Expert: Oliver Hextall – the investing opportunity in changing demographics | Fidelity

Bryce: [00:00:15] Welcome to another episode of Equity Mates, a podcast that follows our journey of investing. Whether you're an absolute beginner or approaching Warren Buffett status, our aim is to help break down your barriers from beginning to dividend. My name is Bryce and as always, I'm joined by my equity buddy, Ren. How are you going? 

Alec: [00:00:29] I'm very good. Bryce is very excited for this episode. The world just ticked over 8 billion people wanted just a couple of weeks ago now. So demographics are on our mind and we've got an expert investor here to talk all things the investing opportunity in the world's changing demographics. 

Bryce: [00:00:49] A fascinating concept and it is our pleasure to welcome to the studio portfolio manager Oliver Hextall. Oliver, welcome. 

Oliver: [00:00:56] Hi, guys. Thanks very much for having me on. 

Bryce: [00:00:57] So Oliver is portfolio manager of the Fidelity Global Demographics Fund. And we're going to be unpacking what it is and what it means to invest in the thematic of demographics. We're going to have a look at the outlook for 2023 and then focus on supply chains and automation and then, of course, close out with some stock specific conversation. But Oliver, we are getting close to the end of the year and we will discuss the outlook for 2023, as I said. But in one sentence, how would you summarise 2022? 

Oliver: [00:01:31] Yeah, well, I mean, I think 2022 has been a very interesting year on a number of levels. And I think, you know, it's hard to put it into one sentence, really, but I'd say it's it's there have been so many different things we've had to deal with in markets. And obviously it's been a pretty tricky time in markets overall. So hopefully we're looking forward to a better time in 2023. 

Alec: [00:01:50] Yeah, what do we mean when we talk about demographics and why invest in demographics or why does it create a better investable opportunity than any of the other options we have to invest in? 

Oliver: [00:02:01] Well, let me talk about demographics. What we're really talking about are the characteristics of the population, of the global population, and how those characteristics are changing over time, whether that's the age of population, the wealth levels of the population, the income levels of a population. It sounds a little bit abstract demographics, but these are really trends that affect pretty much everyone on the planet in one way or another at some point in their lives. And some of them are positive trends. So, you know, one of us saying this is amazing wealth creation. Some of them are more negative, you know, around the pressures that an ageing population puts on society or on around how do we supply water or energy sustainably to it, to a growing population. So some of these challenges, all of the biggest challenges facing the world, and we think we're trying to invest behind companies that can solve some of those problems. And the reason we think it's such a fascinating investment theme is partly because it's such a broad opportunity set so that there really are a lot of opportunities to get behind. But second of all, these trends really are extremely long lasting and extremely visible and extremely predictable, we would say, relative to some other trends. So it's very, very difficult, for example, to change the ageing dynamics of a population at least, at least in the short term. And what we think that does as an investment opportunity is it gives us the confidence that when we look at companies to really build conviction in the growth drivers over a long period of time, because we're typically looking, you know, five, ten years ahead because despite the fact that these are extremely visible and we can have high confidence in the playing out, they often do get lost in the in the short term because they are pretty slow moving. And so that means that we can have conviction in the companies that we're investing behind. But also there are short is a very short term noise where some of these trends get lost and we can have real confidence in picking up these companies and that creates great investment opportunities, we think.

Bryce: [00:03:49] Yeah, it's an interesting one with such a large, I guess, semantics and particularly growth of the middle class for example, like you could easily sort of assume that we take Asia as an example and you could just assume that or make an investment thesis that with the growth of the middle class, more spending, more consuming general economic output is going to improve in general, you know, innovation and GDP and all those things. So you could just say, I'm going to take an ETF that kind of broadly tracks that market. Why is it better to think about an active approach versus something like that?

