Earnings season highlights, individual stocks v an ETF, & should you read The Intelligent Investor?

Bryce: [00:00:14] Welcome back to another episode of Equity Markets, or should I say Greetings, Time Travellers and welcome to Investment through the Ages, the podcast that takes you on a thrilling journey through the corridors of finance and investing with the help of your inquisitive minds, will unlock secrets from the dawn of currency to futuristic financial trends, ready to evolve from mere mortal to a seasoned investment time. Lord Well, this is the podcast for you. My name is Bryce, and as always, I'm joined by my equity buddy, Ren. How are you?

Alec: [00:00:43] I'm very good, Bryce. I still have some getting used to these new and different intros. But that was a timeless introduction. 

Bryce: [00:00:56] Timeless?

Alec: [00:00:56] Yes. That was on you being a time traveller. 

Bryce: [00:00:59] Correct. Congratulations. You're good at this. We are time travellers. 

Alec: [00:01:04] ChatGPT often gives the face of it. Yeah, yeah, yeah, yeah, yeah. 

Bryce: [00:01:08] I'm going to have to blank that out next time I do it. 

Alec: [00:01:12] Also, feel free to go more niche like ask JP today. What would an introduction sound like if Justin Bieber delivered a shush? Oh well. Oh like Nemo from Finding Nemo delivered.

Bryce: [00:01:23] Our well producer, Sascha, you've heard the requests. 

Alec: [00:01:28] Give us a challenge next week. Excellent.

Bryce: [00:01:31] I don't know how I'd go doing a Justin Bieber specific intro, but hey, I'm open to anything.

Alec: [00:01:36] Oh, you just read what ChatGPT gives you.

Bryce: [00:01:39] That's very true. Anyway, if you've just joined us for the first time, Welcome. This is a podcast that follows our journey of investing. Today. We've got three segments we're going to kick off with some earnings season highlights. We've got a call with a listener, Liam, to discuss the pros and cons of investing in ETFs or just owning the stocks individually. And then we close out with another question from a listener, this time from Alex all around a comment that Wren had made on one of the most famous investing books. So we'll pick that up towards the end of this episode.

Alec: [00:02:11] But I'm sure it was thoughtful and considered. 

Bryce: [00:02:13] Comment as always. Always. Now we must remind you that while we are licensed, we're not aware of your personal circumstances. So any information on this show is for entertainment and education purposes. Any advice is general advice. But we're back in the studio and earnings season is well and truly in full force here in Australia then and well and overseas as well. But we've done a bit of fun. 

Alec: [00:02:38] We kind of got through a lot of America. There's still some America to go. But yeah, we're in the final days of Australia as well. 

Bryce: [00:02:45] Yeah, we are. So we've pulled out some stocks that have caught our attention both good and bad, and we're going to have a look at some of the highlights. And we've got to start with the stock of 2023 Ren and that is in video it reported overnight. 

Alec: [00:03:01] And. 

Bryce: [00:03:02] There was much anticipation. 

Alec: [00:03:04] Here's the question did it live up to the hype? Now, for people who are unfamiliar with Nvidia, it makes it well, it designs the semiconductors and chips that they power a lot of things, but particularly this year they power A.I.. The Nvidia's H1 chips are probably the most sought after piece of hardware in the world. They go for 40 grand a pop. It's crazy. There's a massive waitlist to get them. And I think Saudi Arabia bought like 3000 of them last year. Yes, that's like $120 million. Yeah, but they're just getting it

Bryce: [00:03:36] Should we buy one? 

Alec: [00:03:37] We wouldn't be able to.

Bryce: [00:03:38] Oh, you don't think so? 

Alec: [00:03:39] I don't know. 40, 40 grand sitting, right? 

Bryce: [00:03:41] Yeah. Right through on the balance show. Oh, sure. It's. 

Alec: [00:03:46] You wouldn't know what to do with it.

Bryce: [00:03:48] Just sit in Eric Schmidt. It's an asset surely. 

Alec: [00:03:52] Anyway, so Bryce in the video reported, did they live up to the hype? 

Bryce: [00:03:58] So what happened was a number of months ago they reset expectations for the market and said that we are going to experience an absolute boom in revenue off the back of the demand for our product. And so the stock went nuts. So we assumed that the expectations were built in and overnight they reported revenue of 13.5 billion, which was a 101% increase on last year. And not only that, but they did manage to beat Wall Street expectations. The expectations for revenue were 11 billion, so they beat expectations by a two and a half billion. And as a result, the stock has jumped in after hours trading. So the dream continues for in video and its shareholders. It's one of the best performing stocks of 2023. Incredibly hyped. It's hard to tell when this is really going to stop. And as you said, it has a product that is highly sought after. And with the rise of AI at the moment, it's hard to say where that ends. But it did manage to beat and as a result, its stock price jumped and we saw the ASX and the Nasdaq rise as a result as well. So full credit. So in video. 

