Hello and welcome to The Australian's Money Puzzle podcast. I'm James Kirby. Welcome aboard everybody now if you've just tuned in. We started the year earlier this week with the edition Your Shares in twenty twenty six, and we had Mark Jocum take us on a panoramic view really of global investment markets and what we might reasonably expect in the year ahead. Today we're going to look at individual shares. Specifically, we're going to look at Australian shares on the A six,
which means we're talking about stock picking. And joining me on the show is jun Belu of Tedcap. If you recall she did this exercise with me last year. She had just started her fund actually this time last year, certainly as in its current formation, and in that twelve month period, I think we can say that she's become one of the best known, high profile certainly stock pickers in the market. Very good to have you on again. How are you, JB.
I am great, Hi James, thank you so much for having you. Always love to have chat about the stock market.
Well, we are ready to roll. As I say, we did an exercise earlier in the week where we just looked at the broader market and they sort of conditions out there, just to refresh for everybody. You know, our own market, the US did about seventeen eighteen percent, and we in the end almost got to ten percent, thankfully due to as always the dividend kicker of three and a half percent or so, which has come down it
used to be about four and a half percent. We'll come back to that as the show goes on, but we want to look at first of all the outlook for the AX. Tough question, but clear question for you. Do you think the ASEX can do it again this year? Can it do double digits?
Yeah, a SEX definitely is going to get to the double digit if anything, potentially a little bit of upside. I'll tell you why. There's a couple of tailwinds. One is that we started seeing our corporate earnings doing a little bit better. You know, in the last few years, we have had a lot of downgrades and now looking you know, looking forward next twelve months, we're looking at the corporate earnings growth between eight to twelve percent. That's
actually pretty good. And then if you look at some of the biggest sector actually you know, one of the biggest sector, which is mining for Australia, they are having they are on fire. That sector is projected to do pretty well again this year, of course, will be more selective, will be more supported by some of the structural commodity like copper and others, but that sector should do pretty well.
They paid pretty big dividends and that should drive quite a lot of growth in terms of earnings as well. So our market, I think it will get to the ten percent potentially with a little bit more, you know. I guess there's a bit of expectation for US market to do so much better, as people always do. I think the one thing that sort of held holding us back is that, you know, the back of the mind question of what's going to happen to our interest rate. We're going to get a height towards the end of
the year potentially. I don't think it's coming soon, but I do think potentially there is a chance. But that is still going to see us see our market have a pretty good return.
So just to give you some context there, it's not that we have strong earnings this year so much as we have earnings this year, right, So it's actually been pretty dull hasn't it in terms of earnings and perhaps behind all the noise, the inability to have strong earnings on the axis is really what explains why we were dragging our heads compared to the US in recent times.
That's right, so recent US because the index is very dominated by a lot of those growth businesses and they have done incredibly well. And the challenge is that for next year is you know, there is a bit of investor skepism with evaluation, you know, and now they're getting returns and they are becoming cabinets heavy companies now. So now in a way that our market may see, Ernie Swarth, that's actually not too bad.
One of the things that people have been concerned. There's two sort of outstanding, obvious, in your face headwinds for the AX all things been equal, who knows, of course the international markets and if we wake up in the morning and Wall Street has a ten percent correction, where we are going to follow that for sure absolutely probably exceeded history would suggest. So let's put that on the table. But as we stand, and as you say, twelve months is a long time, so we're talking over twelve month
pero that we could do this double digit. But you mentioned one thing first of all already, which is the prospect of rising rates. So the consensus is that we're going to have rising rates now that is surely going to work against sentiment in the market. And the second thing that I just alluded to at the start is our great concushion has always been dividends. The dividend yields, which was about four and a half percent, it's actually sliding and sliding. It's now about three and a half.
So how do you bake in those two factors? JB.
