF - The strategy was designed on the belief that the best way for investors to generate income that maintains its purchasing power is to combine bonds and a gold overlay within one portfolio. TheIndexseekstoprovide100%exposure to the U.S. dollar-denominated investment grade corporate bond sector (the “Bond Component”) plus a gold inflation

Interest rates have been falling largely since the 1981 peak. There's simply not a ton of juice left in this fruit so going forward all investors should probably expect rates to stay rangebound to up, rate volatility to stay elevated and bond returns to be sub-par relative to the last few decades. Investors can just accept lower returns, lower income and more volatility out of their "safe assets" or they can research additional ways to keep getting attractive income and have some inflation hedges just in case inflation really begins to accelerate. Both these ETF strategies offer interesting opportunities for further research.

For more information about Strategy Shares: https://strategysharesetfs.com

In episode 11 I talk Retail stocks and consumer spending brands with Retail & pop-culture analyst Dan Kline from 7investing.com. 7investing is a subscription-based investment site that has very smart analysts covering important sectors and industries and the companies that appear to be dominating and offer strong investment opportunities.

Dan also hosts a Youtube channel called 7investing NOW so check out the show which airs Monday, Wednesday and Fridays with great viewer question opportunities.

Dan is a very knowledgeable retail investor and we dig into the retail sector across a ton of spending categories and chat about the brands we like currently. We also discuss how strong the long-term track records are for these leading brands to highlight the opportunity for investors.

For more info on 7investing: https://7investing.com

Also check out the 7investing Podcasts

For more information on the global brands fund: https://www.globalbrandsmatter.com

In Episode 10, I talk with a serial entrepreneur, Gabriel Hammond of Emles Advisors.  We talk about Gabriel's start in the business with the Energy & Power Group at Goldman Sachs and the need to create SteelPath, an investment firm that focused exclusively on energy infrastructure as well as his creation of Alerian, a leading energy infrastructure data and analytics company. Alerian created and launched the first real-time index of master limited partnerships (“MLPs”) in 2005. In 2010, SteelPath launched the first MLP mutual fund and Alerian launched the first MLP exchange traded fund. Mr. Hammond sold SteelPath and its mutual funds family to OppenheimerFunds, Inc. in 2012, but remained a portfolio manager until 2014, and he sold Alerian in 2018. In 2019, Mr. Hammond founded Emles Advisors LLC where he serves as the Chief Executive Officer.

Gabriel highlights the virtues of identifying an early new asset class that has enormous return potential and placing a flag early to become the leading brand in the category. We talked about our similar paths in that regard with my creation of the Brands strategy which focuses on an important emerging asset class called "Intangible Assets" via the most relevant brands.  We spend some time dissecting the global luxury goods business and the investment opportunity it offers investors through their Luxury Goods ETF, "LUXE". The Emles Luxury Goods ETF (LUXE) invests in a portfolio of global companies that offer luxury goods across accessories, alcohol, apparel, athleisure, beauty, home and vehicles.  

We also talk about another one of Emles's unique and incredibly timely ETF's, "AMER" the Made in America ETF. The Emles Made in America ETF (AMER) provides investors exposure to companies that potentially stand to benefit from deglobalization and increased manufacturing domestically. An allocation in AMER seeks to provide enhanced return potential through exposure to businesses with headquarters and manufacturing footprints based in the U.S.

There's some clear innovation and important uniqueness in the current roster of ETF's at Emles. 

Lastly, we talked about an Active ETF they will be launching in a month or two and focused on a very underserved, deep value and opportunistic management style. Keep checking back for that new active ETF, I know I will.

For more information on all of Emles's investment strategies: https://www.emles.com/

For more information about investing in Mega Brands: https://www.globalbrandsmatter.com

Today I have the honor of talking retail trends with the leading expert in retail & brand strategy, Doug Stephens. Doug is an award winning author with 3 books analyzing the retail industry and his latest book, Resurrecting Retail is my new favorite. Doug has the ear of the major brands for important strategic decisions made inside boardrooms. The knowledge he has of the retail industry, its forward-looking trends and which brands are remaining highly relevant offers enormous advantages for executives in the industry as well as investors who want to invest in these great brands. In today's conversation we talk about Amazon and where he thinks this great business is headed next. We talk about other great brands like Nike and Target and what the future needs to look like for brands that want to compete in an e-commerce world. I enjoyed talking about the U.S. retail industry and contrasting it with China's up and coming e-commerce driven retail landscape. We talked about experiences being small nuggets of content which when added up make for a total experience through the eyes of the consumer. Experiences are what will keep physical retail from being relevant yet very few brands have strong expertise here. 

There are too many insights in this book to list them all but suffice to say it's a great summary of the trials and tribulations of the retail industry, how it's being affected by the pandemic and more importantly, what it will look like post-pandemic. Doug discusses in detail how the leading brands have benefitted from Covid and what lies ahead for brands that rapidly accelerated their digital capabilities and are paying keen attention to the new customer experiences that will be required to keep consumers engaged in physical stores. I loved the discussion of what the shopping center of the future will look like.  As a fund manager that dedicates to identifying the most relevant brands serving global consumers, Dougs expertise has paid serious dividends in helping me identify the brands that also should be great stocks. Doug states in the book that "brands are the new church and state". I could not agree more. The brand, its willingness to innovate and even self-disrupt in order to grow will matter even more into the future. We touched on the concept of a few brands being "Apex Predators" which gave me new things to think about as a stock picker. The retail industry has a lot of work to do in a post-pandemic world and Dougs insights through his book and his podcasts will be super important for CMO & C-suite conversations. The most relevant brands just "get it" and they will continue to survive and thrive at the expense of the others who simply do not. Bottom line: this book is entertaining, provocative, insightful, honest, and delivers on its mission to readers. It's the best book I have read in a very long time.  This book is more than an examination of the retail industry, it shows the future of how we will all shop and what will drive our behavior and allows us to connect the dots back to some serious investment insights that can translate into future potential gains. 

To learn more about Doug and his consultancy business: http://www.retailprophet.com

To buy Resurrecting Retail on Amazon: https://www.amazon.com/Resurrecting-Retail-Future-Business-Post-Pandemic/dp/1773271431/ref=sr_1_2?dchild=1&keywords=resurrecting+retail&qid=1621052234&sr=8-2

For more information on investing in Mega Brands: https://www.globalbrandsmatter.com