Alec: [00:05:08] Yeah, full credit let's. Come back to Australia, though, because there's so many companies that we could talk about and it feels like we should cover off Australia in this episode. Now we have both been away for a few weeks and so we've missed reporting season most of the day to day of reporting season. And so we've sort of come back and we've had a look at results of companies that we own or companies that are on our watch list. Um, and I guess before we get into the individual companies, what's been your general vibe opening the AFR for the first time in after a few weeks in Italy getting very tanned. What was your general vibe of reporting season? 

Bryce: [00:05:47] General vibe Pretty neutral, to be honest. That was my vibe, Yeah. There was nothing that was like doom and gloom, but they didn't also feel like, you know, we're at it, we're out of this. And everyone's there. It seemed like there's quite a mix of results across industry. But yeah, I didn't take anything too negative. What about you?

Alec: [00:06:07] Yeah, I think that's the same. It feels like it feels mixed. Like we'll get into some of the results. A lot of the results. You know, profit was down or revenue was down for a number of notable companies, but it kind of feels like it could have been worse based on, you know, cost of living, the economy, inflation, interest rates, all of that stuff. The ASX 200 is down 2% in the last month. Yeah, and we know that share price movements around earnings season or reporting season are more a function of expectation and how companies go against expectation rather than how companies are actually going and what their results have actually said. Um, but it feels like it's okay with the caveat that some guidance that we've seen sort of suggests that the worst may be to come. But I also feel that like if I was a CEO, I would be giving soft guidance just because there's so much in the face of uncertainty. You've got a conservative conservatives, kind of what I'm saying time rather than, yeah, like you would be a brave CEO to give really bullish guidance just knowing that like the economy is a bit fragile and consumers are a bit fragile at the moment, maybe I'm just being. 

Bryce: [00:07:17] It's an environment where you can give there's leeway to give soft. 

Alec: [00:07:20] Guidance. Oh, yeah, you're not going to get punished. All right. So I guess that's the general vibe. It's like things are okay and like some companies are reporting good results. Qantas best profit ever, but we'll get to that. But it's like what's to come is sort of the there's a bit of uncertainty, a bit of concern. So let's get into it. What are some companies that caught your

Bryce: [00:07:44] Eye or one that caught my eye? I'm not invested in it. I don't follow it often. But, um, but we've had people on the show talk about it, and it was part of the wax back in the day. 

Alec: [00:07:55] For people unfamiliar, the wax. 

Bryce: [00:07:56] Wax is Australia's equivalent of the FAANG. It was Wisetech, Altium appen, Afterpay, Xero. 

Alec: [00:08:07] So Australia's like high flying tech stocks. 

Bryce: [00:08:09] Yeah. Which arguably needs to be redone now.

Alec: [00:08:12] But yeah, because. Afterpay Yeah. 

Bryce: [00:08:14] Afterpay's gone, Wisetech got pumped, which we'll get to in a second.

Alec: [00:08:18] Still a still a great company.

Bryce: [00:08:19] Great company, Xero doing well. Anyway, Altium is back. It makes software used by electronics designers. So chip makers, it's one that was spoken about. 

Alec: [00:08:29] In there to help design the circuit board.

Bryce: [00:08:31] Yeah. So one that is part of the AI boom and they've been able to transition their business to a cloud based software and the main product is called Altium 365 365 and it reported great results and as such its shares jumped 20%. But what is interesting is this is a bit of a turnaround story because it was only a couple of years ago that Altium was in takeover talks and was sort of on its knees. So they've certainly been able to turn it around and benefit from the AI boom. So that caught my eye. But as I said, not one that I'm invested in, but I'm sure there are plenty of equity mates, community members that do have their eye on this one. Given that it's spoken about on the show. 

Alec: [00:09:10] Um, I read some analysis from Jordan, the investment bank shouted out to Elise Kennedy, who is the tech analyst over there. Yeah, her thoughts are We continue to be cautious as Altium is increasingly reliant on price to drive its aspirational targets. The PCB, which is a printed circuit board, the PCB market is mature and we're concerned about the sustainability of ARPA, which is average revenue per user against strong competitors with a smaller total addressable market than tech peers. So your headline with Altium was back. Elise Elise's caveat. 

Bryce: [00:09:47] Is potentially back. 

Alec: [00:09:49] Is just be mindful what's. 

Bryce: [00:09:51] Back from a share price point. 

Alec: [00:09:52] Yeah. No, I'm not disagreeing. I just, it's

Bryce: [00:09:54] Good, it's good. 

Alec: [00:09:55] It's good. Good input. 

Bryce: [00:09:57] But Ren, we've got to move to, you know, Coles and Woolworths, they've both reported in the last few days at the time of recording 24th of August and there's been some interesting. Takeaways. 

Alec: [00:10:11] Yes. 

Bryce: [00:10:12] So first. 

Alec: [00:10:13] A lot of literal takeaways. 