That's a really good question. I think it's very true. First of all, with the interest rate, it's very interesting the expectations for rate rise has changed very rapidly, literally within the last few weeks of December, that market start expecting a rate rise in February, rate rise in May, and you know, instead of ray cards previously. So now my view is that because market is very fast in sort of pricing in the expectations, which you know, economic
seems to have moved together. I do think that what's been priced in which we saw a lot of selling in the ur retailers, is now actually perhaps way too pessimistic. My view that we're not getting a rate rise in February. Even May is very skeptical because you know some of the data stats coming through. Normally for RBA, they called for the board. The key thing is to do nothing usually is the first step, and then it takes a really high hurdle to move from raate card to suddenly
rate right. So that is going to be very negative. So for me is that I don't think it's coming in the first half of the year. Yes, you'll be negative, you know when it does come that part of the year, and that's assuming inflation stays very strong. We only just really have a one data point, you know, in September quarter that was that was stronger than expected. So you know,
we're just still too early to call. Yes, c it is negative for the share market, but right now market is pricing in quite a lot of rate rise already, so from here on you know in a way that we won't be surprised. So I think it's been pricing at least one rise for this year, and I think if anything, timing could be extended out so that if anything, that's kind of on the positive front. So for the market valuation, before.
You talk about dividend, Yeald, that's very interesting. So your theory to some extent is that the sell off in the role of the Christmas was actually because of the change of sentiment about rates and the market and the analysts and the journalists are all running wareheaded themselves in terms of how quickly this would and THERBA would never be seen to flip flop quite so dramatically. Is that basically what where you're coming from.
Absolutely, I think the pricing is essentially being in and now we actually if you've seen some of the rediscretionary sector, they started performing a little bit better just in the last few weeks because the probability for raate rise is already moving back from you know, something like eighty percent in February now down to twenty five. So, you know, just the market's got too way ahead of themselves.
So but consumer sentiment is it's pretty poor, Yeah, I think so.
I think consumer the actual consumer sector for this year will be a bit challenged because we heard the Christmas was okay, you know, November was strong, but the challenges there's a lot of discounting and because of the headline was being discussed in the media. You know, Ray Rice rayhike. Consumer just don't spend. And on top of that, we also had the tragedy at Boondai shooting, you know, hearing your South Wales that has really caused a lot of
traffic to disappear from shopping centers and others. You know, this has happened previously, any of those similar sort of events that you know, consumer just don't feel they want to be shopping, they want to don't Yeah, they don't to spend. So we definitely seen that full back discounting is very heavy at the moment. We already have a couple of retailers came out already downgraded, not on the revenue front, but more so on the march because they
have to discount. So I do think that will become a theme for this year because retailers are sitting at very big margins for the last couple of years because things been good. You know, they do have to give some of that back.
This year, okay, and on the dividend yield. So the point we were making is that cushion is fading for Australian stocks. That the ability that you could always say, well you're going to get four and a half percent whatever happens, but you're only going to get three and a half percent. Now, that puts more pressure on the stocks to grow, doesn't it.
In a way. So I think part of the reason the dividend has been steadily falling is one is that you know, clearly our banks is already sort of peaked in terms of their earning, so it's not growing in terms of dividend. And two is the last few years that resources company which normally pay big dividend, has been really tough. But we just started seeing those commodity prices
turning around significantly. If you look at just take PHPO or Real as an example, both of them are sitting there with thirty percent earnings upgrade to come in this reporting season because how much commodity price has moved. Just this month, the commodity prices all up double digit. So that means these companies normally pay out quite a lot of dividends and that should see the dividend improved for
this year. But definitely they will put pressure on companies because the Australian investors always demanded higher dividends.
So do you think the big miners the mining sector in it it could actually revive the dividend yield across the market, it's self a structural decline.
I think they will pay more, but one of my concerns for the Big Mind at the moment is that they're making so much cash flow at the moment, almost like a windfall, and they historically have being very bad in paying out shareholder and they'll hold on to the cash then normally would like to go out and buy things to grow. You know, managements sit around the table going how do we grow in next year? And we're already started seeing a.
Bit of that.
So the challenge is that hopefully they don't go out and slowly spend all the money. But I think it looks they will be a bit disciplined because you know, shareholder room punish these sort of nowsal quite quickly.
Okay, very interesting now, folks, what we're going to do is we're going to we're going to deep dive. Now, we're going to go and have a look at first of all, and I think this is going to be very interesting. We're going to look at the miners. We're going to look the mining shares of what risks and opportunities you have in front of you, which as JB. Has said it is red hot, and it is red hot.
I can't think of the time. I think you'd have to go back nearly twenty years two four to two o seven to see to see the sort of momentum in the big miners. We'll be back in a moment. Hello,
Welcome back to The Australian's Money Puzzle podcast. Okay, this is the second of our Outlook shows four twenty twenty sixties are always very popular and if you can, I recommend you actually listen to them in sequence because you'll really get a broad picture for investing in the year ahead and it is very useful.
