Talking Money To Us | Anthony Wilson – Head of Equities at Shaw and Partners

Candice: [00:00:10] Hello and welcome to talk money to me. This is your need to know financial podcasts. I'm Candice Bourke.

Felicity: [00:00:15] And I'm Felicity Thomas. Now, thank you for joining us today. We are bringing you another one of our special guest interviews. This time we're actually joined by Anthony Wilson from Shaw and Partners. Now, he joined the firm actually after us. So back in July 2021. Previously, Anthony was an equity partner. Wilson's advisory working on the institutional sales desk, focussing on small cap equity sales, both domestically and internationally. He also had roles at Lenoir Securities and Emerging Growth Capital. Anthony brings experience the team in research, sales, sales, trading and hedge fund sales roles. So welcome, Anthony, to talk money to me. It's nice to have you on the show. 

Anthony Wilson: [00:00:54] Yes, thanks a lot. It's good to be here. 

Candice: [00:00:56] We're excited to be chatting with you. And I've really been looking forward to this chat with you, Anthony, because the retail world is very different to the in-store world. So pumped to get into our conversation. But just before we do that, just quickly, guys, here comes our disclaimer. I'll be quick, I promise. As always, our chat today on talk money to me is not considered personal advice, even though we are registered financial advisors at Shaw and Partners. Please note that these podcast in the context discussed does not constitute as financial advice, nor is it a financial product. So Anthony, let's kick off the scene for our listeners. Can you give us an update on the state of play in the market at the moment? You know, what are you kind of keeping a close eye out on? 

Anthony Wilson: [00:01:35] Yeah. Okay. So, I mean, if I was going to describe it in a word, I'd say it was pretty shaky at the moment. We're seeing the first the interest rate moves higher, which shouldn't come as a surprise to most, but it's coming at the same time as you've got the war in Ukraine and supply chain issues have caused inflation spikes around the world. So that's causing some pretty big problems for listed companies, which is leading some company downgrades, certainly domestically in Australia. So on the back of that, there appears to be a bit of a de-leveraging event going on. Worst case, maybe people who may have drawn down debt in the House use the margin margin line to invest that money into the market at a large margin thinking they can borrow it. So 3% and then getting paid a 5% yield or something. On using a margin line that works very well in the bull market. You look like a hero and you're making money out of nothing. However, this type of market, if you get some some down days, all of a sudden you get to a margin call and therefore sellers because they can't come up with the money required for the margin. So that just creates panic selling. And we're sort of seeing that recently in my history looking through the GFC and when COVID was hitting and in the markets in early 2020, that type of margin call selling usually happens somewhere between sort of ten and 11 where you see those big drastic falls. Now that's something we're certainly been saying recently. It seems to have eased off. Currently on the date we're recording this. But going forward on the back of all this, you know, interest rates heading higher, we're going to see valuation compression. That's not exactly the type of semantics that leads to a bull market. So I'd suggest, you know, keeping an eye on inflation, it seems like the market's got a handle on inflation expectations now. And that's sort of shown by the ten year bond yield in the US in stabilising and actually pulling back. But perhaps the turmoil isn't over yet. 

Felicity: [00:03:33] That's a really interesting point. So we're actually recording on the 17th, the fifth, 20, 22 for everyone listening. So essentially, if our listeners do want to look at buying, there's a bit of selling between ten and 11. So it could be a could get a good bit of a bargain around 10 to 11. For the benefit of our listeners, could you explain to us what your role as head of institutional sales involves? Can you walk us through a typical day? Because I believe a lot of young people listening are you want to be in institutional sales? I mean, everyone says that they would love to be in in-store sales. [00:04:07][33.3]

Anthony Wilson: [00:04:07] Yeah, I think I'd probably just do it more typical sales and store sales desk role rather than in a management role, which is probably a bit too boring for most, but generally it depending on the firm, the morning meetings that you go to are essential, but they just different time for us where it was just slightly before before our time and at that meeting, you talk about the overnight wrap up and what's happened and really what that means for our research stocks and anything that we should be doing in the back of that. So really information coming out of comparable industries and sectors or stocks in which those drivers can be related to ASX listed stocks because here it shows we predominantly look at ASX listed stocks, but that doesn't stop you looking throughout the world. So, you know, for other things that may have. Any influence on the certain drivers of the stocks we're looking at at that meeting. You also talk to and share sort of any other trading ideas. You can talk about stocks that we don't necessarily cover, but, you know, guys on the desk or in research may have had an interest sort of past life and historic sort of idea about that. And people you still talk to on it, you talk to flows. So what stocks you're active trading in the previous day where we're left and sort of what sort of blocks or larger size interests we have. And then certainly talking about our published research and key bullet points for those because really is sales. That's that's what you want to be doing and sitting there talking about our views and and essentially selling our research that's produce.