Oliver: [00:04:25] Yeah, so we see obviously we are very strong believers in the acting approach. All three of us as portfolio managers on the fund have come through the Fidelity model where we're really focussed on looking at companies from the bottom up, so in great depth. So every analyst will cover sort of 20 to 30 stocks and they know them inside out all around the world. They know the value chains, they know the industries. And I think, you know, when we think about our themes yet, for example, better, which is the play on emerging market wells, it is an all encompassing trend. And a lot of companies play into that. You know, we think that the middle class will represent around two thirds of the population by 2050, which is up around about 50% today. And if you look at Asia-Pacific specifically, that equates to almost a tripling in spend over that period. So it's a huge opportunity. But at the same time, you know, you just have to look at stocks in the market and not all of them. Despite being exposed to vaccines that outperform over time or even perform particularly well over time, there is a massive divergence in these stocks and how they do, despite the fact that you could argue they were all exposed to similar trends. So what we think is the opportunity is to really find the best plays on each of the themes that we're trying to invest behind. And that that for us comes from doing the detailed work from, from meeting the companies, really understanding the value chains from really understanding the competitive advantages that some of the companies have relative to others. And so that's where we think the opportunity lies mostly. We have a very strong focus in the fund on quality, the quality of a business franchise and the quality of the financials of a business. And that's because we really are thinking very long terms of five, ten, 15, 20 years ideally. And so we believe that we can own a company that has competitive advantages. It will continue to generate stronger profits through cycle. It will generate more cash flows. And ultimately and hopefully we'll have better sustainability credentials as well, which within as the world changes will put it in good stead. And so we think that not only are we investing behind these themes, but it's very, very important to pick the best companies to play into those themes rather than just buying an index. 

Alec: [00:06:31] Well, Oliver, your thinking very long term at the Global Demographics Fund. The three themes, more lives, better lives, longer lives play out over decades. We're going to bring you a little bit closer to the present day and talk about, I guess, some more short term predictions. We're going to talk about the outlook for 2023. And I think if we were really talking about some of the key things for this year, we'd be looking at inflation, China, Russia, interest rates. They're some of the key buzzwords of the year that's gone by. Do you have any thoughts on what we'll be talking about this time next year? And, you know, demographics play out over a long time horizon, but is there any outlook or anything that's relevant for your fund in 2023? 

Oliver: [00:07:22] I think, first of all, we're not trying to take big macro bets in the funding that we are very focussed on the bottom up and the stock, the individual stocks and how that is positioned. But obviously particularly at a time like this when it's been so volatile and there are so many macro cross-currents and we obviously do have to factor that into our analysis. I think, you know, looking ahead in the very short term, at least, you still face and come through everywhere. Interest rates are still rising in many economies. You've got geopolitical tensions that aren't going away. You've got the war, you've got, you've got plenty of risks. I think we have seen markets move up quite a bit recently. Multiples at a simplistic level are not particularly cheap in developed markets. So I think we would still be relatively cautious, at least in the short term. But for us in the Demographics Fund, we think that the trends don't change. As I said, they're very long lasting and we're trying to pay them on a very long term view. And also we think that the attributes of our companies, such as the high quality nature that I was talking about, something like pricing power is a key thing that we look for and in an inflation environment that stands in very good stead. Downgrades are likely to come through at some point. You know, lots of people talk about recession. We haven't actually seen that in many parts of the economy yet in terms of earnings outlooks. And so we think, again, that the quality of our companies stand in the good stead for having more resilient earnings in some other parts of the market. So for us, although we think that the outlook is still highly uncertain, we actually hope that our trends will know that our trends are going to change, and we don't expect to have to change the portfolio too much because of our focus on some of these attributes. 

Bryce: [00:08:55] What do you think that people might be getting wrong about The View for next year?

Oliver: [00:08:59] I think I don't know what people are getting wrong. I think it's interesting at the moment because sometimes when you're reading out the pieces, everyone is all very clustered around the same sort of outlook. I think now the world is so uncertain that you can make a case for all sorts of different outcomes this year. So I think you can always find different views. I think what we're thinking about in the fund is just really trying to understand the environment today is very different to what we've had for the past ten, 15 years. And I think, you know, when you look back when we had very low inflation and had very low interest rates, and that's created an investment environment that has seen multiples rise very, very quickly at seeing massive leadership in some specific parts of the market. And so what we're trying to do internally in the fund is understand what has changed, how persistent those changes are going to be. And I think it's likely that we will see very different leadership going forwards from here. And so it's just trying to understand those changes and make sure that we're ahead of them in what is a very different investing environment today than it has been. 