You know.
One of the secrets of investing is not what you think is going to happen. It's knowing what everyone else is thinking is going to happen. And this is what these shows are about. They do really give you a guide if you use them in that fashion. My guest today is Jun Belu of ten Cap. Ten Cap is a one point five billion dollar fund. It is an active manager. It is long short, which is very interesting. That is they have the ability to short should they
wish to do so. It started basically it has a net return ruffling of about eleven point two percent since its inception. That's against the air six two hundred of eight point nine percent over the same period of time. And if you want to know more about my guest today, We've had a show that was very popular that Juliane Sprague did with JB earlier in the year, which is
called Secrets of a one point five billion Investor. Have a look at that if you want to know more about her today, I just want to concentrate on what she knows about the market and what she's thinking. Okay, now the miners, Okay, where will we start? The big three BHP, Rio and Forteskew. As you say, they've been somewhat dormant, but boy, they were kicking at the end of last year. It takes a hell of a lot to lift those stocks. They're up about twenty five percent
so far in the twelve month period. That is a bhp in Rio. And when they deliver dividends, they deliver gigantic dividends, don't they. They just blow it out of that They blow the banks out of the water when they're at the top of the cycle. So where do you think we are with these big miners just now? I mean is there is there more to come? Are we are they? Where are they in their own cycle? Because they are notoriously cyclical.
Yeah, absolutely certainly, Minus are not what you buy and hold and your bottom drawer sort of thing. Look at they are still looking at having a pretty good year, But it really depends on what type of commodity is. So for if our commodity outlook, if you look at the support, you know, the structural names such as copper or certainly some cases gold and maybe even al aminium
has some of the structural supports. In terms of copper, you know, it's electrification and the demand globally, demand for copper has really increased, and then the supply just hasn't been there and we all know that's going to create price this location. And we're seeing copper going to have another strong yet because there's just a supply with it. Iron ore is a bit harder because a big consumer of iron oil is actually China, and China hasn't really
revived that much. It's just not doing any worse. So China is steady, and then we're looking at globally the demand is actually picking up a little bit. So yeah, I think all these commodities are well supported, so our minus probably still another good year. You know, probably not going to see that twenty thirty percent range for the large miners, particularly because we are now already seeing a
lot of earnings upgrade coming through. In February this year, we're going to see something like twenty thirty percent earnings upgrade for a company for these large miners, FORTESQ, if you like, actually here looking at even bigger upgrades, so you know, it's quite a lot of earnings upgrade, big dividend to come through for them. You know, this reporting season and I think next reporting season August we're going
to see an even larger name. But then posta we really have to see whether globally, you know, where we stand in terms of the global bombers, But certainly first half they're going to continue to do pretty well.
It sounds to me like you're saying that to some extent it's priced in the Big three, But there is such a huge mining sector and we can look further down the line at what is available out there. So if copper is like this year's thing right this year is hot metal, so to speak, where could we enter as an investor? What sort of stocks are you looking at beyond those big three? And Fortescue isn't even in
the game here, is it? Really? It's iron or almost and real with very heavily iron or BHP is more diversified. But beyond those big three, what's the next layer of stocks? Let's start talking about individual stocks. Yeah.
Absolutely, there's a lot of interesting names. So in terms of copper, you want to play pure play slightly larger. One is the sam Fire. It has you know, has a really good copper exposure, but said by is very expensive. Then you go even smaller. The next one you can look at is Capstole. It's due listed in Canada and then also you know in Australia it's got a really
good production growth as well. Because one of the things about minor is there not only commodities, you get a right each by company actually growing production and also can benefit from high prices right now, So I think Capstole is a really good one to look at. What's also interesting is so if you look at the copper price that's gone really well, there is the next derivative. So when usually globally where copper price go really high, there's
some sectors they started moving into some substituting effects. So instead of copper, it might be to use al aminium. So if you look at the prices of aluminium, normally they trace copper, and so far at the moment aluminium actually underperformed comper Now I'm not a mining specialist, but you know if you look at what that means is that potentially, you know, with strong copper, alominium will have it stay in the sun.