Felicity: [00:05:46] So essentially you need to be an early riser because if you need to be in the office before 8 a.m. in an instant sales role. 

Anthony Wilson: [00:05:53] Yeah, I mean I wouldn't say that I am. So there's some of the bulge bracket guys there and of like six I am. But you know, it's they're on you know, everyone on the desk has a different role for us. We've got Hodge. He sits there and he he does the overnight wrap and he goes through it in full, which is very helpful for everyone else. So he's willing to do that for us and that helps us then relate that to other stocks. So outside the morning meeting, you sort of you go back to your desk and you start talking about the insights that you discover in that morning meeting. The morning meeting puts the structure on your day, so you do calls on that. If you're in research sales, you're calling institutions with the thoughts. As discussed, you're viewing news flows throughout the day. There'll be new announcements out. So you're reacting to that new information. If your cells try to, you're managing the orders in the market, you're trying to find liquidity, you're checking on the orders, the cancer from yesterday and and coming back on those to get back on to the flow. And then throughout the day, you might be meeting with company management. You might be on non deal roadshows where the company's meeting with us or we're hosting the company and taking you out to to our institutional clients. You know, there is a side of organising that as well. So you'll be sitting there organising those roadshows for future events. You've got internal meetings, account management strategy. On top of that, you got to sit there and actually read the research products and and understand.

Candice: [00:07:18] And trade and look at the markets. 

Felicity: [00:07:19] I mean, the roadshow sounds fun, though. That sounds like a lot of fun. I think what would be good is to explain, you know, what is an institutional client?

Anthony Wilson: [00:07:27] Institutional client is this for a retail investor? It's it's for most people that don't have a self-managed super fund. You probably put that money to a certain fund each months or each week or whenever you get paid. The you know, the big one back in the day was Colonial. I remember when I first came out of university, I tick the box and mice of the money went to Colonial first day. Back in the day was the biggest fund manager in Australia. And within Colonial I'll have all that money. Whether it doesn't all have to be from super funds, some of them are just managed funds and that'll be split between different mandates. Some will be large caps, some will be mid-caps, some will be small cap. There'll be, you know, growth and value banks depending on the mandate. So the clients differ variably, but essentially they're people managing other people's money to to a mandate that's that's pre-written.

Felicity: [00:08:25] And you guys put the trades through, is that right? You're doing the buying and selling and executing. 

Anthony Wilson: [00:08:30] Yes. So yeah, you've got designated trading representatives who do the executing of the trades in the market sells. Traders also do that function. So ultimately research sells, sell the products and give ideas and opinions on stocks and sectors sells. Charters are all about execution and finding liquidity and then hedge fund sells is can be a little bit more short term and catalyst trading and going long and going short. That's kind of the broad, broad roles there, I guess you'd say. 

Candice: [00:09:02] And when you say finding liquidity, if there's literally none on the screen. So walk us through your relationships. You've got to pick up the phone and say, hey, let's do a deal here. Is that how it works? 

Anthony Wilson: [00:09:13] Yeah, well, it all ties in together. So let's say we're doing a roadshow which is essentially taking your company around to to, say, the institutional investors. Through that, you get an idea of who owns the stock and who's got an interest in it and their opinion on it. So, Katie, education stocks are very illiquid. So let's say we've got a seller of that same million shares in that, which I mean, look at the current spread. It could be worth 1.7 million bucks ish. I think now you can't try that in the market, so you have to try and find the other side, which is finding liquidity. So, you know, through your knowledge of who owns the stock and who's got an interest in it and their opinion on it, you can reach out to them and try and find the other side. So a special. Tribes in that smaller cap end of the market is anything over $200,000 worth. So yeah. And then for the broker, it achieves double any brokerage. You know, if that's worth $2,000 brokerage on one side, double to four, and you're doing a job. 

