The world is a constantly evolving, often dangerous place. And while natural selection or "survival of the fittest" certainly applies to the Earth's abundance of flora and fauna, it may be time for investors to take a page out of Charles Darwin's book.
Natural selection posits that only those who can adapt to their environment will survive, but investors cannot adapt to our new technologically advanced environment when we are still relying on books written in the 1950s, 1960s, 1970s and 1980s on how to value stocks.
That's according to FNArena's Rudi Filapek-Vandyck, who believes that the market has irreversibly changed since 2014.
And while value investors will argue that the good times in quality and growth cannot (and will not) last, Rudi believes that today's technological disruptions may have put a spanner in the works for value's revival.
"We now have GLP-1s and Artificial Intelligence. And I would argue that you shouldn't count on a reversion to the mean here. This is a strong extension of what has already been in place since 2014 and it's probably going to define life as we know it - with consequences for investing and share markets for the next 10 years," he says.
If these technologies, particularly AI, become as important as many predict they might be, Rudi believes the share market will split into the haves and the have-nots.
"Those who can't do it will ultimately end up as value traps and any value an investor will get from them will be short term only," he says.
In this episode of The Rules of Investing, Livewire's Ally Selbysits down with Rudi to learn more about why he believes technological innovation will see growth and quality continue to outperform value over the next decade - as well as completely reshape markets as we know them.
They discuss some of his favourite ASX-listed stocks to play the AI theme, the factors Rudi believes are important when identifying quality companies, and some of the stocks he's recently been buying.
Plus, he shares a recent example of a position that has taught him to never have high expectations of low-quality companies.
Note: This episode was recorded on Wednesday 29 May 2024. You can watch the video or listen to the podcast below. Note #2: Ally was today years old when she learnt what R.E.M. is, she apologises for any harm her ignorance may have caused hardcore fans. If it's any excuse, the song was released seven years before she was born.
Other ways to listen:
- Podbean
- Spotify
Timecodes
- 0:00 - Intro
- 1:32 - One thing that will truly surprise investors: The true impact of AI on markets
- 10:42 - What that means for the future of value investing
- 16:49 - The next stage of AI winners
- 17:24 - Locally listed players that could benefit
- 19:56 - Why forecasts for NextDC and Goodman Group are likely accurate
- 22:54 - How to value these companies
- 24:55 - Why quality companies are so important today
- 26:35 - Defining quality
- 30:37 - Businesses that are heavily investing in their futures
- 32:13 - Quality "pretenders" and the mistakes Rudi has made recently
- 35:15 - A bearish analysis of Telstra
- 38:12 - Putting Rudi's cash holding to work
- 38:48 - Two questions from one of Rudi's biggest fans
- 45:09 - The biggest mistake Rudi has ever made and the lesson learnt from that
- 50:13 - Three stocks for the next five years
Never miss an update
Enjoy this wire? Hit the ‘like’ button to let us know. Stay up to date with my current content by following me below and you’ll be notified every time I post a wire
By
The Rules of Investing,
Livewire Markets
The Rules of Investing is one of Australia's top investing podcasts. We interview the leading investment minds from Australia and overseas to better understand their processes and philosophy. After launching in October 2017, there have been over 150 episodes published - you can access all content on Livewire Markets, Spotify and Apple Podcasts.
........
Livewire gives readers access to information and educational content provided by financial services professionals and companies (“Livewire Contributors”). Livewire does not operate under an Australian financial services licence and relies on the exemption available under section 911A(2)(eb) of the Corporations Act 2001 (Cth) in respect of any advice given. Any advice on this site is general in nature and does not take into consideration your objectives, financial situation or needs. Before making a decision please consider these and any relevant Product Disclosure Statement. Livewire has commercial relationships with some Livewire Contributors.
More from The Rules of Investing
To catch-up on previous episodes of the Rules of Investing, click here.
- 700+ meetings each year: How WAM Global uncovers under-the-radar stocks
- Chris Stott’s 5 high conviction stocks for the new bull market
- Christopher Joye: No margin for error for risk junkies craving rate cuts
- Why Ben Clark is taking profits on growth stocks (and where he's putting that money to work)
The Rules of Investing