So there's like a like a reliable ratio like LPG two oil or whatever.
Very reliable ratio. That's right.
Who are the players in that space?
Yeah, so the easiest purest play is our CoA And clearly the share price actually gone incredibly well. And that's again Julis said, it's not just pure here and then you know, obviously it's and it's for a cousin which has had many production issues, which is South thirty two. Now, being mindful mining companies, you do really need to know what's happening in total mind production. South thirty two has
had a lot of issues. It's one of those companies people always say you buy it before the result or after the result, but not during the result because they're always disappoint So just be bringing mindful when you move away from the large chap the smaller ones they generally have issues and you just got to do the homework. Be very careful with those things.
Can I ask you in your own fund beyond the big three bhp real and for the SKU, what would the peer ibor was looking at your fund and looking at the biggest holdings.
Sure, so aside from the larger so larger ones, we actually have more PHV than the real because you know we go through later on, we have that, we have the capsule, we have the same fire, we have the alcohol as well, a little bit of self rearly to smaller position because a little bit, you know, it needs to be careful with those socks.
Operational risk as they call.
It, operational risk, it's very large, that's right, it's really therefore, you know for a period where you've seen that aluminium price catch up. And also one thing we haven't talked about is the gold set, that goal set.
I'm going to do. I don't think I have a little of gold. Let's do it. Let's do it. Just before we do it, folks. Something that JB has pointed out and it's so true and it's just extraordinary. Don't for one moment think that because a company owns a gold mine and gold is rising at its fastest pace since the nineteen eighties, don't for one moment think they can't blow it. They can blow it every time, it
doesn't matter. They can be sitting on a gold mine, so to speak, with the most marvelous external macro conditions, and unbelievably they can blow it. And one of the things in this market, and people regret that Newcrest, which was our biggest goal miner, was sold back in twenty twenty three to Numont and it was a giveaway and it was an exquisitely time purchased by Numont and a terrible loss for Australia. But what people forget is that
Newcrest was the greatest disappointer on operational risk. Talk about things going wrong every time. So with that preamble, jombat a couple of things. Let's let's set the ground here. Gold is running extraor in extraordinary run, and it's entirely understandable and rational because of the mounting risks in world economy, primarily in the US, primarily off the back of the Trump administration's behavior. Now, on that basis, I think we
can be confident that it will keep going. Gold is up about very roughly, up about sixty percent in the last felve months. Gold miners who tend to lag gold itself for commodity, they are up. That is our own ASX gold sector is up about one hundred and forty percent twice as fast as goes. So we can put it on the table. There's a enormous opportunity and I'm still excellent opportunity left foreign investors in gold stocks. Where do we start?
You're absolutely right, I think where do we start? So with the goal companies, And you know one reason for why goal companies always lack the goal prices. First of all, goal prices can be affected by so many things, and often it trends in directions that we don't expect. Now, So with the so when people forecast gold equity prices, people don't expect the current spot. So most of the gold companies, you know, when others do their evaluation, it
assumes it's going to fall. It's been like other commodities as well. And at the same time, most of the larger gold companies, they actually are contracted all their volumes has been contracted with their customers, so they don't actually get the highest price until they.
Yeah, they're working on long term contracts, which which don't necessarily reflect the red heart lift in gold.
Okay, that's right, that's right, and so that's the second reason. Now the last reason of why it's always lack is because gold companies, if you do, a risk customer. So we have a model we look at all the companies risk their volatile. They are relative to share market, gold is four times of volatility goal shares, goal gold equities. They're very volatile. The reason being is that most of the gold company always need to raise money to dig out all the goal because gold is hard to dig out.
You have a lot of operational risks, so they always come equity raising, particularly smaller names. So when the market so often when the market goes through free four, when people worry about the world, the goal price will go up, but goal shares, goal equity will fall a lot because people think, oh, they can't raise money anymore. They can't dig those goals out. So it is very interesting dynamics.
So it's not exactly like your goal bus. It's actually works as a very extreme volatility measure of the market. But normally market in the normal condition, they will go up rasually over the goal prices. So these are the key reason why they don't they always be cheaper. But I do think the goal sector is really interesting because in the last four month, we actually have gone to
a lot of smaller gold companies. So when we talk about the big goal company, you know, they have contracts and everything takes a long time to benefit from the thing. And some of the bigger ones and we both know, you know, particularly Northern Start has had a lot of production issues exactly.