Candice: [00:10:15] Well and that trade might take a week to do. 

Anthony Wilson: [00:10:17] Right? I hope not. But yeah. 

Felicity: [00:10:19] If you're bad at your job. But Anthony, his team are very good. So within the day. 

Anthony Wilson: [00:10:24] Hey, boss, that's you. Maybe that takes two months off, but it may. 

Candice: [00:10:29] It may just depends on the company, right? 

Anthony Wilson: [00:10:31] Yeah, it depends on the company. And, you know, whether it's, you know, people are positive towards it or not, sometimes you just kind of find the other side and that's just the way it is. So people are stuck in what we call a lobster pot. Lobster pot. You get in these kind of get. 

Felicity: [00:10:44] Out.

Candice: [00:10:45] Another term in the markets. We are going to unpack a couple of different jargon words. But I just want to ask one question before we go there. That's just sort of, I guess, might be of interest to our audiences. You're obviously talking to companies on day to day basis. You sometimes go on a roadshow like you've explained. So when does the Chinese will come into effect and explain to us what that means in a layman terms to to those of it that might not know that term? 

Anthony Wilson: [00:11:11] Chinese wall is a pretend wall where the people on one side are in knowledge of of insider information or information that you would expect to move a market if the public market was in charge of it. So in our business, you've got sales and you've got research there generally on on the the public side of the Chinese wall and then you've got your corporate team and they're on the other side of the Chinese wall. They usually in knowledge of some insider information. So that could be an early look at the numbers of an upcoming result. You might find some firms are in the same position because they'll be given the first half result numbers and they have to build out a presentation that the company will talk to and the release the market. The often corporate guys are bought over the wall and helps in that same er function or these guys may be looking at acquisitions so they might be advising on the acquisition or merger and then beyond that they'll be advising on, you know, how they going to finance that and, and who's it going to. So you know, there's a couple of stocks I'm over the wall at at the moment and that means in the sales function, I just can't talk about them to anyone who is who is in over the wall.

Candice: [00:12:27] Yeah, that makes sense. And thanks for explaining that. And going back a step, you kind of touched on a few different roles in your team. So and then now knowing what the Chinese wall means for our listeners, have we missed anyone else in your team? You've got sales, research, anyone else? 

Anthony Wilson: [00:12:44] Yes. Well, I mean, there's the corporate department, which is is is really important in what we do. Essentially, they connect the the listed equities to to finance their growth and development, essentially helping connecting companies with equity when and if needed. They might be the guys working on an IPO, which means they're writing prospectuses, communicating both with the institutions companies to make sure the deal is correctly priced and structured. That might involve finding cornerstone investors for the primary issuance. Yeah, so that's that's a fairly lucrative and already highly competitive market. 

Felicity: [00:13:24] At the sexy side of finance really because I know everyone wants to get into corporate finance, but then a lot of people don't actually know what they do. 

Anthony Wilson: [00:13:31] Yeah. Careful what you wish for. 

Felicity: [00:13:33] They long hours, right? Yeah. 

Anthony Wilson: [00:13:35] If you don't like working long hours, those guys are often in weekends and still sitting there just at one or two in the morning and they don't generally show up at night. I am for morning mining but they get some leeway in the mornings. But yeah, they're hard.

Candice: [00:13:48] Workers so I guess, you know, long hours, pretty intense. You need to definitely be in a team environment which you've definitely gone through all of the different roles, which is great. So yes, you've got to become a big family, right? 

Anthony Wilson: [00:14:01] Yeah, absolutely. And you know, it takes certainly on the desk. I always say it takes liquorice allsorts. You can't always the same person because you've got a broke to different clients and if everyone's so similar, you just don't get along. In my view.

Felicity: [00:14:16] I'm loving all of these analogies. This is so great. So I guess it's kind of like Candice and I were a bit like yin and yang. Candice is more risk averse and I am happy to take on a little bit more risk. She likes the larger end of town and I like the smaller end of town.

Anthony Wilson: [00:14:31] Yeah. As I listen to one of your other podcasts where you said that, so why don't you guys tell us about your sales? CV I don't know much about private wealth management apart from trying to manage mine. Well, sadly, we always work pretty closely together. Business partners. How do you mate? And how do you. How do you work together? Well. And what do you do? 