Bryce: [00:10:15] Yes. Yes, literal takeaways. So firstly, both of them posted profits. Kohl's posted $1,000,000,000 profit on the back of bumper sales. And Woolworths posted a $1.6 billion profit. You know, they both benefited from price inflation. And also both are seeing a shift in consumer buying behaviour and buying more of their own brand products given the cost of living crisis. 

Alec: [00:10:39] Yeah, I mean you would expect Coles and Woollies to do well in this environment as people tighten their belts, they stop going out as much. They stop and, you know, they buy more groceries and cook at home. They stopped going to the pub as much and instead they buy booze and drink at home. Yeah. And then also, rather than buying branded versions of alcohol and groceries, they buy their own brand versions. And that's good for Coles and Woolworths as well. So this is like big box supermarkets as consumer staples, like defensive as you can be and not surprising. Yeah. 

Bryce: [00:11:15] But what was interesting that came out of this is they both made it clear that they have seen a significant increase in theft. 

Alec: [00:11:24] The literal takeaway, literal. 

Bryce: [00:11:26] Takeaways, both are saying, you know, above average, more than above average causes experience. A 20% spike in theft. And Woolworths has also said that theft is now becoming a major issue because of the cost of living living pressures. 

Alec: [00:11:40] Yeah, it is. It is fascinating. The whole theft from supermarkets story is is a really just it's fascinating. It's organised crime. Like there's obviously, you know, you're scanning your broccoli as brown onions and it's not really hard to look like but, but it's organised crime and then they, there's huge rings of supermarket thieves and then they go and sell those groceries in like one of the. 

Bryce: [00:12:08] Black mob black. 

Alec: [00:12:09] Market supermarkets. Yeah. Yeah. That's wild. That's like the last time when I was at Coles, you know, that would work with the cops and they would break up like organised crime rings. 

Bryce: [00:12:17] Yeah. 

Alec: [00:12:18] You just don't think that, You just think.

Bryce: [00:12:19] It's, say, one single person, it's.

Alec: [00:12:21] Scoundrel scanning. Everything is brown on you. Yeah. Yeah. 

Bryce: [00:12:25] It's unbelievable. So both are facing it. It's hurting their profit margins. Interestingly though, Coles came out and despite profit, their share price sunk 6% on the news. Woollies came out and their stock rose 3% on the news. So mixed results from a share price point of view. But then something that I found given that I used to work at, was found alarming and rating some of the investment calls. A question came from a well-known analyst, David Errington. Did you know that there were there's been two deaths at Woolworths this year? 

Alec: [00:12:58] Oh, no. 

Bryce: [00:12:58] Yeah. So someone was crushed by a floor cleaner in a store and another person was crushed by falling pallets in a distribution centre. Yeah, well too. And so the analysts were pumping bread about how can you still be giving out bonuses to management and stuff when people, people have died. And so he's stripping back, still paying, but they're stripping back bonuses and they're doing this extensive review of every single piece of equipment in the business and like overhauling safety and like Brad was obviously like there is no monetary compensation for lives. But I was just like, wow. Like, heartbreaking to hear. 

Alec: [00:13:40] Very intense. So two companies that caught my eye. Obviously, housing is front of mind for everyone in Australia and in particular for you and I at the moment, because we are taking the first tentative steps on our property journey, which is to figure out how much we can borrow and then realise what that actually gets us, which is a lot. But when you're thinking about property and it's a reporting season, there are two companies that we can look to to get a sense check of the property market, and they are the two big real estate listing portals ARIA group, which is real estate dotcom there are you and then domain. Now both of them had down years so well at least from a profit perspective. ARIA group's profit was down 9% while Domain's profit was down 28% and domain. Well, I mean it was because of a drop in listings such. Yeah, yeah, yeah. So there's a couple of takeaways. The first one is, you know, sometimes property companies do strike so surprising in Australia. 

Bryce: [00:14:46] Surprising.

Alec: [00:14:47] But often when we've spoken to experts on things we rate you hear about if there's two big companies, the better company or the bigger company will often trade at a premium. And so people often think, Oh, I'll get the second one because there's a bit more value there. But the lesson that sort of is taught over and over again is that like you want to be investing in the best in class because they're going to be more resilient and. Okoro more. And then it's just for me, it's interesting that when you look at this area, the bigger scene is the more premium often trades at a higher valuation to domain. But when things got tough, their profit only fell 9%, whereas domains fell 28% of cases, which I'm just throwing out there, you'd have to test is that if people decided I don't have the money to advertise on both platforms, I'm just going to advertise on the platform where there's more users and there's more listings. And that's how I grew. And so maybe that's why they weathered the last year a little bit better than I did. 

Bryce: [00:15:44] Who even uses a domain, honestly.

Alec: [00:15:46] So unless my partner uses domain and sends me listings on domain and I, I use RSA. So I'm also a shareholder of RSA. Full disclosure. But I've downloaded the domain.

Bryce: [00:16:00] Oh. 