Yeah, yeah, just like Luclest added their day.
Yeah, yeah, that's right, the weather and everything else, and most of them they're pretty good in telling us about it. It's just that market don't remember. So by the time the market don't adjust their number until suddenly they report and they said, we told you, and then the market have been put into their numbers because they got too carried away with high prices. So we moved into some of the mid tier mid caps, so smaller names, and they are the one that actually has been doing really well.
Not only they growing production, they actually don't have long term contracts, so they just they started benefiting much higher prices and get all these cash flow. That's why you're seeing them doing so much better than the larger names. So you know, so the names we sit in are the likes of Catalysts and the names of Genesis, Capricorn.
They're all doing really well now. They all actually gradually, you know, going from small cap small ordinary index into larger index just because they actually are benefiting so much more than the larger like the Northern Star and.
US fourteen of the top twenty performers last year were gold miners. That's right, a goal that is the extraord Do you think we have a similar reflection in this twenty twenty six?
I think it will be harder, but of course, look if the goal continued with the way Trump operates it, the world is still very uncertain. There is a possibility, but I think hargely for that gold reray is they distruggle for many years. The part of the reray is the market recognized your cryptocurrency is not the true diversification from the money from the you know, over stimulus. You know, all these world and wash with money. So you know, because that has become quite a problem towards the end
of the year. So now the gold you see just see investors moving back into gold at the same time you see all the central banks buying gold China in your emergency market. They're not buying what they might be buying some cryptal currency. But it's just it's the gold has now restored its title as the story value.
That's very interesting and I certainly I actually did something a few prior to Christmas on this. It is certainly from my point of view, digitally goal. It's over really the story about whether crypto is digital gold. It's not goldles gold. But I'm going to ask you two questions. They're not easy questions. They're relating to gold. One is on the gold rally. I don't know if you're a
buler bear on gold, but I wonder one thing. If the whole thing about gold is that it was a non correlated asset and in theory it went down when markets went up, then what's going on because markets are going up and gold is going up, and so what does that mean? I mean, if what does it mean it's becoming I don't know if it's becoming correlated sufficiently that mathematically that the analysts are convinced but does that concern.
You in a way because it's like you said, it's becoming very correlated, right, So it's possibly correlated. So it's been like the bond and equity when they move together, which do these days, it's almost that reduces its effect as diversification. I think what with gold is a bit different at the moment. It's look, that's why it kind of feels okay, is it going higher? You know, it's harder to see it down from here now. But so
the goal is a little bit different. I do think that investors or you know, insitutions or countries around the world, there is so much demand they realize how much under owned of the goal it is, so there is this rush to buy them. So it's actually demand for you know, from real demand. It's not actually more you know, sort of financial you know, sort of structuring demand. It's actually different countries positioning, for whatever reason, a real demand for
this asset class. So I think it's well supported that it still is enough support to support that. And given you know, crypto is a little bit unsure of where it stands at the moment, I think that's at least for the next twelve month. You think this price is well supported, you know, very hard to see it collapsing, particularly given the Trump administration. What's happening.
Yeah, I suppose the factors that have driven it to this point remain very much in place, if not, if not enhanced. Really Okay, it's interesting you mentioned about being under owned. There is there is speculation, hard to prove this at the big superfunds. Australian super funds are way behind on glow delocation and if they are, then that's another sort of demand that would come through from that under ownership. Okay, shortbreak, folks. Back in the moment, we're
going to talk about what you might avoid. Hello, Welcome back to The Australian's Money Puzzle podcast. James Kirby here talking to June Beileu of ten Cap, regular on the show, perhaps a much better known as a staff picker now then we started talking to her earlier and I'm sure
that will continue in this year. She's great to talk to and I think particularly for fund managers, she's talks in detail and takes a stand and there's nothing more frustrating, I can tell you on a podcast show than someone who's humming and haweiing and beating around the bush. Not everything works for you, you always have I mean, as a staff picker, it's hard, right every year something goes right,
something goes wrong. I mean most things go right. I mean I think the last time we talked, the one that the one that I thought had let you down was Ramsey. Maybe they're turning a bit now this time around Premier Investments. How do you that didn't work out for your heart? I mean do you just say that it's like doing karate? You do karate every now and again, A punch lands and you just keep going. Is that your approach or what is your approach?