Alec: [00:09:57] So when you're thinking about those changes, when you're thinking about opportunities, you know, demographic themes play out over a long time period. But this current pricing opportunity, this current market downturn where you can maybe. Pick up something on a bargain for a bargain may not last too much longer. Hopefully won't last too much longer. Hopefully we see markets rally. So where are you looking region wise, sector wise for opportunities to capitalise on the hopefully the buying opportunity that this moment presents. 

Oliver: [00:10:28] Within the fund. We're not we're not changing huge amounts at the moment. I think what we have seen, though, is there's probably two areas that are particularly attractive, and it does come down to the way valuations have changed over the past year or so. So, you know, we are aiming to own the best in class companies playing into all of our themes, the real long term winners. A lot of those names have been trading very expensive based on very high multiples over the past couple of years, which is which has put us off or where we haven't seen really attractive upside. So I think one area we have been looking into in trying to build positions is companies that we've always wanted to own long term winners, but where valuations have been too high. So now that they're coming off, we're starting to buy that position. So an example of that might be ASML and the semiconductor space, very high quality company, great outlet, dominant position in its market, but has been quite expensive. Still short term question mark that we can start of the Thames Estuary thing and the other area of the market that we find very interesting is stocks that are very sceptical and are expecting a recession. You can see in the numbers that people are expecting things to weaken and valuations are very low versus history. But where we think actually some of the dynamics that we've seen recently mean that earnings, the earnings might be more resilient than people are expecting. And so, you know, when we think about what's happening with supply chains, for example, it means that production a lot of parts of the world and lots of industries is actually still relatively low versus history. And so despite the fact that we're coming into a downturn probably or a weaker period of demand, actually production is so low that can create a bit of a base for some of the. So some of the and exactly so one one area that would be some automotive suppliers which have already which are already operating at pretty recessionary production levels. And we think that provides a bit of a base. Things can always get worse, but we think that provides a bit of a base for earnings, whilst at the same time the valuations are now pretty close to to to trough levels and that is history. So I think that's kind of two areas that we're looking for. And then other than that, we just continue to invest in make sure always that all companies are automatically pure fit with our themes. And we're fortunate because we do have a pretty broad array of opportunity sets and companies that we can invest in. Yeah, it. 

Bryce: [00:12:49] Feels like you could almost funnel any company into a large demographic theme. But let's turn you mentioned there supply chains. You mentioned that automation. And you know, in preparing this episode, it came through that you were a bit of a specialist, I think, in in supply chain. So how do supply chains as I guess an industry or an investment opportunity fit into demographics? Which part of the fund do you do? You put sort of supply chains in inverted commas, yeah. 

Oliver: [00:13:21] So yeah. So I mean, it's obviously been a very, very tough year or a couple of years for supply chains. I think what we've seen coming out of COVID, first of all, the pressures that put on the manufacturing side, the production side, everything shut down. And then we've had a big imbalance of demand as demand has rebounded in some parts of the world. And while production is still pretty tough, what companies and people have realised is the risks around having supply chains really concentrated in certain regions or with certain suppliers. And at the same time you've had rising geopolitical tensions, which I think sadly are not going away. And so people have looked at how they can resolve some of these issues and maybe supply chains were extremely efficient. That brought risk with it. And so I think for us in the fund, it's kind of two main areas that we think this will lead into and they're obviously interrelated, but these would be automation and then also near shoring or reshoring. When we think about reshoring or near shoring, this is a play on people trying companies trying to rearrange their supply chain so that they are building factories and manufacturing capacity closer to home or close to their customers, and also diversifying where they are building products and also limiting the amount of time they have to spend or the or the complexity of getting products from from where they're made to where they're actually bought. And within that, that involves a lot of build out of manufacturing capacity. And so that is part of a driver for automation because obviously when you go to a new factory, you need to put in some of the factory automation processes, some of the robotics, some of the other pieces that come with it. But also, obviously, as we've seen, there's been increasing inflationary pressures and particularly around labour cost inflation. We've seen that. The economics of investing in automation have also improved at the same time, because just the cost of labour has got so much more expensive today that actually a robot looks better value. And at the same time we know that some of the technology has improved so much that the opportunity for the capability now is so much better that actually you can do many different things with it. So that for us this fits nicely into the more lives bucket. So as there are more people in the world, we need to be able to produce more and more things more efficiently. But it also fits into the longer life bucket because one of the key things we're seeing with an ageing population is the pressure it puts on the workforce which is shrinking whilst the population of retirees is is growing dramatically. So we need to be more efficient and obviously also robots don't get COVID. So that's the other side of the paper capacity. 