Candice: [00:14:53] Well, we met back at our previous firm, and I was there for about. Nearly two years before Felicity joined from BT Westpac and I was sort of at this pivot road kind of moment in my career. I was like, you know, do I stay, do I go, what do I do? And we actually met at an advisor conference and I sort of looked around and, you know, typically in the industry, as you know, Anthony saw a lot of male heads and a lot of, you know, females. But then we sort of started chatting. And then on the back of that, we ended up just trying it out, sitting next to each other on the desk. Because what you've explained is quite right. It's an intense environment, it's long hours. You really need to, you know, trust and really like the person you work with. And that being on the desk is a great way to figure that out because you've got the phones, the markets and everything going on and then we sort of just like joined forces. We didn't really kind of plan it. We went into a a prospect meeting to, to pitch and we ended up naturally falling into the conversation really well with the client. We ended up winning the client and then we sort of looked at each other, went, well, let's, let's see if we can like join forces sort of thing. And we've kind of morphed into this holistic wealth advisory offering for our clients. 

Felicity: [00:16:10] I think to add to that point is, you know, Candace started out as I guess a traditional stockbroker when I first met her and I was a traditional financial planner coming from the Westpac banking world. But over the couple, over the last, you know, I think it's been five years now, we've really morphed into holistic wealth advisory, so we both do everything now which is fantastic, right? So we've basically just been able to duplicate ourselves, which allows us to go to separate meetings now and see more clients and help more clients. So, you know, no longer can, as a traditional stockbroker, no longer am I traditional financial planner or I put clients into, you know, models of managed funds. So we've really, I guess, developed over the last five years together.

Anthony Wilson: [00:16:54] Yeah, that's pretty good. Pretty good. So yeah, I mean, we seem to have told each other it's really important, in my view, just to get along with the people you work with. In my career, I've gone full circle, so the three people on the desk that I work with now closely I used to work with in a previous life. One of them actually hired me in my first equities broking role, so. 

Felicity: [00:17:20] No kidding. 

Anthony Wilson: [00:17:21] Yeah. 

Felicity: [00:17:23] Who's that? 

Anthony Wilson: [00:17:25] And Mark Sanford. So I went from precious metals broking into into equities and for some reason he chose me. And here we are today. 

Felicity: [00:17:36] And now you're the head of our whole department. How cool is that? 

Anthony Wilson: [00:17:39] Yeah, it's nice.

Felicity: [00:17:41] Nice to be so humble. 

Candice: [00:17:42] We love it and see it. 

Felicity: [00:17:44] Well, turning our attention to the markets again. Now, you mentioned it earlier, but we've seen a spike in market volatility lately. I feel like it's been volatile the last three years now. But let's have a crystal ball question for you. This is what everyone, you know tuned in for. Do you think we near the bottom now or do you see more downside to come?

Anthony Wilson: [00:18:03] I think more downside to come since COVID hit was we're sort of had this blissful environment for risky equities, government stimulus all over the globe, and it's helped a surge in equity markets. To me, that's now done and over. You know, it this has led to sort of a combination of macro factors, high inflationary environment. It's, you know, led central banks to act. And there's only really one true lever to access to an inflation environment that's outside of verbally talking about doing it, and that's increasing rates. So in expectation of central rates, central banks increasing rates for same sort of bond yields surge. And and this has caused that recent carnage in equity markets across the world. So I guess in the short term is the question is, is that capitulation and is that where we're going to see it and now it can rebound? I think the answer is probably not. You know, you and the US inflation appears to have peaked in March and fallen slightly in April, but it hasn't really rolled over yet. So what in turn to interest rates are still sky high, surely. And in that environment, you know, we're going to see some valuation compression and that's just the way it works. So whether we see it in a bear market for one or two years, it's usually something along that time frame. So yeah, it's not it's not a great picture in my view for the for the next one or two years. 

Candice: [00:19:32] So would you say that I guess someone looking to get into the markets, whether it's retail in STO, is it a buying opportunity? But is it more also just like like you've kind of outlined be patient and keep getting into it, right? Like keep topping up. 

Felicity: [00:19:46] That dollar cost average and find the right value companies. 