You know, when we look at the company and we have a thesis, you know, what is expected to return, what are some of the catalysts, and then when the catalysts come along, we look at it and say, look that's just way too tough. And so in a case of Ramsey, I remember many years ago, you know, it was a case where we're waiting for the reopening trade, right, I remember when the you know, post COVID had a
lot of issues. We're waiting for people to finally start using you know, egos of doctors, and they're like, now we are seeing it now, but it's two more years then expected, and they had all these extra inflation in terms of nursing stuff and others. That's been very tricky, so, you know, but Ramsey, to be honest, it's actually now finally looking a little bit better. We know, health scopes go through these challenges, but the market seems to be turning.
We'll do double digit return. So this is what we see. We want to see our thesis. We're constantly testing our thesis to say if it's a still it is a still intact. If it's perhaps the money should be allocated elsewhere. So it's kind of all, well, we always look at
in the case of the retailers. Yet last year was looking as a good year to start with that, with the rake cards, you know, with the you know many ray car on the car that's coming through, with the consumer not doing too badly, you know, things were looking pretty good. However, the challenge is now that we just you know that we all see now are we getting a rad cards? Probably not, Probably is more likely to
stay on hold for some time. And then in the environment also where consumers a bit more picky, not collapsing, just a little bit more picky, there might be a little bit of challenges for some of those companies in that sector.
Okay, so looking at docs that may let you down. They were so good for so long, and Combank obviously was I've been talking to people all week about this about Combank, and there's almost like a mystery as to just how it got to the sort of extraordinary levels that it get to, and when it had a valuation, and when it had an intrinsic value of allegedly one hundred bucks or so and it was trading at one hundred and eighty or whatever, of course it couldn't hold up.
So the question this year with banks, we have the four banks now sitting with you know, possible rate rises, possible soft consumer sentiment, struggling with the fact that they were clearly overvalued in twenty twenty five, and they are the big sector that often we would be talking half the show on. But we'll take it. I don't know if you agree, but I would take it that the best we can expect from the banks would be a sort of market average return.
What's your view, I think, Magie is that it probably will be market average, a little bit less in terms of written and the return delivered from the banks will be quite you know different, So within the banks, you know, also into outperform and then the disparity will be still quite large compared to last year, so that would be
quite large. And I do think the banks will be, you know, in terms of performance, will be a whole lot worse than you know, the lives of resources and a few other sectors, just because they don't have earnings growth and they're previously their earnings upgrade was because people were expecting very bad, bad their cycle. And now all the expectation has been re rated, so people don't expect that cycle. So there's no earnings upgrade to come through,
and there's not much earnings growth. And then now it's all about cost out, so revenue environment benign, you know, it's really just about cost out. Then who can do the cost out? So we saw A and Z already talk about cost out. I think it's got a little more rude to go, you know, West Pide potentially a bit more. And CBA is the one that doesn't you know,
never really does cost out. They invest, so you know, that's the one I think will be probably struggled more, you know, for the next twelve month because they're not going down the path where they will control costs and they will probably want to invest ahead of the pus.
Okay, so banks as a sector, the big four, you say, maybe average or less than average. And when we know we have one, we're talking about a very good year that put that on the table, folks. And I suppose part of the message here is always be diversified. So Bank's not looking great, ordinary at best, with some diversity within the four. After that, I think we're going to start basically we're going to get random here, folks. Okay, I'm going to just I'm just going to spray JB.
But also as the questions that you probably have in your mind. So let's go CSL extraordinary disappointment. This great stock, once the biggest stock in Australia. Can you believe this? Bigger than CBA, bigger than BHP. Now what has happened? It's down thirty five percent, but it's got an ROI of about sixteen percent, which is magnificent. What do you think is going to happen to it this year?
I think by the end of the year seer Priss should be higher, but it will betail two hearts again, you know, because the reason they sounds so much is because it's perpetual disappointment. It's disappointed market again and again. Last year. I think with something like two three downgrades. Now the risk is there's one more. There's one more downrade. Look, the operating environment is still very tough. Sounds like the core business has lost really lost, you know, lost its
structural growth driver. Now you know, the ig business, it seems to be in oversupply. That's why the competition is being severe. They're losing share and they say they don't want to compete on price, but clearly the market is very competitive. So that's tough. We're not seeing that turning around yet. And then the other product category, you know, we're seeing the album is doing really poorly in China.