Bryce: [00:16:01] Yeah, just on that, you said that at the start, you know, supply chains have had a shocking year. And for those, like, everyone's experienced it, everyone's had a parcel that's taken way too long to get here or orders of things that just haven't rocked up. But for those that aren't in the know and have just had the blanket. Oh, so it's because of COVID. What actually has happened to supply chains globally? Is it literally just people getting sick and not being able to pay at the wharfs and pay on ships and those sorts of things? Is that what's happened? 

Oliver: [00:16:34] At a simplistic level? That's you know, that's been the biggest driver of that. At least that's been the catalyst. But the problem is then I think the supply chains have been so interrelated and so managed closely together. So you have a sort of just in time inventory phenomenon where you have a product. It's you know, people are so desperate to keep inventory levels low and to remain efficient. But as soon as there's a small shock somewhere, what I think people realise is that the flow through effects are enormous. And I think you know this as you say, it's affected everyone in the world. But you know, my speciality is consumer at the moment is as an analyst that I'm talking to companies there, some of the sporting goods companies that used to cost $5 to ship a pair of trainers from Asia, where that creates it to Europe for the US to sell them and at times over the past year has been costing 25 to $30. And when you think about selling these shoes to maybe 50, $60, you realise how much of the profitability has been eaten into. So that's a huge problem. And then you think about semiconductor chips, which is another big problem area. And again, this has really come down to not only not having the workers in the factories and the factories being shut, but also the components and the raw materials that you need to build. These products have been stuck. So not only has it been capabilities and you also had the war in Ukraine, which has some key components that come out of that. You've had sanctions on Russia. Even something like crypto has taken a lot of chips out of which may have gone somewhere else. So, you know, you had a bit of a perfect storm for supply chains over the past few years. But I think, you know, something like semiconductors, again, that's just that's impacted everything from cars to computing, all of these things like the supply chains, you know, everyone has seen it and it's been very painful for everyone. It's and it's really just been a combination of factors, COVID towards your personal tensions, the lack of capacity in airfreight again, when you haven't had commercial passenger jet flying. So we haven't been able to ship things as easily. And all of these things have added up to make people realise how when you have such an interconnected supply chain, it creates risk and you need to have a small shop. We've had big shocks to create huge problems. 

Alec: [00:18:45] So we're seeing these problems and we've got this long term tailwind of more people in the world, more people having disposable income, more people being online. And if prices recent online shopping that for some reason gets delivered to our office is any indication more people spending more on e-commerce sites is the investment thesis around supply chains just rebound and like an earnings rebound post this COVID disruption or are you saying particular you know business model disruption technological disruption that gets you really excited as a portfolio manager? 

Oliver: [00:19:21] I think it's more than just the river. I think you're seeing a structural shift actually. I think automation is a really exciting opportunity as a result of this. I think, you know, I mean, maybe we talk about one one of the stocks in the fund is a company called Keynes, which is a Japanese factory automation player. And it's actually the leading player in optical sensors and machine vision, which sounds very complex. But I think the easiest way to think about what it what it actually does is effectively is that it gives eyes to blind machines or to robots so that those machines can perform much more complicated tasks and also provide much more detailed information on their environment so that whoever's operating them has a really great sense of what's going on, on the supply chain. This is really positive. A benefit and a big opportunity because, for example, some of the things that it can do if you have one of their products can inspect finished or half finished goods in a manufacturing process extremely quickly and much more efficiently than a human can. And that means, you know, if a half finished goods is faulty and it continues through the manufacturing process. So you then have a you have an end product that's faulty. So that's wasted or, you know, it can now it can look at not just a sort of uniform set of objects, but it can look at parcels of boxes in a in a bin. So you think about an e-commerce sorting centre where all the products are coming from, and a robot can now actually pick out different sized individual items. It can scan it and it can sort it for you. So people are rethinking structurally how they how they want to operate their supply chains and how they want to go forwards and in a more efficient way, particularly, as you said, with the pressures of inflation, and particularly with concerns around doing everything in one country and realising how much problem that can bring. So yeah, we think it's more of a structural shift and it feeds into, as with many of these things, it also feeds into trends that we were seeing before and has accelerated them and exacerbated them. So automate we're already seeing the pressure from from a shrinking workforce. We were already seeing the pressure from an ageing population. And I think this is just strengthen those trends even further. 

