A year ago I sat down with Oscar Oberg, lead portfolio manager at Wilson Asset Management. His thesis then was that small caps were beaten down and due some mean reversion.
Alas, small caps haven’t done much since then, with the Small Ords returning 3.91%. Yet Oscar’s thesis also remains unchanged. 
In fact, it’s gotten stronger!
Not only is he positioning for a rebound in smalls and microcaps, he’s doing it with overweight exposure to consumer discretionary, a sector that has been tarred and feathered by today’s macroeconomic landscape of high inflation and high rates. As Oscar puts it, “there’s no mean reversion without consumer discretionary.”
In today’s episode, Oscar lays out this thesis and the companies that make it up. 
He also discusses:
the relationship between the tech rally and small caps;
generating return with short-term tactical trades; and
how he deals with low liquidity, 
and the primed aged care stock under takeover.     
Note: This episode was recorded on Tuesday July 20, 2023.
Timestamps0:00 - START1:50 - When will small caps bottom?4:30 - No small cap rally without consumer discretionary6:30 - Profit taking7:30 - Why large cap tech matters to small caps10:14 - 30-40% rally is not out of the question14:30 - Harvey Norman's (ASX: HVN) property backstop16:00 - Wearing the volatility17:00 - Industrials20:20 - Going tactical24:15 - Mermaid Marine26:30 - Body language matters27:30 - City Chic (ASX: CCX) was a mistake29:20 - Managing liquidity in small caps32:45 - Takeover target34:50 - Balance sheets look good36:55 - Going public too early40:25 - The classifieds company for the bottom drawer

Oscar Oberg: Small caps are primed to rally, and it doesn’t happen without these stocks

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.

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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

Why Ben Clark is taking profits on growth stocks (and where he's putting that money to work)

If there is one theme that has taken the world by storm in 2024, it's Artificial Intelligence or AI. 
Until very recently, this week's guest was a bit of a sceptic, but a recent trip to the US has seen him come back a changed man.
In this episode, we'll be sitting down with investment adviser Ben Clark of TMS Capital. We'll be learning about the wonderful world of growth investments, the key technological innovations that have him excited and his top holy grail stocks. 
Here's a sneak peek of what you can expect...

Trailer: Ben Clark, TMS Capital

If there is any one investment product that has experienced a true boom over the last 10 years, it is exchange-traded funds (ETFs) and exchange-traded products (ETPs) more broadly. 
The number of listed products has increased by 17.5 times in Australia during the last decade alone. More than 300 products are now listed across the ASX and CBOE exchanges and two million Australians have at least one ETF in their portfolio.
And, as if you need more proof of the growth of ETPs, 2024 marked the first time that inflows outpaced those going into unlisted managed funds. 
So if we've seen this growth over the last decade, what could the next 10 years hold?
In this episode of The Rules of Investing, we put this and other questions to Tamara Haban-Beer Stats, Director and ETF/Index Investments Specialist at BlackRock Australia. BlackRock is the world's largest asset manager and its ETF arm iShares runs 49 ETPs in the Australian market.
In this episode, Tamara also discusses the key mega forces that BlackRock believes could drive markets over the long run, where they are overweight in portfolios and the asset classes they believe could see the biggest growth within ETPs over the coming years.
Note: This episode was recorded on Tuesday 19 March 2024.
Timestamps
0:00 - Intro
2:21 - BlackRock's outlook for the next 12 months
4:06 - What the new investing regime means for ETF investors
6:17 - The five "mega forces" of investing 
9:13 - Currency impacts on ETF returns
10:27 - Will the Australian Dollar rebound in late 2024?
13:45 - Should investors consider hedged ETFs?
14:55 - Opportunities in Japan and the US
16:47 - Why the AI boom won't be early 2000 all over again
18:02 - The explosion of interest and uptake in ETFs
21:31 - The asset class that could gain the lion's share of growth in the future
23:17 - Other interesting innovations in the global ETF market
25:06 - Which products are seeing the most inflows and outflows in 2024?
27:31 - The Rules of Investing's regular questions (with an ETF twist)

The next 10 years in ETF growth could be dominated by this asset class

Warryn Robertson, portfolio manager and analyst at Lazard Asset management, understands the nuances of infrastructure assets like few others in the market. His approach is to find monopoly assets with inflation protected revenues, high margins and reasonable leverage then buy them at attractive prices. 
Of the 400 listed infrastructure stocks globally only 160 have passed the four filters and typically Lazard’s Global Listed Infrastructure Fund will own just 25 to 30 of those companies. Given the attractive nature of infrastructure assets it is unsurprising that sovereign wealth funds and private equity firms are also circling these assets. Robertson estimates that of the 160 stocks that meet his criteria 25 have been taken private and delisted. 
The situation in Australia is even more challenging, of the 14 infrastructure and utility stocks on the ASX valued at more than $1 billion just four meet Warren’s criteria as being ‘preferred infrastructure’.
The good news is that Robertson is a firm believer and concentrating your capital into your best ideas. In this episode of the Rules of Investing, Warryn Robertson reviews the recent performance of that asset class through an inflationary environment, explains why US utilities look vulnerable and shares what he believes are the best opportunities in infrastructure. 
Robertson also reveals what he regards as the top infrastructure stock on the ASX and an infrastructure company with an absolutely stunning earnings outlook.

Oscar Oberg: Small caps are primed to rally, and it doesn’t happen without these stocks

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