That's another headway to come through. Flu is not great, but I think that's in people's numbers now, So I think the next six months there's still numbers to be notched out. But look, it is cheaper compared to what it was. It will never go back to the heydays because it's not a growth structural grower now because it doesn't have a big pipeline to grow it but cyclically should do better less than twenty times. It is cheaper
for what it was. So I think second half the year, once the earning is really cleared through a weekend, you know confidently say it will grow from here. It will definitely you should outperform.
You're not exactly calling it all the way back right, Okay, very interesting. I had no idea what you're going to tell me on that one. Okay, that's CSL. Let's take a look at and talking about potential areas that may not thrill, shall we say in the year ahead, the things that might let you down, things of where there are distinct risks. Tell me if I'm I mean, tell
me what you think. If there's any area I'm guessing here, where are we standing on for instance, Reads and the big If we have rising interest rate environment, then the textbook would say keep away from Reads. That is a property trust. Where are you on that.
Property trust? That you're right? They underperform leading up to the rate rise, and then you're probably looking at again the second half names. I think with the Reads they will do okay. For the first part of the year, earning is still pretty strong. Now this is as a sector, but this as a sector because the earnings just started turning. All of them has been come upgrades. Retail property is doing really well and they all probably have earnings upgrades.
So your center group, your vicinity, that's doing pretty well. Even some of the office space, which you know Childhol's doing is not too bad. Dexus is a different story. That's just going to be tough. And then the residential space is actually doing pretty good. You know, we like the retirement some of the retirement living space where you know, the recent listing of gem Life is doing very well.
So we kind of prefer company that more have the self help right, so they are building all these properties in the area highly desirable. You know, they're going to do very good earning growth regardless you know, whether they might be build a micro pressure. So I think the reason will do okay, but it's more on neutral stands for the rest of the year because once the great
they usually start underperforming as a sector. You know, when they don't have a proper growth for the company itself, they tend to underperform five month leading up to the first rate hike. So if we say the the year's ray high, so second half the year, that's pretty much it or the rebrates is pretty much done. So that's how it is more neutral. I think the housing is still looking okay, but it's you know, it's the other the some Yeah, it's the other face.
I wanted to ask you something there. Goodman being in theory a property trust but in practice priced as an AI play with an extraordinarly ambitious agenda, one would naturally be skeptical except for the fact that Greg Goodman has an impeccable record through decades of getting it right in the end again and again. Are you comfortable with the price that's at now?
I am. I hold Goodman. I think it's an incredible company, and I think what they're doing there is a disclaimer coming. I think what they're doing is great because they're repurposing a lot of their industrial property, right and they just keep them another leg of growth and you're delivering double
did you return? It is great? You know into the data like it's great now, I do have, But rather saying, you know, Russia for all your eggs and buying lots of goodment, I'm a little bit skeptical, and you know, unsure about this whole data center space, whether there will be enough return to be generated in five years time, right, So you know, because there's hyperscalers putting so much money into the data center and evaluation going through the roof,
we just don't know who's going to be the ultimate buyer, like saying ten years, who's going to buy them, and then whether there will be enough technology if the data center is still going to be in the current form, So maybe there's no terminal value for those and Goodmen instead of just buy and sell it, they want to hold it because normally with their other industrial property that's what they do. So they will manage. They will put them into a fund and the fund will manage it
so they will be the owner of this property. So it's a little bit challenging for me to see ultimate value of data center. But for Goodmen, I do think they underperform the sector enormously last year. You know, I think it does look pretty good from the industrial perspective and the money they can make right now from those data center.
Do you say Goodman underperformed the sector last year?
Yeah, they did, so the sectors down If you compare Goodman and Charta Hall, I think something like thirty percent or more difference now Obviously the year before Goodman did really well because the data center. But it's just it does look like there's a bit of catch up to do, and industrial property is still doing pretty well, demand strong, and then meanwhile they're making good profit out of those making building those data center So you know, so I
think it's it's something that I do like. I think for the time being, it's good. But I'm still working out this whole data center centeris because our portfolio can hold it and we can show other companies, so you know, we can take how that data center uncertainty.