Alec: [00:21:32] It feels like every industry is sort of embracing automation in its own unique way. I know. So Bryce and I previously had a retail background and there was a British company actually that was sort of right on the forefront of grocery and supermarket automation, which was Ocado. Yeah, be interested to know if you have any thoughts on that, because Bryce and I still disagree on the merits of Ocado. Are there any particular companies that are servicing particular industries or sectors like Ocado is servicing the grocery sector that you think is a really interesting or novel use case of some of this supply chain automation? 

Oliver: [00:22:09] Well, when we think about kind of automation and robotics in particular, I think what is the most striking thing is, as you say, automation is used in many, many different industries now. But at the same time, there's a massive difference in penetration by region and also by industries. So if you look at robots, for example, in South Korea today, there are around a thousand robots per 10,000 employees in the manufacturing sector. But the global average is still only around 140. And even if you look at the US or Japan, you're kind of talking about 3 to 400 robots. So we still think that there's massive penetration to go in this particular with robots. But we think around the world we fast. That's one thing that gets us really excited. And the other thing is, just as you mentioned, you know, ocado's in the grocery space and lots of lots of companies in different spaces are continuing to adopt automation. But the car industry is still far and away. The biggest user automation, they've been early adopters and I think it depends on the region, but around ten times higher usage of robots in the car industry than in many other industries. And so what we think is exciting is looking outside of those very penetrated industries of where the opportunities are. And I think, you know, one thing that's really starting to come through, I think as robotics, as automation becomes cheaper and as it becomes simpler to install, it's actually much more attainable for some of the smaller industries and the smaller companies to invest behind. You know, these are now cobots which are collaborative robots which don't you don't just work in isolation. They work with humans because it's historically been quite dangerous to have a robot because obviously it doesn't know who is picking up a parcel or is accidentally picking up a human. So if there's a big risk but now the getting robots are much more sensitive and you can actually just install in the factory line with people still that so rather than having to rebuild a completely new factory line, you can just put them into place alongside the existing workers. It's an easier step to take than full investment. So I think there's loads of opportunities everywhere and automation, I think that is and is driven by technology as well as the structural trends.

Alec: [00:24:17] I've never heard the term cobots before. Yeah, that's, that's, that's a new one for me. I like that. 

Oliver: [00:24:23] Well it's, it's still pretty small, but it's a, it's a, it's a really interesting space. 

Alec: [00:24:27] I'll wait until I can get a robot co host. Yeah. 

Bryce: [00:24:31] Yeah. Good. Well, you've mentioned a a company already, Oliver, and that was Kay and Control. Let's turn to some specific stocks to, I guess, illustrate what you've been talking about. And if you want to continue down the route of can in the automation space or perhaps there are others in the portfolio that you could bring to light will start there and then maybe a couple of others that are in the other sort of pillars of the demographics theme. 

