Rudi Interviewed: Ongoing Potential In Technology & Growth

Always an independent thinker, Rudi has not shied away from making big out-of-consensus predictions that proved accurate later on. When Rio Tinto shares surged above $120 he wrote investors should sell. In mid-2008 he warned investors not to hold on to equities in oil producers. In August 2008 he predicted the largest sell-off in commodities stocks was about to follow. In 2009 he suggested Australian banks were an excellent buy. Between 2011 and 2015 Rudi consistently maintained investors were better off avoiding exposure to commodities and to commodities stocks. Post GFC, he dedicated his research to finding All-Weather Performers. See also "All-Weather Performers" on this website, as well as the Special Reports section.

Rudi's View | Feb 19 2024

It has become the 'unofficial' tradition in recent years: an interview with Livewire Markets ahead of yet another corporate reporting season in Australia. Below is a sub-edited transcript from the pre-February results season interview that took place on February 7. The video is available on Livewire and on YouTube.

Interviewer Ally Selby: Hello and welcome to Livewire's newest series Views from the Top - a series dedicated to bringing you the best of the best ideas and insights from those at the top of their game. Today we're very lucky to be joined by FNArena's Rudi Filapek-Vandyck for a deep dive into the reporting season and what you can expect. Thank you so much for joining us today, Rudi.

Rudi Filapek-Vandyck: It's a pleasure.

Interviewer: You told me I would be surprised by what you have to say today - so I am both excited and nervous, but let's get straight into it. The big picture - the market is looking through all the headwinds that we're seeing right now and betting big on rate cuts in 2024. Is there anything wrong with sticking to consensus?

Rudi: It's not necessarily wrong, but we have been here before, just a short memory back - February last year and August last year. In both cases, the setup was basically the same. We get a big rally leading into the reporting season and then, of course, the reporting season turns out to not be good enough to sustain the share prices and then we erase all the gains we had. And then the process starts again.

It's not inconceivable we will have a similar process. We have rallied on macro considerations. There's not an upgrade cycle happening in economies or profits, but there are two things I think that are different now. One is the carrot of interest rate cuts. Whether that is short-term or medium-term, the carrot is there and I think that will, to a certain extent, support share prices.

The other thing is that - while it's very early days - we've actually made a good entrance into the reporting season. The reporting season starts really slowly and gradually in Australia. So we have a very small sample, but the early signs are there that companies are tending to do better than forecast or at least meet expectations. So far so good. Again, it's a small sample, but at least we've had a good start.

Interviewer: Okay, we'll get into some of that granular detail later on. I want to talk about what you expect going forward. We saw value being tipped as the area of the market that would outperform in 2023. It didn't. Growth and momentum outperformed instead. What can investors expect this year and did that surprise you?

Rudi: In my view, and that's probably a little bit different from the majority of experts, we're going through quite an exceptional era of technological innovation. I've made the comparison a number of times in the past. The best comparison we have is the 1920s.

The 1920s were a great era of technological innovation. It also meant it was a great era to be a shareholder in the share market. And a lot of companies, of course, had tremendous growth on the back of new developments that were essentially reshaping society, and the share market and economies too.

We are going through a similar phase now. As a consequence, high growth driven by megatrends and technological innovation is not going to go away. So this whole discussion about whether we should go into value, which basically is either cyclicals or old economy companies, or high growth companies that promise the future, I think this whole discussion is a bit warped.

On occasion, we will see the pendulum swing between those two extremes in the share market. But I think on average, longer-term, sustainably, I think you can't ignore the fact that we are going through this tremendously exciting time. Technology should be on everyone's radar. Those companies will continue to perform and they will never be priced at nine times next year's profits.

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