Anthony Wilson: [00:19:49] Yes. So it's so hard to predict what's going to happen on the macro level and clearly. That's not my job and it's just because it's too hard. So I always sort of look at a specific level. I guess I imply a sort of a macro overview or not. Clearly high growth loss making companies, they're just not going to be where they were recently. We're not going to be sitting here talking to sales multiples. We want, in this type of environment, inflation, hedge stocks or quality high growth stocks, which which are actually probably making money. 

Candice: [00:20:30] Can you give us a couple of examples of those ones that you're liking? And in those characteristics? 

Felicity: [00:20:35] Yeah, give us some good stock tips. 

Anthony Wilson: [00:20:37] Are stock tips. I can give you some. I can give you some buys and sells. And let's. 

Felicity: [00:20:42] Do it. 

Anthony Wilson: [00:20:43] In that sort of scenario. You'll see a a valuation bent come back into the fore as well. So on that basis, SJ, I have as a bar, it's a 250 mil market cap services, business, asset services, mining services, construction. So the asset services segment supplies, integrated services to customers across their entire asset lifecycle. The Mining Services Segment, it provides services to mining clients, transload solutions, production drilling, ground slope, stabilisation, design, engineering and sort of monitoring of that as well. And then construction segment supplies, integrated products and services to customers involved sort of in the construction of complex infrastructure. So, so.

Candice: [00:21:33] Completely vertically integrated business. 

Anthony Wilson: [00:21:35] Well it's yeah. Through the whole cycle. Right. Of a, of an asset lifecycle. So it's not a new company. But what's happened is it's shifted its revenues to be now two thirds asset services. So asset services are highly rated in nature. So for me, this stock deserves to trade on a high multiple. It trades on, call it four times elevate above Avatar. And I even on those numbers, I think it's probably come upgrades. So I think looking at comparables is things should probably try it on six times every but to because of that very rare occurring nature. So you know if you if you look on the current numbers that should be trading over $0.80, there's a chance it probably could make some further acquisitions as well. 

Felicity: [00:22:18] That's a great buy. What about another buy for us, Anthony. 

Anthony Wilson: [00:22:23] Mm. I, which is a 50 mil market cap which is probably in your sort of risk range for the city considering what you said previously. So Metro mining, it operates bauxite here, low price in far north Queensland exports bauxite to customers in China bauxite. So those aren't familiar. It's used to make aluminium. So the stock in previous years has gone through a lot of troubles which so now has sort of seen to be through. And recently they'd announced that I have basically underwritten the calendar year 22 numbers by securing remaining offtake for the upcoming export season. So these guys can only export outside of the wet season, and that's generally April to November. So they've locked away 3.8 million tonnes out of the full main target and the remaining will be sold on the spot market. So essentially over the last 12 months, management have right. Shipped from essentially what was a, you know, a near death experience. So what's changed? They've got a floating train installed which stands stolen calendar year, which is lowering freight costs and allowing allowing them to much cheaper cape vessels rather than the super maxis. They're selling some of their products free on board or FOB. That puts the freight risk back on customers. And they've signed a two year six freight deal for 2 million tonnes of this year's production. So with all that said, they could go from delivering 10 million cash losses in cash losses a quarter to generating something like $25 million free cash flow this year. So remembering it's only a 50 mill market cap company. Right. 

Candice: [00:24:03] So watch that space are out there to really good stock tip, guys. So add it to your your watch lists, SGI and MMI. So we're going to just take a quick short break to hear from our sponsors. But when we're back, we're going to unpack with you more of the financial jargon that we have in our industry and also hear some of your sales. So stay tuned. And we're back. So any any more buys to float out there before I ask you the sells? 

Anthony Wilson: [00:24:31] Oh, yeah, I had one more and no, it's okay. Minerals, it's still pretty small. It's about 110 mil market cap. So it's called exploration focuses on what they call a pickle crow project. It's in Ontario, in Canada. So what's. 

Candice: [00:24:46] That? 

Anthony Wilson: [00:24:47] It's just one of the names of the areas. You know, it was previously mines. It was a very high grade underground operation. So these guys have got it now. I think originally it was mined in the early 1970s and it operated until sort of mid-sixties. 

Felicity: [00:25:04] And the code is 80, is that correct?