Oliver: [00:24:57] Well, maybe just to finish on Cairns, because I think so first of all, it has these fantastic products in this machine, this sort of vision and senses space which is under-penetrated within automation relative to all the. Also relatives of robots that we think gives it a much stronger growth outlook and should outgrow the end market as well. It's also an incredibly innovative company, which I think is one of the most fascinating things about it. So 20 to 30% of its annual revenues are from new products, which has developed within the last 12 to 18 months. And when you think about some of these things going into factory lines, which will be in place for a long time, I think that just is an amazing stat and it shows you how innovative it is and it's got a different business model as well. So this is I think this is again, is, you know, we're not just training companies which play into these things, but where we can go a level below that. We're very fortunate to have experts around the world in all of these sectors. And so we can talk to the analysts and really understand the business model. And the key business model is differentiated versus peers as well, because they don't have that fabulous. They don't have their own manufacturing. So actually, they outsource manufacturing and they really just focus on the design process. And so that gives them more flexibility. And also they sell directly to customers. So they cut out the distributor, the sort of the middleman, which has a double advantage on. Firstly, you don't lose the margin to them to the middle man who inevitably you have to pay some money to. But secondly, you have incredibly close relationships with the customer. So not only can you encourage them to buy more of your product, but also you can get great feedback from them about what they're looking for. And that then feeds back into the research and design process, and you can really make sure you're making things that the customer wants. So that's an example where you have a sort of virtuous circle which continues to build capacity and which we think is exactly the sort of thing that we're looking for. And also, obviously, automation from a sustainability perspective is great because you have less waste, you have better products and you have a safer working environment. So that's one stock and automation. I think if we look outside of automation, maybe on better lives, it will actually be better and longer lives together. I think it's a good example of how a company could essilor luxottica, which I don't know if people would be familiar with, but it's a you definitely know their products in that it's a combination of two businesses. So Luxottica is an Italian sunglasses company, effectively owns the Ray-Ban brand, it owns the brand. It makes a lot of sunglasses frames for other brands too through licences and it operates stores like Sunglass Hut. I think Opsm you have in Australia it's pretty well-known and it's very dominant in its market and then it merged with Xolo, which is the leading manufacturer of lenses, so, so lenses for glasses, sunglasses and prescription glasses and they merged in about 2018 and it's created this really dominant player in the eyewear industry has to get combined. It has over 20% market share. It's four times bigger than the next biggest player in eyewear and it's fully vertically integrated. So they design the products, they design the lens and the frames, they manufacture the products, they market the products, and they sell the products through their own stores. And that's put it in an incredible position relative to peers because it controls every part of the value chain. And it has a great relationship with customers and also the retail customers, but also because it's so dominant, has a fantastic relationship with other people in the industry who need to buy lenses, for example, who are designing frames. So it's become this really, really powerful player in what is a very attractive industry. So eyewear, structurally growing market, you have pretty low penetration around the world. Around 60% of the world needs that site corrected, but of those, only around 40% actually have it. So there's a sort of structural penetration angle then obviously as the population ages that people increasingly need glasses. So that's one of my themes. And at the same time as emerging middle class wealth grows, they tend to buy more into branded products. And so that's not fits that theme. And again, when we think about that, this is in a great position, but also it brings together the benefits of the merger. It's brought together two very complicated supply chains coming back, supply chains again, which are used to build lenses and one place frames, another face designed to separate and put them together at the end. And also you then have to ship frames and lenses separately to all of the stores, whereas now you can do that together, which provides huge efficiencies. So it's a great company, very dominant position and a structurally growing market where we think there's huge synergy potential still to come through from the deals done recently. So I think that's the really interesting stuff. 

Alec: [00:29:55] You do really run a global fund. We had a Japanese company and then an Italian company. It is just really a real reminder that the opportunity set is truly global and it's kind of refreshing too. Hear about companies that aren't listed in the US. I was about to ask, is there one other company? And as I was about to ask, I knew that it's going to be listed in the US after I said that. But I did have maybe one more. 

Oliver: [00:30:22] I will talk about when I think I think it is. You know, one of the things about the fund is great is the breadth, but also we have a very strict thematic purity criteria as well. And I think it's good because we can invest all over the world, but also we are very careful to make sure that all of the stocks fit into our themes. And we have a pretty rigorous process around that. But yeah, it's very exciting to be able to pick stocks from anywhere. It's great. And again we think it sets the fun about the other companies to talk about is Solaredge, which is the US. So I think this one is a play in our lives bucket. It's a solar power play. So it fits into how can we provide energy sustainably to a growing population and what solar does. The people are familiar with it. It creates inverters. So this effectively converts the electricity in the solar panel into interest in that you can power that you can use around your home because otherwise you wouldn't be able to use it. And so it's actually essential to installing a solar system at home or in an air, in an office or in any sort of environment, that that technology is actually very differentiated. So effectively what they do, they have power automate, which effectively means that in in a legacy system, if there's a problem anywhere in the solar system that reduces the output and the capability of the whole system, whereas they have an individual system. So then you have a problem somewhere. It doesn't reduce the output from the rest of the system. So it's much more effective, much more efficient and a much better proposition as a customer, practically. It's a play on on solar power, which we think has a very strong growth outlook ahead of everything to at least 50% per year after 2030. We know that energy demand will continue to grow around the world as there's more people coming onto the planet as urbanisation and obviously just a general kind of electrification trends, we see more and more people in actually vehicles or using heat pumps to heat their homes. Then we think there's a natural trend that people want to use more renewable energy and obviously governments are not really getting behind it as well in terms of subsidies and some of the incentives that they're offering. And then again, you know, that's the theme. And then we said we're trying to get one level below that. So it's also very dominant position. It markets the number one player, particularly in US residential, it's over 50% market share, but it is pretty diversified by geography as well. It's got decent returns, it's got it's got pretty good margins. And so we think it's a you know, it's an attractive play within solar. There's not that many areas of the market. We don't make any money at all. So this is an example of how we can find a stock which plays into that theme, but also has the sort of attractive financial characteristics and the defence ability of positioning that we're looking for in the stock. 

