Hear from our Chief Investment Officer, Jamie Nicol as he provides his thoughts on the opportunities in the market for high conviction investors.


The key issues impacting the market at present are pretty much the same ones that have been impacting it for the past 18 months. That’s your big debate around inflation. We’re seeing inflation start to decline. And the question is, is that decline going to continue as we see the productivity benefits from AI, and technology, and an aging population, versus the ongoing spend that’s needed as we transition to a zero carbon future? You’ve got the Biden Inflation Reduction Act, you’ve got friendshoring, where the US is moving manufacturing back to the US. So there’s sort of a balance out there in the market that the market’s trying to figure out which is likely to be the direction.

I think the other debate that’s in the market at the moment is just around hard landing versus soft landing. Clearly interest rates are on the way up and ordinarily we’d expect the economy to slow in response to that, and we have seen some evidence of slowing, but the economy’s been pretty resilient really to date. And so that remains a key area of debate. But what this means from a market perspective and an opportunities perspective is you’ve had a very long period of uncertainty and it’s not particularly clear the outcome of some of those debates. But what we’re seeing in terms of opportunities is that uncertainty is driving some good quality companies to trade at discounts and it’s rare opportunity really to pick up some really good quality businesses that perhaps are getting disrupted through hiccup in earnings, change in CEO, a range of events which are causing some of these better quality companies to trade at discounts and set up an opportunity for us to buy them.

So a couple of examples. We think SEEK is a great business, market leader across Australia. Clearly its earnings are a little tied to the economy with job add numbers, and the uncertainty attached to that means people are gravitating away from it a little bit and it’s an opportunity here to pick it up at a pretty reasonable price. SEEK has a long-term opportunity to continue to lift prices and continue to expand into new markets, and we think that’ll drive very good EPS growth on a through-the-cycle view. So perhaps at the moment where we’re sort of peak uncertainty, that’s a period of time in which you can pick it up at a decent discount.

A couple of others, which are perhaps a little bit more defensive but also have been a little disruptive, is something like CSL. Obviously a great market leader, everybody knows that, a lot of people like that business, but it is trading at a reasonably weak level. They’ve had a change in CEO. They did have a downgrade to near term earnings, which was all about the recovery and earnings post-COVID, and perhaps the recovery’s taking a little bit longer than what they initially expected, but really the longer term trajectory still looks very good.

So there’s a couple of examples and yeah, we’re seeing a series of pretty good businesses that are trading down on some near term concerns and, yeah, that’s set up some opportunities for us. We always like to buy in periods of uncertainty, particularly when we’re unclear around what that sort of macro framework looks like. You go back to some of those quality characteristics, good management, good businesses, good industry structure, competitive advantages, good ability to earn good margins over the longer term because the market tends to gravitate back to those companies over time. And right now you can pick up some of those businesses at really good discounts.



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