Monthly, we update our wholesale investors on what’s happening in the market. Running what’s probably the only late-night trading desk from New Zealand, we’re well-positioned to feel the pulse of the market’s direction.
Achievement is driven by insight and selective action.
—Richard Koch, The 80/20 Principle
In Richard Koch’s excellent book, he profiles General von Manstein’s four types of army officer:
1) Lazy, stupid ones. (They are to be left alone. They do no harm.)
2) Hardworking, intelligent ones. (They make excellent staff officers.)
3) Hardworking, stupid ones. (These people are a menace and must be fired at once. They create irrelevant work for everybody.)
4) Intelligent, lazy ones. (They are suited for the highest office.)
Source: AI generated image by Freepik
The point about the 80/20 Principle is that irrelevant work, no matter how ardent, can be damaging. Because we are all short on time.
Those intelligent, lazy officers who rise to the top are not lazy per se. Rather, they have an ability to discern exactly the few areas that generate the best return.
This certainly applies to investing. Too many investors focus on trying to pick the next big trend. Trading in and out of positions in an attempt to capture that. Or they spread themselves too thin.
Rather, the insight of 80/20 is to invest your research time into which businesses and sectors remain undervalued at this point.
For the past year, we have seen rising liquidity.
Providing this coincides with recovering economies (not falling into recession), it should also see rising stock markets.
First, increased liquidity has chased the high-tech sector. Today, prices are high. For New Zealand tax-resident investors, there is the further disadvantage of little or no dividend.
We’ve been directing our time to unearthing value in the early stages of a bull market.
For example, we’ve noticed:
- Plenty of listed real estate remains undervalued. But you need to do your homework on portfolio health and outlook. A few positions are already starting to move — like our Italian business, now up 46% over 6 months.
- Some luxury brands, especially in the manufacturing sector, are still well-priced. They got slammed by the threat of an inflationary recession. The market has not yet adjusted these stocks for an improving outlook.
- There are further value spots in financials, energy and resources.
Through August, our focus has served us well in positioning for the long game.
The Japanese carry-trade market rout on August 5 gave us one of the best windows for buying this month. After, clients will have noticed in the later part of the month, we largely slowed up buying. The market recovered.
Managed Account performance*
For the month of August 2024, we were down 1.39% across the composite portfolio (total aggregate TWR return across all portfolios following the strategy). This was significantly due to the August 5 drawdown, particularly on US positions outside the benchmark.
Our MSCI EAFE benchmark was up 6.07%.
Our YTD performance is 9.81% (January to August 2024), or 14.71% on an annualised basis.
Our average annualised return since inception is 13.84% p.a.
Please see our performance chart for more details.
We’re looking ahead for September opportunity
September volatility in the US tends to wash across global markets.
On top of this, expect more dancing as we get closer to the US election and interest-rate cuts.
Yes, there will be more woes, dips, and bumps in which to mine long-run value.
It’s a fantastic time to have available funds ready so we can capture opportunity.
Regards,
Simon Angelo
Editor, Wealth Morning
*Past performance is not an indicator for future performance. Your actual portfolio will differ from the composite portfolio mentioned. The information contained in this document does not constitute an offer to sell or a solicitation to buy an investment, nor should it be construed as investment advice. Wealth Morning Managed Accounts are available to Eligible Investors and Wholesale Investors (not to Retail Investors) as defined in the Financial Markets Conduct Act (2013).