Bryce: [00:33:06] I love it. So we had Luxottica and SolarEdge, so three, three great stocks there. We have got to the final three questions of our interview. So thank you for your time. If anyone would like more information on the Global Demographics Fund, you can head to the Fidelity website. It's fidelity dot com dot our you and then under the funds the ticker is ASX FDM if you're interested and a shout out to fidelity for supporting this episode as well. But again we have reached the final three questions to close it out. 

Alec: [00:33:44] That's right. All of the first one we always like to end with. Do you have any books that you consider a must read? 

Oliver: [00:33:50] I think I think it's important to realise as many books you carry that you get you get so much information from reading books as you know, in investing, that's it's I think it's the best source of learning that you can is the best tools that you can use really. Seven people have done it before. And it's great to learn from the real experts in terms of must reads. I think I would have picked one book. I think for me, depending on where you are in your investing journey, I think I remember the bit that I read when I joined Fidelity was a book by Anthony Bolton called Investing Against the Tide. And De Bolton is a sort of fidelity legend, extremely successful PM portfolio manager over a very long period of time. And I think it's I find it very interesting just to understand how he thought about investing, what he was looking for in stocks. He was typically a sort of value or contrarian investor. And it's a great insight into what he was looking for, the kind of characteristics of a stock he was looking for. But also, I found it interesting to understand a bit more about asset management and what it's like to work at a large asset manager and really understand about the process within the mastermind. I think that does one, but is great is a sort of more of an introduction I suppose, but for me personally, one that I found incredibly helpful or sort of expanded the way that I was thinking about the world was thinking fast and slow. By Daniel Kahneman. Obviously, I think, you know, it's pretty well known. But but it's not it's not specifically by investing or that does reference investing, but it is much more about sort of how the human brain works, I guess, how how it operates, how it you can take shortcuts sometimes, how you can you can be a bit lazy in thinking processes and then also how there are so many biases and things that we're constantly do very quickly in our heads, which you're not even aware of. I think for me it was very relevant because in investing you're constantly confronted by uncertainty. I mean, ultimately we're trying to think about and predict the future, which no one can really do. And so I found it very helpful and sort of informative to understand some of the hurdles that we have in our brains. And we're trying to think about these complicated things that we never actually get to know the answer to. And although it doesn't necessarily mean you get them right, I think it's just an interesting way to learn about the kind of natural biases in your brain, how you can overcome them and hopefully be able to think about what there is where there is no real correct answer. I would think about things more effectively. 

Alec: [00:36:09] Yeah, I love that. Two great recommendations. I haven't heard of investing against the tide, but we've been doing this podcast for five years and I still have no idea what the inside of a large asset manager is. So I think I'll be picking that one up. But over the second question, we like to close out these interviews with just forget valuation for a minute or turn off the stock market just purely on what the company is, what it does and who it's run by. What's the best company you've ever come across? 