Alec: [00:16:01] Because I have nothing to. So it's all about compromise, you. 

Bryce: [00:16:08] Why doesn't she compromise and get on our. Yeah, well, need to stop humping her with links. 

Alec: [00:16:12] I have no response to that. 

Bryce: [00:16:13] Nice.

Alec: [00:16:15] What, what are some other companies you call your. 

Bryce: [00:16:18] One that I just thought was interesting. You don't often hear companies apologising too much, but Domino's came out and apologised for putting prices up too much last year because of inflationary pressures. They realised that it's they put them up so much that it has impacted their sales volume and so they're now going to reduce their prices, but not necessarily the pizza price, but some of the surrounding service costs. So they're removing the delivery service fees and reviewing, I guess, the input, some of the input costs, because I think they went a little bit too hard on on the on the increase in prices. So I just thought that was interesting. And another one, Wren Wisetech, this is just classic markets. Listen to this. Revenue up 29%, earnings up 21%, dividend up 31%, however slightly missed expectations, stock down 20%.

Alec: [00:17:10] Yeah, it's a classic. Classic. Yeah. 

Bryce: [00:17:13] Expectation of solid, solid results just misses expectations and gets pumped. But Wisetech continues to be one of Australia's leading tech companies. 

Alec: [00:17:22] Yeah, yeah, yeah. There was a classic example of that, the strangeness of earnings season that was shared on our Instagram. Walmart smashed expectations and Target had a weak second quarter, but Walmart was down 2% and Target was up 2%. Classic. And that is even Walmart didn't just smashed the previous year. They smashed expectations. But that's still that's weird. Yeah, I think it must have been about enough. They must have had guidance going for it. Yeah, but it's just like movements in share prices can be so misleading too. Like what's actually happening with the underlying. 

Bryce: [00:17:55] Yeah, absolutely. All right, Ren. Well, before we move to our second segment with the call, what else caught your eye? 

Alec: [00:18:02] So a couple a couple of ones that I'll just quickly rip through. CSL, Australia's biggest healthcare company, was previously Australia's biggest company. They just continue to go from strength to strength despite a warning from the company last quarter, their revenue was up 31%. Profit up 20%, net profit after tax up 8%. And a strong outlook going forward. It's it's a pretty amazing story that CSL is building Temple in Webster. We had a bit of fun with this online furniture retailer because they were one of the first companies in Australia to really try and ride the hype train still. Are they are they still outright.

Bryce: [00:18:40] Yeah, they're still very much in the press about it. 

Alec: [00:18:42] Okay. Yeah. Yeah. They reported a 7.2% decline in sales and a 30% decline in profit. 

Bryce: [00:18:50] I tried to find what it is that like all they say is. 

Alec: [00:18:53] No, no, no, they've said it. 

Bryce: [00:18:55] Yeah. It's just changing the description of all their products. 

Alec: [00:18:57] Yeah, yeah, yeah, yeah. They've, they've rewritten all their product descriptions with AI and I think they're using it in their customer service stuff as well. Like there's a chat bot and all that stuff. Right. Yeah. Um, I gotta do what you're going to. The ASX caught my eye. The stock exchange itself is a listed company. Its profit fell 38% due to costs related to notice the prizes for guessing the failed chess replacement project. So that is just the gift that keeps on giving. I would assume it's probably now all in the review. I would assume Qantas reported record annual profit of a $5 million buyback. It is raising some questions now about the amount of money they got during COVID, which I guess it's also a bit tough because it's like that was that that was then and this is now. Yeah, if they didn't have money then they didn't have money then. But it may drop the price on some of your flights. Qantas. Yeah.

Bryce: [00:20:00] Apparently the level of complaints against Qantas that the Government are just burying is getting ridiculous. 

Alec: [00:20:06] Oh yeah. 

Bryce: [00:20:07] Like all time highs kind of vibe and there's. 

Alec: [00:20:09] We did an episode on the dive. And by the way, I mean, I was on holiday, so I had nothing to do with it. But Sasha, our producer, did an episode on The Dive where she spoke about ghost planes because Emirates want to do more flights to Tala. Is it Qatar? 

Bryce: [00:20:22] Yeah, I think it's Qatar. Yeah. 

Alec: [00:20:25] A non-Australian airline wants to do a flight. I think it was. 

Bryce: [00:20:28] Emir of

Alec: [00:20:28] Qatar. Oh, okay. I was on holidays. They want to do more flights to major Sydney airports like Melbourne and Sydney, but they can't. So they're doing these things where they say they're flying to Adelaide but drop all the passengers off in Melbourne and then fly an empty plane to Adelaide to get around it. But they've asked, they've asked the Government for more flight slots and they can't get it. That's like why like let competition in, know, put some price pressure on Qantas. 

Bryce: [00:20:54] The Government says jobs. But anyway. 

Alec: [00:20:57] One more notable name and then let's move on Magellan. Yeah share price up 18%. 

