We complete 2022 with a special edition of the Good Investing Podcast featuring Investment Director Nathan Parkin. Nathan walks us through the Ethical Partners approach to investment in one of the most challenging macro environments for many years. We review the year, neatly broken into four very different quarters. Nathan speaks about how the second quarter threw up opportunities to own the very best companies in the market – opportunities that come around only once a decade. Nathan also gives us unique insights into the differences between investing in a rising inflation environment vs the low interest rate environment of 2018-2020. He also translates the macro environment to what it actually means for companies on the ground. We talk about excessive pessimism and why when that occurs it can actually be a good time to invest. We break down inflationary drivers and pinpoint why on balance of risks, the worst may be behind us. Nathan outlines key company positions and how the portfolio is positioned going into 2023 including 1) Why the portfolio is overweight consumer discretionary companies despite the consensus expectation being that consumer spending will slow next year and 2) Why the portfolio is underweight resources.

Highlights

2 mins 33 secs Nathan makes sense of 2022 and talks about “being prepared”

2.57: The investment compass. Key company attributes that feed into the investment process

4.00: 1Q22. Market down substantially in January but recovery into quarter end

5.50: The market construct looks very different now. Resources have a much higher weighting

6.30: 2Q22 we looked at a number of quality factors. What does “quality” actually mean when assessing companies

7.30: Positioning at the start of CY22… overweight resources / materials. But have been down weighting and upgrading the quality of the portfolio over the course of CY22

8.03: New companies we now own that we didn’t own a share of at the start of the year – what are they?

9.15: A rare opportunity. You don’t get many chances to upgrade the quality of the portfolio at the right price

10.00: Digging deeper into “quality” attributes – management’s expertise, vertical integration, competitive advantage including company examples – Reece, Wesfarmers, Pinnacle, Breville, Goodman.

14.05: Being a “value-oriented investor” – what can that mean? It can mean buying assets at 50c in the dollar but it can also mean buying companies that can grow but paying a low price for that.

14.39 Company stock prices can fall on heavy volume and rise on much less volume… insights into how to get set in a position

17.20 Investing in a low interest rate environment vs investing in a rising interest rate environment – explaining the very different approach required

21.05: Companies that were disciplined when interest rates were lower are very well placed today given the optionality they have to grow

23.10 Why reporting seasons are important… the market’s (and fund manager’s) report card. August 22 reporting season was actually quite solid

25.49 Converting the macro to what companies are actually seeing on the ground… expectations of a recession but it is not being seen… yet

28.40 Extreme pessimism today... thinking back to 2012 as a comparable period, Markets are often too pessimistic… and too optimistic given human psychology... and therein lies the opportunity

34.03 USA visit in Oct 22 seeing companies… key takeaways and learnings. Generally we got the impression that many companies are in a better place than the market is giving them credit for… and while there will be a slowdown (we are sure of that) it is all about how companies are priced moving into that as to where the value lies

36.50 Components of inflation… where to from here? Consumer end demand softening, input prices growing at a lower rate, China exporting less inflation, supply chain pressures easing, wage inflation still coming through but the global population is becoming more mobile again… all points to (on balance of risks) of inflation increasing at a decreasing rate

43.50: Discipline is back. And that is a good thing. The market can climb this wall of worry. Summary of the portfolio positioning for 2023.