Anthony Wilson: [00:25:06] You say, yeah, that's the code. So, you know, at the time I think it produced like one and a half tonnes of gold, it like 16 grams a ton like that. That's very high. So essentially these guys have got a hold of it and they're starting to to build on what's left of the asset and and drill regionally. So it had had a pretty good result recently in the latest raw around it it drilled intercepts of 2.1 metres at 92 grams a tonne from its current bogus McArthur zone and and three and a half metres at 7.6 grams a tonne from the swamp sign. So they're really highly encouraging. So they're putting holes in regional targets and having success. So in our view we think that's probably going to be, you know, north of 5 million ounce resource. And even at the moment it's got, you know, it's, it's got 2.23 main ounce resource. So as they continue to drill those original holes when it should, it should rewrite higher. 

Candice: [00:26:10] Okay that sounds interesting definitely going to for that one. And any cells you want to put out there. 

Anthony Wilson: [00:26:16] Yep. Just with what's going on in our Aussie market, I'd have a sell on Collins Foods, much larger market cap. Yeah. You're looking at $7.1 billion. Collins Foods. It operates a cool 300 odd, a bit over capacity restaurants as a franchisee throughout Australia. It also operates Taco Bell franchisees across Victoria and why it's got KFC in Netherlands and Germany as well. So I just think the Collins Foods as assured, I think they're going to see some headwinds going forward both on the top line in terms of demand and also via cost pressures. So you're seeing grain prices rally really hard. The latest bit of news there was India has stopped wheat exports. So I think overnight you saw weight up five or 6%. So seeing grain prices going up, that's an input cost clearly for rising chickens. And I enjoy Inghams. They updated the market the other day talking about how they're starting to pass these costs as input costs on now. Collins For these easy customer gains, that's where they get some of their chicken. So that's clearly going to be passed on. You've also got staff costs, especially if the Labour Government get in, you know. Collins They they employee generally people are on minimum wage if not close to. So those staff staff council will start to come through as well. So then on top of that, you've got interest rates going up. So their customer base, I think you just have less money to spend on fast food. With interest rates going up, they're probably going to start to spend less and faster and put it more towards mortgage repayments. So in that scenario, I just can't be bullish about that stock and I think they're yet to come out and talk to the market about most of this. And when they do, I can't see it being taken positive and I can't see them coming out with a positive outlook statement.

Felicity: [00:28:08] That's some really great insight. So the code is C, k F on the ASX for everyone listening. 

Candice: [00:28:13] All right. So no more popcorn chicken. So let's get into breaking down the financial jargon in the industry. We're just going to kind of far away quick ones for you. 

Felicity: [00:28:22] Can you explain what a flow means? 

Anthony Wilson: [00:28:25] A flow is is probably short for order flow. So it's essentially the buy and sell orders that we have or the flow as is the sort of longer term. Right. 

Felicity: [00:28:34] And a line what's a line? 

Anthony Wilson: [00:28:37] A line is either pride like a lump of stock which you can put through as a priority or or special sauce crossing. So we may have a large sell order. So the idea is the sales trying to find liquidity, find the buyer and cross the stock in what we call a single line. 

Felicity: [00:28:56] And what about end of line.

Anthony Wilson: [00:28:58] End alliance, same sort of block of stocks. So often you'll have incised with sort of large percentages of a stock and, you know, the end of the lines where you basically clear someone out who has been pressuring the stock. So, you know, that can sort of come about money wise. So a lot of investors are interested in buying the end of the line or the end of the line. I don't want to really buy prior because they don't want to get run over by more. Selling stocks more likely to bounce if you buy at the end of the selling because, you know, just pure supply and demand. Demand semantics, right. Where selling means some of those the price. 

Felicity: [00:29:36] That's interesting. And what about end of a line coming from a small percent fund within the fund? 

Anthony Wilson: [00:29:41] Yes. So that's one step further. So sometimes in that situation where you've got the end of the line, you might have a large fund to, you know, could be managing $1,000,000,000 and they may be willing to sell in a liquid stock at a discount or below the market price just to get it off their books, because the selling at a discount doesn't necessarily hurt their performance because it represents such a small portion of their portfolio, you know, and sometimes they can only, only iron a limited number of stocks. Let's so they can only have 50. They're mandated that they can only on 50 stocks in their portfolio if they've got a new idea they want to put the money into and they've got a really small portion of a stock last and it's basically can you can you give me a discount on it to get off the books so I can stop buying the other idea, which I think in terms of opportunity cost is going to buy me more money. 