Bryce: [00:21:02] Yeah, I did say that, but I didn't want to say anything about it. Yes. Anyway, so if you have a stock that caught your eye during reporting season, please jump into the Equity Mates Facebook discussion group. We'd love to hear about stocks that potentially haven't come across our desk and share them with the equity markets community. Speaking of community, we love getting our questions from you guys. Ask out equity mates dot com is where you can leave them and we'll do our best to to answer them and and get you on the show. We have one that's coming today from Liam and Wren. He is in a bit of a pickle. He is very bullish on some of the big tech companies Apple, Nvidia, Microsoft and Google and has has belief in them and has everyday experiences with a lot of them, but is trying to understand what's the best approach around owning them individually or finding an ETF that still gives decent enough exposure to them and figuring out what is the best investing approach. So we're going to give him a call right now to chat this through with him.

Liam: [00:22:02] Liam is speaking.

Bryce: [00:22:03] Liam, it's Bryce from Equity Mates. How you going? 

Liam: [00:22:05] Good mate, how are you? 

Bryce: [00:22:06] I'm well. I've also got Renhere. 

Alec: [00:22:08] Hi, Liam. How's it going?

Liam: [00:22:09] Good, thanks. Ren. How are you? 

Alec: [00:22:10] Good, mate. Good. We got your question. Thanks for sending it through. 

Bryce: [00:22:14] So I guess what? Ren, where you sitting with this? The tussle between owning companies outright and wanting to find the perfect ETF that has just the companies that you want in it? 

Liam: [00:22:25] Yeah, I feel like you should be able to make a custom ETF. That is pretty cool.

Alec: [00:22:29] Good news. We won't get sidetracked with it, but that is coming. It's all okay. I think it's started in the US. But anyway. 

Liam: [00:22:35] Yeah, it's a while and you can pick and choose the holdings yourself. Yeah. Right. Okay, cool. Yeah. Yeah. So like. So I recently, well, a little while ago, I suppose I sort of jumped out of markets for a little bit. We purchased a house, so I sort of needed the cash and that was the part of it.

Bryce: [00:22:52] Congratulations. Congratulations on doing that, by the way. 

Alec: [00:22:55] It must be nice. Yeah.

Liam: [00:22:58] I think being in real estate myself or he is a kind of, you know, a few tricks of the trade, things like that on the inside. So that makes it easy. 

Bryce: [00:23:04] Well, passing through our way. We try to find the balance at the moment. 

Alec: [00:23:08] We'll edit this for that.

Bryce: [00:23:10] Now let's, let's stick with stocks and then we'll see where we get to with property. 

Liam: [00:23:14] So I'm sort of in a position where we're looking to jump back in and I've had a look around and I've like, you know, I suppose the news is at the moment that the is at the top eight like Fang plus stocks Facebook, Apple you got Yeah. Sort of on a dominating that Nasdaq increase whereas a lot of the other companies in that top 100 are sort of just you know they're doing all right obviously, but nowhere near the level of well in video or Microsoft and Apple are doing at the moment. But you guys always say if you know a company that you use and you have belief in, go for them. Like, you know, I use Apple every day. I've got an iPhone. I'm a massive Apple fan. Microsoft, my office always uses Microsoft products. Google, it's Google, of course, YouTube, all that Nvidia. I'm a gamer. So, you know, they kind of dominate that area compared to AMD in my opinion. So I, I have like a personal tie to them and use them every day of my life. Whereas while I also use Facebook, I'm not a fan of Xbox and all of these sort of outspokenness and I think he causes a lot more turmoil than what it's worth saying with Elon as well. So that's kind of my mindset is like obviously owning shares internationally, there's all that extra level of bureaucracy with us, tax filings and all that sort of stuff. Is it more efficient to just sort of bite the bullet and take an ETF with all of them in that? Just accept that you're going to get some other ones that you might not be super stoked with, but you know, at least it's easy and efficient. Or is it just better to get them individually and just hold them? 

Alec: [00:24:53] So I think there's a few elements to that question. I think on the tax thing, first of all, it's you have to fill out the what is it, the white bean form, but it's not. 

Bryce: [00:25:05] Difficult. I'm going to go as far as saying that the brokers these days do it on your behalf. When you sign up, there's a signature required, but you're not you're not in the weeds. No. When you're signing up to these process. 

Alec: [00:25:16] So my my gut is don't let that. 

Bryce: [00:25:18] Yeah, definitely don't. 

Alec: [00:25:19] Be a deciding factor. 

Bryce: [00:25:20] No. Yeah. It's never been it's never been a hassle for, for me over my years. I've never gone down it. I don't wish I didn't. I did nine overseas stocks because of the tax the tax on this is too. 