We complete 2022 with a special edition of the Good Investing Podcast featuring Investment Director Nathan Parkin. Nathan walks us through the Ethical Partners approach to investment in one of the most challenging macro environments for many years. We review the year, neatly broken into four very different quarters. Nathan speaks about how the second quarter threw up opportunities to own the very best companies in the market – opportunities that come around only once a decade. Nathan also gives us unique insights into the differences between investing in a rising inflation environment vs the low interest rate environment of 2018-2020. He also translates the macro environment to what it actually means for companies on the ground. We talk about excessive pessimism and why when that occurs it can actually be a good time to invest. We break down inflationary drivers and pinpoint why on balance of risks, the worst may be behind us. Nathan outlines key company positions and how the portfolio is positioned going into 2023 including 1) Why the portfolio is overweight consumer discretionary companies despite the consensus expectation being that consumer spending will slow next year and 2) Why the portfolio is underweight resources.
Highlights
2 mins 33 secs Nathan makes sense of 2022 and talks about “being prepared”
2.57: The investment compass. Key company attributes that feed into the investment process
4.00: 1Q22. Market down substantially in January but recovery into quarter end
5.50: The market construct looks very different now. Resources have a much higher weighting
6.30: 2Q22 we looked at a number of quality factors. What does “quality” actually mean when assessing companies
7.30: Positioning at the start of CY22… overweight resources / materials. But have been down weighting and upgrading the quality of the portfolio over the course of CY22
8.03: New companies we now own that we didn’t own a share of at the start of the year – what are they?
9.15: A rare opportunity. You don’t get many chances to upgrade the quality of the portfolio at the right price
10.00: Digging deeper into “quality” attributes – management’s expertise, vertical integration, competitive advantage including company examples – Reece, Wesfarmers, Pinnacle, Breville, Goodman.
14.05: Being a “value-oriented investor” – what can that mean? It can mean buying assets at 50c in the dollar but it can also mean buying companies that can grow but paying a low price for that.
14.39 Company stock prices can fall on heavy volume and rise on much less volume… insights into how to get set in a position
17.20 Investing in a low interest rate environment vs investing in a rising interest rate environment – explaining the very different approach required
21.05: Companies that were disciplined when interest rates were lower are very well placed today given the optionality they have to grow
23.10 Why reporting seasons are important… the market’s (and fund manager’s) report card. August 22 reporting season was actually quite solid
25.49 Converting the macro to what companies are actually seeing on the ground… expectations of a recession but it is not being seen… yet
28.40 Extreme pessimism today... thinking back to 2012 as a comparable period, Markets are often too pessimistic… and too optimistic given human psychology... and therein lies the opportunity
34.03 USA visit in Oct 22 seeing companies… key takeaways and learnings. Generally we got the impression that many companies are in a better place than the market is giving them credit for… and while there will be a slowdown (we are sure of that) it is all about how companies are priced moving into that as to where the value lies
36.50 Components of inflation… where to from here? Consumer end demand softening, input prices growing at a lower rate, China exporting less inflation, supply chain pressures easing, wage inflation still coming through but the global population is becoming more mobile again… all points to (on balance of risks) of inflation increasing at a decreasing rate
43.50: Discipline is back. And that is a good thing. The market can climb this wall of worry. Summary of the portfolio positioning for 2023.

The Good Investing Podcast connects you with successful investors and business leaders who invest in, or are experts in, a range of industries… but do it with a difference. These leaders of industry are the best at what they do in their chosen field but all have one thing in common - they are passionate about doing things the right way. They are not-for-profit pioneers; they are good governance experts; they are social entrepreneurs; they consider financial and social investments thoughtfully for the long term. They are people that inspire us all to make a bigger difference in the things that matter in the lives we lead.

The Good Investing Podcast connects you with successful investors and business leaders who invest in, or are experts in, a range of industries&hellip; but do it with a difference. These leaders of industry are the best at what they do in their chosen field but all have one thing in common - they are passionate about doing things the right way. They are not-for-profit pioneers; they are good governance experts; they are social entrepreneurs; they&nbsp;consider financial and social investments thoughtfully for the long term. They are people that inspire us all to make a bigger difference in the things that matter in the lives we lead.

Ethical Partners – Good investing Podcast

The Good Investing Podcast connects you with successful investors and business leaders who invest in, or are experts in, a range of industries… but do it with a difference. These leaders of industry are the best at what they do in their chosen field but all have one thing in common - they are passionate about doing things the right way. They are not-for-profit pioneers; they are good governance experts; they are social entrepreneurs; they consider financial and social investments thoughtfully for the long term. They are people that inspire us all to make a bigger difference in the things that matter in the lives we lead.

The Good Investing Podcast connects you with successful investors and business leaders who invest in, or are experts in, a range of industries&hellip; but do it with a difference. These leaders of industry are the best at what they do in their chosen field but all have one thing in common - they are passionate about doing things the right way. They are not-for-profit pioneers; they are good governance experts; they are social entrepreneurs; they consider financial and social investments thoughtfully for the long term. They are people that inspire us all to make a bigger difference in the things that matter in the lives we lead.