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Taken from the Future Generation Investor Webinar

Markets have been volatile for the past 18 months, and many portfolios have been heavily impacted. With some burning questions on investors’ minds right now, the team at Future Generation Investment and Social Returns put fund managers in the hot seat at an Investor Webinar aimed at providing some answers.

SBP tuned in to watch portfolio managers Jun Bei Liu (Tribeca Investment Partners) and Matthew Kidman (Centennial Asset Management) take questions from an audience of investors. From outlining some promising companies to invest in to tackling the rise of the Indian economy, here are their top insights.

What is expected from this upcoming reporting season?

“We’re expecting it to be tougher.” – Jun Bei Liu

According to Liu, various pressures are expected to cause downgrades and create a tougher reporting season.

“Costs will remain elevated for corporates and there will be wage pressure, which will also tie in with lack of availability of workers.” Liu also expects there to be a softening of the top line, brought about by a slowing of foot traffic in the retail sector.

According to Matthew Kidman, this reporting season will likely reveal the true impact of recent cost and premium rises. “Costs, wages, energy and insurances have gone up over the past year; [we will now] see the results,” he stated.

Where do you think inflation and interest rates are going to go?

“If we use the US as an indicator, we can see that inflation has fallen much faster than it rose.” – Jun Bei Liu

Liu had a “glass half full” assessment when it came to interest rates, affirming that we are entering a zone where we know rates won’t rise much further. “It certainly looks like things will cool down quite quickly,” she said. “It’s actually really positive for the share market [when looking at a 12- to 18-month outlook].”

Which companies do you think will help investors to weather the current economic conditions?

“The names who I think can perform in the next little while are in the resources sector.” – Michael Kidman

Kidman’s current top picks for investors included:

  • Lycopodium (LYL) – a company that aims to commercialise science through engineering, construction and project management.
  • XRF Scientific (XRF) – manufacturer of equipment and chemicals distributed to production mines and construction material companies.
  • MMA Offshore (MRM) – provider of vessels and marine services to the offshore energy sector.

According to Kidman, there are also promising opportunities in the novated leasing sector, with the government providing appealing incentives in electric vehicles.

Jun Bei Liu conceded that most of the opportunity currently sits in the small to medium cap space, but admitted that her number one choice was CSL. “It will deliver the highest growth in the healthcare sector, is very defensive and has never been cheaper,” she said.

“The other one is Treasury Wine. It has a strong balance sheet and great brands. It’s growth across Asia and the newer markets is doing well, and it’s not expensive.”

Will India be the economic powerhouse many are predicting?

“It has proven to be very resilient and resistant, compared to the rest of Asia.” – Jun Bei Liu

When asked for an assessment of India, Liu agreed that becoming the world’s third-largest economy brings with it plenty of opportunity, stating “it’s on the right track” to becoming an economic powerhouse. However, she did raise concerns about India’s existing relationship with China, stating, “it has a lot of reliance on China in terms of sourcing products”.

Matthew Kidman agreed that India is heading in the right direction but can’t see its growth being a rapid one. “I don’t think it’s going to be a seamless rise, like we saw out of China over a 10- to 15-year period. It will be a lot more stop-start.”

Kidman also sees potential obstacles for India when it comes to alternative energies, but admits that Australia can offer support. “The pivot of the Australian Government towards India has been significant – and this will bring great opportunity over the next 30-40 years.”

What is your view of the AI market, and how can Australians take advantage of it?

“[AI] will move from the back of the company deck to the front.” – Michael Kidman

Kidman explained how the value of AI will be not in the technology itself, but in how companies use it. He encouraged investors to research how companies will use AI to make things more efficient and more targeted. Kidman admitted that some jobs will go but we should embrace how AI will change the economy and how we live.

On the same question, Liu said: “There’s opportunity everywhere, this certainly seems real.” Because AI filters through every sector and there will be mass data usage across the globe, she stated that “the demand will be incredible”.

However, Liu did warn investors to be cautious – companies may say that they are working with big names in AI development but still be in very early stages. For now, she recommends talking to company representatives about how they are using AI to try to solidify their positions within a market and against competitors.

Six Back Pens would like to thank Future Generation and all guests who took part in the webinar.

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