Alec: [00:25:32] Confusing I reckon. Back in the day when we were with CommSec, they made you print it out and sign it properly. I probably posted in. I have a vague recollection of that, but yeah, since then, with all the online brokers, it is pretty easy. The way it works is so you basically established yourself as a foreign investor and Australia in the US have a tax treaty. When you get a dividend from a US stock, you still pay 15% tax, it's 15% is withheld. But if you sell there's no US tax and then you obviously claim it back in Australia. So a little bit on the dividends, but on the capital gains in individual US shares, you're okay. 

Bryce: [00:26:09] I think also for me I'm sharing at the moment because a lot of the US investments that I have are also benefiting from the Australian dollar paying down the drain in terms So you've got that US sort of currency sitting in there. Not that I really take that into consideration when buying. It's always from the investment thesis of the stock, but if I were to sell those it take advantage of a low, low Aussie dollar. 

Alec: [00:26:33] I guess that would be the same with US ETFs.

Bryce: [00:26:35] So yeah, yeah, yeah. 

Alec: [00:26:36] Yeah, yeah. Because even if you buy, you know like Fang plus for example, it's listed in Australia but you get the, the, the stock, the underlying stocks in us. 

Bryce: [00:26:46] Make sure it's not hedged. 

Alec: [00:26:47] Yeah, yeah, yeah. All right. So let's actually get to answering your question because I feel like we're waffling a bit, so I feel it. You've got strong feelings on this price.

Bryce: [00:26:55] I individuals have strong feelings. My sense is like if you're if you have high conviction in two. A handful of stocks and why not go for it? We've just come off an interview, actually, where the expert was saying, like you, you're better off having high conviction on fewer stocks than having multiple positions across many different stocks because you run the risk of of not of underperforming.

Alec: [00:27:21] Well, and just not knowing. 

Bryce: [00:27:23] Exactly and just and needing more time to research individuals. And I think that's where ETFs obviously help. But if you have high conviction on two or three strong stocks, there's nothing nothing wrong with building, building up large positions in each of those. My counterargument to that is the stocks that you've spoken about are the ones that are driving this huge returns through the Nasdaq and the ETFs that you buy obviously give you incredible exposure to those companies. And should they over time not be the ones driving growth on the Nasdaq, you're still going to be owning the companies that eventually replace them and do so. That's the longer term play. But I don't know if that helps you there at all. I personally own FAANG Plus because I've I've had this predicament I only own now alphabet and and apple outside of my FAANG plus but I've gone heavy into FAANG plus because it's equal weighted and it's all of the companies that I want to be invested in. Yeah. So I kind of have hedged my bets on on though those companies in there. But to your point, they're all the companies that I would want to invest in outside anyway. What about you? How do you think about it? 

Alec: [00:28:29] So a couple of thoughts. I agree with your sentiment generally that it's like if you have conviction on a certain number of companies, you should just invest in those companies rather than diluting that conviction to other companies that you don't believe in. And, you know, looking at FAANG plus, it's got a lot of the companies that you mentioned. It's got Alphabet, Nvidia, Apple, Microsoft. But you mentioned that you thought NVIDIA was a lot better than I am day, but well, I am days in FAANG plus as well. And you know, if you don't believe in Metta and you don't like Zach and his cage fighting antics with Elon and all of that, then you know it's in there as well. 

Bryce: [00:29:07] But you may not like it, but you would have benefited from the 258% increase that it's gone through over the last 12 months. 

Alec: [00:29:14] So I think for me, like my approach with something like this and how I do invest, it's kind of like the best of both worlds approach. So I don't own FANG plus the ETF, but I own, you know, just like generic US ETFs where those big tech names move it and the majority of the the ETF or that they're at least the biggest weightings in the ETF. But then for companies where I have high levels of conviction, I then buy them individually as well to give myself more exposure to that. And so I think one of my biggest individual stock holdings is Alphabet. And so, you know, I obviously own that in ETFs, but then it's like because I have conviction, I'll buy it on top. So my I guess my answer to the question would be like, you can have the best of both worlds and you can get the, you know, own a little bit of everything. And then whoever wins, I benefit world of ETFs and indexes. And then you can also invest where you conviction lies with individual stocks. 

Liam: [00:30:16] Yeah, that's probably a good idea. I mean, I like the idea of having the best of both and own a little bit of everything, but then increase your own personal weighting by buying those ones individually.

Alec: [00:30:24] Exactly. Yeah, yeah, yeah.

Bryce: [00:30:26] The good thing is they're all they're all U.S. And so depending on which broke is as well they're going to be zero commission on brokerage so you can dip in and out of them with very low cost as well. 

Alec: [00:30:36] I've been thinking about the build your own index question that we started with as well. And I believe you probably know this better than maybe me do, but I think you can choose a basket of stocks. And then like set up auto invest with that basket of stocks. So essentially that is build your own index sort of. 

Bryce: [00:30:58] Yeah, let's keep that at a high level because when I'm not quite certain on the execution of it but I, I think they do have a functionality similar to that. 

Alec: [00:31:07] Maybe let's just say this lame it maybe do your own research on shares these as a broker because they may have partially solved the problem that you're trying to figure out or.