Candice: [00:30:32] That's a really, I guess, good insight because a lot of people wouldn't realise that because you've got these different types of clients that you represent, right? Whether they're endowment funds. Big funds, like you mentioned, the colonial and such like. But when they have a mandate, would you argue that sometimes they're not flexible, they can't move so quickly? I guess with the market moving as quickly, this is the moment. Is that a good or bad thing, would you say?

Anthony Wilson: [00:30:56] I mean, it's got the positives and negatives like cash levels, for example. A lot of few funds are sort of mandated. They can't have more than 5% cash in this type of environment where they think, well, I'm bearish. They're paid to manage money and not to manage in the market, not to manage cash. So then those are the funds who are clearly going to outperform because they've got the ability just to either hedge their positions for derivatives, which others aren't allowed to, and or just go to cash, not have such a large amount of money in the market. So yeah, there's positives and negatives, but you know that these guys are they write mandates which suits their style and the way that they think or they usually go and are employed in that manner. 

Felicity: [00:31:43] And the first financial jargon that we actually spoke about when we had Martin Crabb on the podcast late last year was hawkish and dovish. You know, what is your explanation for that? 

Anthony Wilson: [00:31:55] So I think you've got basically monetary hawk or hawk for sure. That's someone who advocates, keeps keeping inflation low, and top priority is monetary policy. In contrast, you, Dave, is someone who emphasises other issues, especially low unemployment, low inflation over low inflation, I should say the other one in between. That is when you're not a hawk or Davos opinion. I think it all came from essentially some guy in the 1800s. So he was a war hawk because he wanted to chase after Great Britain. And then on the other side, people who didn't like him, I think they they called them doves. That's where it all came from.

Felicity: [00:32:37] Should we talk about more your clients? Are they long term investors or more short term driven?

Anthony Wilson: [00:32:42] I have I have both, which I like. So in terms of the short term guys, I like looking at catalysts and upcoming catalysts and essentially buying or selling prior to an event that I know is coming up. But then you also speak to longer term clients or medium term, some of the mandates. You know, they say they need to look to invest for 3 to 5 years or, you know, that sort of timeframe. But that doesn't mean they don't care about what's driving the stock in the short term. And that is, you know, some of these KAOS events that are coming up. And yeah, so on the on the side of a 3 to 5 year investment, that means, you know, to generate further alpha, they may want to try to around the edges any amount that they're expecting at that upcoming event.

Felicity: [00:33:28] I'm glad you said the word trading catalyst, because that kind of leads into our next question. So we commonly hear that term. Can you explain to us what this means exactly? 

Anthony Wilson: [00:33:38] Catalyst, by definition, is an event that will likely speed up change. So in thinking about loss equities, this could be anything that is perceived to have an effect on the share price, a certain price, certain points in the future. So prime example would be half of full year results. But these are non events. The better catalysts are those that are less known, which could be results of comparable stocks domestically or overseas trading updates which come out of season surprise updates, company roadshows, investor days, economic data or specific industry specific data. That's the type of things that you think about when you try to trade around in the catalysts. 

Candice: [00:34:20] And what about with company upgrades and downgrades, I guess, are there any. Patterns that you look out for, you know, like multiple downgrades. Is that a flag, would you say? 

Anthony Wilson: [00:34:31] So the key was company releasing market updates. The forecast is knowing what was expected. So if an update is released, clearly the first thing you look at is is what was previously put out and how does this compare with what's what's just been released. So if nothing was said, you can use one of the various platforms to look at what consensus forecasts are and where is the new guidance or results set and how big is the upgrade or beat or downgrade or miss? So probably the harder thing to do or to look for is how expected or unexpected the result or miss was. So let's say the downgrade was small at 3% and no changes to next year's forecasts combined with being a highly shorted stock. So depending on the underlying details, that's when you call the short term traders and you you be getting them to buy because it's highly likely that to cause a short squeeze, it's not a big enough downgrade if it's a really high, very highly shorted stock. So those who are short are probably going to try and buy back what we call cover their position as they haven't got the call. Right. Yeah. So the other thing in terms of repeating downgrades, so patterns do occur in natural business cycles. So downgrades, you know, the saying is that they occur in three, but once you've had one, you're more likely to say, you know, at least two, two more, maybe. So in my experience, it takes longer than expected to come back whatever has caused the downgrade. So I think a recent example, this is probably BW X that's downgraded plenty of times and weight per se. It shows we saw maybe the downgrade Sarkozy over and new management came in and look at skeletons out of the closet and that they came with another downgrade. So on the back of that, you probably people try and pick the end of that sort of downgrade cycles. So it's probably another thing to be careful of, as is analyst calls. So, you know, just be aware of analysts who sort of upgrade upgrades to buy even though they're downgrading their forecasts. 