Oliver: [00:36:41] Yeah, it's a great credit. I think we're fortunate that we look at a lot of great companies all the time, I think. I think for me personally, I saw as I said, I've been a consumer discretionary analyst looking in Europe. I think for me personally, the best company would be LVMH, which is a very, very large luxury conglomerate based in Europe. I think pretty much the biggest company in Europe now is at a phenomenal time over the past few years. And so I know it very well. I've met the management team several times, the CFO, and, you know, every time you meet them, you learn something more about the industry. And it's absolutely fascinating. So they are, I think the real reason it's done so incredibly well is because of that portfolio of brands. They have phenomenally successful brands. And when you look at the heritage of some of these brands, they are so, so difficult to replicate, you know, 100 years, more than 100 years of existence and all of that sort of brand equity that that builds up. So that's it. That's a huge barrier to entry. You know, others just just can't recreate. But at the same time, even when you have that brand equity, it doesn't necessarily mean the company is going to be incredibly successful. So I think, you know, they really are an extremely impressive management team. So Mr. Arnault, who effectively founded the company and continues to run the company today, has an absolutely brilliant way of nurturing brands and making them grow. And I think it's fast. They have a slightly different operating model to some other luxury companies in that it's very decentralised and they believe that every brand has to prove that it can stand on its own two feet as a separate entity, pretty much within this huge conglomerate. So although you obviously get some benefits around if you want to lease a store in a place and a shopping mall, something like that, you get some benefits of being in the group and you get you get learnings through other companies for other brands in the group, actually every brand is forced to to prove there's worth its its worth its position in the group on its own. And I think that just creates real discipline within the business. And it means that if there are problem areas, they get weeded out very, very quickly. So I think that's one of the ways it's run is incredibly impressive. So it's also really diversified across categories. So it's got wines and spirits, which is focussed on cognac through the Hennessy brand and through pretty much every major champagne brand you can think of. No, Hennessy obviously is the main one. Then you've got works in jewellery, you've got perfumes, cosmetics, but it's also diversified very nicely across geographies as well. So it's a great business. And I think the key thing at the moment is the pricing power that these brands bring you. So Louis Vuitton has raised prices sort of 20 to 30% depending on specific product over the past few years. And it amazes me you go into a downturn, you think coatings might slow and they said, don't worry, we'll just raise prices and we still get the revenue growth. And it's that ability to do that. I just there's not many companies that can do that. 

Alec: [00:39:28] Yeah, it's such an unbelievable story. Can't say I frequented too many of their businesses, but it's amazing to watch. 

Oliver: [00:39:37] Yeah. 

Alec: [00:39:37] And then, Oliver, our final question. If you think back to your younger self, maybe when you were rating investing against the Tide and thinking about what it would be like going and working in a place like Fidelity, you know, earlier in your investing career, what advice would you give to your younger self? 

Oliver: [00:39:52] I think when I think back so I actually started in investment banking, so I did M&A for for nearly four years and I realised after about three months that I didn't want to do it particularly. And then unfortunately I started it as it was kind of 2007, 2008. So it wasn't the easiest time to move. And I was sort of very frustrated at the time. And I really wanted to know that I wanted to do investing. That became very clear while I was doing M&A. But it took me a long time to get out of it. And, you know, and then I'm very glad it took that time. And I think I ended up exactly where I wanted to be. And it was and I feel incredibly happy. But I think I look back at that time, I think I would say to myself, I say to other people just now, take your time and there is no need to rush in when you're starting out. I think it's much more important to get as much as you can from every experience that you're going through and really take the time to think about what you want to do, what you're good at. And there's this sort of feeling that you've got to get on straight away. And I think, you know, now I look back on it and you realise it's so much time in those days, it's much more important to use that as well as you can really learn from every experience and not be desperate to get on and actually just take the time that you end up in the right place. 

Bryce: [00:41:00] Well, Oliver, we thank you so much for coming on Equity Mates and helping us unpack the global demographics and the investment opportunity that it does present, as Ren said. The global population has just ticked over 8 billion, so plenty of opportunities in some of the major pillars within the Fidelity Global Demographics Fund. We do really appreciate your time all the way from the other side of the world. Are you in London? 

Oliver: [00:41:23] I'm actually near New Green, England. 

Bryce: [00:41:26] Not easy. 

Oliver: [00:41:27] To say, but. 

Bryce: [00:41:27] To London, it's the same thing. 

Alec: [00:41:29] Final question Oliver, why is it coming home? 

Bryce: [00:41:32] Is it coming hard?

Oliver: [00:41:34] Absolutely. Yes, it is. 

Alec: [00:41:38] Well. 

Oliver: [00:41:39] Is going to be better.

Alec: [00:41:41] Depending on when this gets released. You may or may not have played France, so you may look like a genius or edit it out. 

Oliver: [00:41:48] France is the biggest. Yes. 

Bryce: [00:41:50] Yes, yes, yes, yes. Well, all the best. But as I said, really appreciate your time. Thank you very much.

Oliver: [00:41:57] Thanks very much, guys.