Liam: [00:31:17] Yeah, funnily enough I'm like most people, I've got multiple accounts with multiple brokers, but I have you share these in the past and I do believe they have a that sort of thing. Like you said, rent where you can auto invest in a select few US stocks and just keep it ticking over. 

Alec: [00:31:30] Yeah. Okay. Yeah. Nice. I guess it doesn't it doesn't do the, the sort of the weighting of indexes but I mean it's, it's half, it's half right. Yeah. 

Liam: [00:31:39] Yeah, yeah, yeah. I mean I suppose that the, the whole ETF sort of debate versus the individuals was mostly around one the added convenience of just not having to worry about that exchange sort of cop and phase changing and all that sort of stuff as well as all the tax implications. But I suppose I didn't really understand the tech stuff myself. 

Bryce: [00:31:59] So here's the thing though, with this. ETF thing. If you have a broker that gives you zero brokerage and auto invest, you can create the exact same thing as a

Alec: [00:32:10] No. There's one other thing that you need, which is like a really low minimum investment. Because that's that's the other benefit of ETFs. That is true. 

Bryce: [00:32:18] You can put in like $2 or whatever. Yeah. 

Alec: [00:32:20] And you get access to everything. So if it was a broker that offered you like investing from a dollar and then you could, yeah, then you could spread it yourself. But if it's like minimum investment, 500 bucks like CommSec. 

Bryce: [00:32:30] Yeah. Yeah. Well there are the platforms, the online platforms to do it. But anyway, going down a rabbit hole but lame. I hope we've been able to. We've been able to provide some clarity if not just it's been fun chatting it through and we really do enjoy talking to the equity mates community so. Certainly appreciate you, um, sending the question in and supporting the show. 

Liam: [00:32:50] Always. Thanks guys, for reaching out and having a chat. It was. 

Bryce: [00:32:53] Fun. Well, good luck with it. Let us know what you decide on and we'll we'll have a chat about it on the show next week. 

Liam: [00:32:59] Beautiful. Sounds good. 

Bryce: [00:33:00] Well, a reminder that if you want to ask a question, ask an equity mate. WSJ.com is the email or jump on to our socials and send them through Sasha rapid. So we'll keep an eye and we'll do our best to answer them. Make sure you're also subscribed to our weekly email where you can ask questions as well, and we'll get some of Australia's best advisors to answer them. You can subscribe on our email, but we're going to take a quick break. And on the other side, we've got another question from Alex around a comment that you've made about one of the most famous investing books of all time. 

Alec: [00:33:30] Yeah. In the break I'm going to remind myself what that comment was.

Bryce: [00:33:44] All right. Well, we're back. We've spoken about earnings season. We've chatted to Liam, and now we've got a final call question coming in from Alex. So let's give it a listen and then we'll get stocks straight in. 

Alex: [00:33:57] Hey Bryce, Ren. I'm relatively new to investing and getting a lot of value out of this. Getting started and investing in podcasts. I've got a question specifically about encroaching older investment books, the Intelligent Investor, specifically by Benjamin Graham, and in one of the recent podcasts with James Reynolds Friend, you made a comment that caught my attention and excuse the paraphrasing, but it was so many people start investing, get told to rate intelligent, invest, get introduced to traditional value investing, then start trying to apply this to the real world and try to find companies trading below their net asset value, etc. And you quickly realised the rules of the game have changed and deep value plays made sense. And those days don't make sense that I would have been arbitrage the way of course, I've recently bought this book about the day before I heard this podcast and I'm curious what I should take away from reading it in light of that comment, particularly how I should interpret the idea that the rules of the game have changed and date value plays that make sense and those that don't make sense to that, I guess in your view, is a book like this still worth reading? If it is? Is there a particular approach that I should make with adjustment in mind to avoid pursuing strategies that might lead to false hope? Really greatly appreciate any guidance or inside you could offer on that? Thanks, guys.

Bryce: [00:35:16] Nice. Great question. Thank you, Alex. I love being kept honest here at Equity markets Investing. So it is a book that I think you and I both picked up in the early days, ran and tried to give a crack. 

Alec: [00:35:26] But it's a tough first trade as well. 

Bryce: [00:35:28] Very tough. But it is tough. But it is funny that it's one of those ones that always gets put up on the lists of like best books to start as an, you know, starting to invest rate intelligence. 