Felicity: [00:36:34] Yeah, that's a good tip.

Anthony Wilson: [00:36:36] So, I mean, they're trying to pick the bottom just as much as anyone else. Yeah. 

Felicity: [00:36:40] So really our investors and listeners really need to keep track of the companies in their portfolios if they're going to be holding direct equities. Now, a lot of our listeners are retail investors, so what red flag should they look out for when it comes to trading the stock on the back of a company report? I feel like you've kind of already answered that, to be honest, haven't you? 

Anthony Wilson: [00:37:01] Yeah, but I mean, the red flags come sort of in all various shapes and sizes prior to results, you know, and it doesn't have to be on the back of reporting, you know, it could be a CFO leaving. That's a pretty good red flag. You know, they've got the most insight into the financial performance of the company. So if they're heading out the door, you should ask some serious questions. Insider selling, that's not actual insiders that they're over the Chinese wall, like we discussed. That's engagement and directors or employees of the company, they'll have certain periods that they're allowed to trade. Certainly for directors, they will be if they sell stock within the period, they'll always come up with a good excuse to be buying a boat by house tax purposes. You see some divorces cause some pretty nasty sell downs, life struggles. So yeah, that's pretty bad. On the other hand, if you see management buying or directors buying, I mean, that's a green flag. So get on board with that. Probably less likely for retail investors to be able to pick up the management who are usually fairly available for conversations with with analysts or salespeople. As I have a relationship, if they are suddenly uncontactable now, that usually means they're probably over the wall and they don't really want to talk to anyone. But maybe there's a downgrade coming. Not so sure. I mean, so that works the other way as well because recently I was trying to get in how to contact details for Oxfam and I was told that for some reason they've been quite hard to get a hold of. But a couple of days later you see big counsellor for Oxfam, so or indicative be it anyway. And then beyond that you've got some pretty obvious ones in financials, debt levels, you know, expense versus capitalising the other one to be careful of this sort of silly high estimates on on on dividend yields as well which are not sustainable. 

Candice: [00:38:56] Right. 

Anthony Wilson: [00:38:56] Yeah. Won't be coming true. We used to talk about this, the Death Cross, which was when you used to ride stocks and the price to earnings multiple and the pay became lower than the dividend yields. 

Candice: [00:39:09] Well, that has been a great chat. I definitely have personally learnt a few different new terms and insights into the in-store world. So thank you, Anthony. A really fun way to wrap our conversations with all of our special guests is we asked them a preference. It's tea, tequila or coffee? 

Anthony Wilson: [00:39:26] Oh, yeah. I'll have all three. I'll go. Coffee, morning. Tea, mid-afternoon. And then certainly a couple of tequilas at night. 

Felicity: [00:39:33] That's it. Aftermarket, thanks so much for joining us and we'll hope to get you back on the show next. 

Anthony Wilson: [00:39:40] Time to go see James.

Felicity: [00:39:42] Well, that's a wrap. What a really, really interesting episode, Candice. Like, honestly, I think our listeners are going to get a lot out of that because I certainly did. Now, before we sign off, please remember that although Candice and I are financial advisors and Anthony is the head of institutional sales at Shaw and Partners, please note our discussion today does not constitute his personal financial advice. As always, you should seek professional financial advice before making any financial or investment decisions. And everything we've actually chatted about is based on recording, which is the 17th of May 2022. While this year has flown. 

Candice: [00:40:17] I know it's already almost into June. Holy smokes. Now, as always, is where we sign off and ask you if you enjoyed this episode to please share it with someone and also give us a review if you have the time at which we would appreciate, as we always say, five star.

Felicity: [00:40:35] Until next time.