I certainly tune into your notion, your concept that the technology itself could change, and then you know, maybe data centers as we know them will not look anything like data centers that have been planned to be built right now that are getting such valuations. One last thing, and it's a kind of a reflection really of our market and its absence of tech and AI that we leave
it to last, because there isn't really a part. I mean, Goodman has become a proxy AI play in the blue chip space, or at least the top of the market, and within the market, there is very little else. NEXTDC has been seems to be a very disappointing company in many ways. Is what do you think of a NEXTDC and do you of in recent times has been disappointing. Do you see any AI play within the ASX.
I think, first of all NEXTDC again, it comes down I think it's done very well. If you want to have exposure to data center, it's just one all the contracts and everything's great. My thing is that again, I'm just not sure about ultimate value of those data center. I don't know if by building it today in five years you know who's going to be the next person to buy those assets. You know it's going to be
harder to see. And then when I talk about technology goal change, you know what if there's a breakthrough that you can have data center in the middle of the forest, like in the middle of the.
A data center in your basement.
That's right, Yeah, why what if you just put something out of the building. So I think it's just really I don't know, because the technology changing so fast. So that's the thing. So I like it as a data center exposure, but I'm just not sure if I want that. I seen the exposure at the moment. Goodman gives me a quasi it's still got other assets in that sort of exposure in terms of the AI player and everything.
I really think this is the year when you actually, rather than just AI exposure, it's the company that benefit from the AI. You know, it's the costs out. It's the secer for example. You know what is the sector that has the highest labor cost? You know, where there's healthcare, where there's banks, there's a lot of cost efficiency coming through. You know, we're hearing chatters overseas now, you know people
talking about overseas banks. You know, one of the JP Morgan Stanley cheap Ecommas said that they think the banks is the growth stock of the future because there's so much cost that can come through with the AI efficiency. So I think this is a year people will distinguish on also win there a loser. People still trying to work it out of the AI, the development of the AI rather than just go to the physical AI exposure. You know, I would actually say some of the company
tech companies be sold off recently. It potentially is the benefit beneficiary of those AI because they you know, they have big database RAA for example, big database, the proprietary database. You know, they actually working with some of the AI model, you know, so that is the beneficiary. And but the market at the moment is selling your tech not sure what it is, and then just all buy just direct chip exposure. So for me, it's the companies that will benefit.
And then there's a lot I think companies will start talking about it in the next six months.
So hard one just wrap. We're going to say at the start stock you really like stock you think you could avoid top of your head.
Yeah, so the things that the stoker would avoid, it's probably temple on website this stage. I'm a little bit worried. One is it's expensive and that we're heading into a somewhat slow down sort of environment. Lots of expectations. I know, shampires fallen, just a little bit caret cautious on that front. The thing that's soccer like is actually you know what flight center. Yeah, because of the companies downwhere look at
Godfrey's challenges and everything. Then we had the war last year, so now it's heading into an environment where you know, the travel is normalizing. Austria faced Australia as we love to travel overseas, so you know, demand environments put not too bad. And and then you're cycling some really weak coms. That means you're earning growth will come through at the
same time. Corporate travel. The problem with corporate travel, and it's going through review of some of the you know, dodgy accounting and the like has now created, you know, opportunity for other corporate travel service provider like flight center. You know, in a way that you know, all the large companies that we great speed to, they're all now revising their corporate travel contracts. So you know, I think the next six month growth for travel or flight Center is going to be enormous.
Really interesting. Parently convinced by both those calls, might I say especially the travel one. Yeah, absolutely, well, well you've got two extraordinary stories there. One obviously the extraordinary story of corporate travel being so bad that they left it. They've just basically left a big gap in the market, haven't they, And every corporate and every government department is going to have to review. Terrific. All right, Thank you
very much for being on the show. Always great. We'll talk to you again during the year, I hope, but thank you for today.
Thank you so much for having me and Best of Black with twenty twenty six.
Thank you. That was Jim Baylor of ten Cap Folks. Terrific to talk to us always. So now you've got it. Okay, You've got Mark Jocum of Global XCTFS, who talked about the global markets. Then we talked specifically today about Australian share opportunities stop picks. Next week, we're going to talk about property opportunities in twenty twenty six, and we're going to wrap it over Will Hamilton at the end of next week. Talk to you soon.