Alec: [00:35:39] Yeah, yeah. And like it is a great book. Yeah. But there's so much stuff I get to plug in this. So in a recent equity mate's email every Monday we share five of our favourite pieces of content that we've come across and we do a bit of a write up on them. And then every Thursday we share a question and we get it answered by a financial advisor. In a recent Monday email, a shed, an article Investing Big Blindspot, and just one of the challenges of investing is the longer something has worked, the more likely it is to stop working. And that is because, you know, early days a different asset class or a different investment strategy will be discovered or will be thought of, and the early adopters of that strategy will make a lot of money because it works. And then more and more money and more and more people will flood into that market. And the opportunities that they have to invest in will become worse and worse just because there's only a finite amount of any opportunity. And then but, you know, there'll be so much hype in the early adopters will have made money, but eventually that opportunity will go away. It will be arbitrage to way and any value or any opportunity will be priced out. Essentially. It doesn't make sense. Yeah, Yeah. And that is essentially what's happened to Benjamin Graham's style of investing that net net deep value style of investing. And you don't have to take my word for it because this is the second thing that I get to plug in. Our most recent book, Don't Stress, Just Invest available in all good bookshops. Now, we actually pulled out a quote from Benjamin Graham himself. So Benjamin Graham wrote security analysis in 1934. Another that's even harder.

Bryce: [00:37:28] Don't go there. 

Alec: [00:37:29] And that's like that's like a 1930s textbook. Yeah. So he wrote security analysis in 1934 and then the Intelligent Investor 15 years later, in 1949, he taught at Columbia, he taught Warren Buffett. And early days of Warren Buffett's career, he adopted this deep value cigar bar style of investing. But towards the end of his life, even Benjamin Graham realised that the style of investing that he pioneered was being arbitrage. To what end? You know, the longer something is worked, the less likely it is to stop working. Here's what Benjamin Graham told the Financial Analysts Journal towards the end of his life. Quote, In the old days, any well-trained security analysis could do a good professional job of selecting undervalued issues through detailed studies. But in the light of the enormous amount of research now being carried on, I doubt whether in most cases such extensive efforts would generate sufficiently superior selections. 

Bryce: [00:38:28] They go from the man himself. 

Alec: [00:38:30] And if you think about him saying that, then when there was just more and more focus and more and more research. 

Bryce: [00:38:35] I think now. 

Alec: [00:38:36] Think about today with like quants and the amount of computing resources that is being put towards finding those deep value opportunities. And that isn't to say they don't exist. This is the third thing I get to plug. We've recently come off an interview with Marine Yunus, who's the co portfolio manager at Fidelity's Global Future Leaders Fund. We unpacked two companies in his fund. One of the companies, a Japanese company, fit's Benjamin Grey, in the style of deep value investing where you can buy a dollar for $0.50. So those opportunities do still exist. It's just that the number of them are far less. And where they do exist, they often get realised and you know, the price gets beat up faster. And so it's not to say that the book doesn't have merit or the investing strategy doesn't have merit. It's just that a lot of people, myself included, I reckon you as well, Bryce, because I think we were living in a share house in Canberra together when we were trying to do this is well read the book and then we'll, we'll get a stock screener out and try and find these deep value plays. And the fact of the matter is there's just less of them. And when you do find them, there's often other problems with the company. Yeah, there's a reason that they're so cheap. 

Bryce: [00:39:50] Yeah. Yeah. Well, that certainly does answer in my mind Alex's question. Alex, thank you for sending that in and I hope it does help. Still give the book a read, obviously taking into consideration everything Ren just said, but also Don't Stress, Just Invest is probably a more relevant book for today's day and age.

Alec: [00:40:08] It won't help you with individual stock picking. 

Bryce: [00:40:10] That's true. That's very. 

Alec: [00:40:11] True. But it'll help. 

Bryce: [00:40:13] It'll help. 

Alec: [00:40:14] But yeah, I think like still read the book, still learn as much as you can. John Hempton The Australian investor has this great quote that I there's always stuck with me. He said, Every new investor should read five investing books. It doesn't matter which five, just rate five. And I think there's so much truth to that because like, even if it's old, even if, you know, the markets have changed, there's so much to learn about just how markets work and how to think about investing in stocks. 

Bryce: [00:40:41] So well. We've got a recommended books page on our website, if you like.

Alec: [00:40:45] That's the fourth. Blog in this segment. 

Bryce: [00:40:47] If you're willing, if you're looking for. 

Bryce: [00:40:48] Some inspiration, head there. Also, jump into the Facebook group. A whole episode on Thursday is inspired again by an equity mate's community member. We love hearing from you. Keep the questions coming this Thursday. We're really digging into ESG and how it can be sometimes, I guess, contradictory. 

Alec: [00:41:06] Counterproductive. 

Bryce: [00:41:06] Counterproductive to, I guess, the business outcomes. Well, environmental, environmentally going green. Yeah. So a lot coming up. It's good to be back in the studio. We do hope that you enjoyed the money in series? We'd love to get some feedback on it. We know it wasn't for everyone. We will be back with investing content, but we just love to get where we are, back with investing content. We just love to get your feedback because you know it is important to us. So please, if you want to email this contact@equitymates.com.

Alec: [00:41:37] Will have a Google form to collect some feedback that will be on the Facebook group and on our Instagram. So more plugs.

Bryce: [00:41:44] We'll plug anyway, we'll leave it there Ren. It's great to chat as always and we'll be picking it up on Thursday with Kelly Shue, professor of finance at Yale.