FREE WHELAN: The Premiership Quarter, When Unions Move Markets

In this Stockhead series, investment manager James Whelan from VFS Group offers his insights on the key investment themes and trends in domestic and global markets. From macro musings to the metaverse and everything in between, Whelan offers his distilled thoughts on the hot topic of the day, week, month or year, from the point of view of a professional money manager.

Good afternoon.

Another week at it and we move closer to the final quarter of the calendar. The “premiership quarter” comes to a close and there’s a tantalising volume of sport on the various networks.

AFL shows us the potential for the Collingwood vs Carlton grand final we all deserve this year. The NRL will deal up another great finale too, no doubt. The Ryder Cup is close on the horizon too and as for the Rugby… well maybe Eddie should just stay in France for a while and really enjoy his inevitable time off.

Meanwhile one of the biggest milestones of my year is just about behind me with my house ready to move back in. Many said that starting an add-on with rates at near term highs and building costs accelerating was a bad idea. Those people were right.

As we near Summer, this weekend just gone showed us there’s heat out there and it’s not friendly. Pretty sure I heard a radio bulletin as I was shifting boxes that South Australia was expecting weekend temps 16 degrees above normal. 16!!

Without even checking the facts I decided that sounded believable enough to write about.

Global X Thematics

On to some more serious things, one of the perks of my job is being able to shift off the screens and hear some very smart people talk about things that are relevant.

Global X invited me down to the offices to hear their global head of Thematic Solutions, Scott Helfstein, out from New York to discuss some of his research on what’s ahead and why the things that happened, happened.

Jetlagged, following the amazing experience of travelling from the States to Sydney, he managed to make a solid bull case for what’s ahead.

More importantly, he managed to give the best overview of why things have happened how they’ve happened.

Specifically, I’m referring to the dramatic and mostly unexpected rally in a small handful of megatech stocks that has continued to baffle even the oldest heads.

This is from June (below) but is still something to behold. It’s been written about to death but a decent reasoning hasn’t been forthcoming.

Firstly, Heath and I run through it on the podcast as at Friday with a few things on Tesla so if you get a chance please have a listen and save your eyes the reading time.

Scott’s thesis

There is widely held acceptance that interest rate rises hurt growth companies because the value of their long term discounted cash flow is reduced and their ability to secure low-cost debt financing is more difficult. (You don’t need an MBA for this, it’s literally on Google for everyone to see.)

However for the mega-techs (Apple, Google, Microsoft etc), they’re massively cashed up already. Debt isn’t a problem. Debt financing isn’t a problem. If they need money they just use their own cash or their own stock to raise.

“The discounting method is a theoretical construct,” he says.

Also, and this is a good bit that opened my eyes, when the cost of money gets tighter, the “lesser” growth stocks start to feel the pinch for the above reasons (or at least sentiment) and so the bigger companies, actually innovating, increasing productivity, becomes a hot commodity.

Add to that the fact the big techs were under-owned and you have the makings of a rally.

I strongly urge anyone who gets the chance to hear Helfstein speak please do so.

Speaking of productivity, AI, tech and the like, he made a great point about Deere. Everyone knows my love for food & agri stocks and Deere is one of the best. They’ve won the self-driving race.

But not just Deere, the future of agriculture is here and it needs to be paid attention to:

Drones with scanners able to tell the grower exactly what’s needed where via AI forecasters and scan readers, providing specific recommendations for crop management.

Meanwhile there are Deere harvesters on full self-driving mode able to work 24 hours a day.

If I wasn’t fully allocated on the thematic side of the portfolio I’d having to be giving more creed to FOOD.

Strike!!!

I had a theory a while back that the changing shape of the working person post-Covid would lead to a new paradigm (read: challenge) in the WFH/Commercial real estate situation.

My newish theory is that the labour movement of the American worker is market-moving. In a big way.

Play this as you will but there’s a definite trend of stoppages and missed days. I’m building a little thesis on it, for now please be aware of its “thing” status.

Yield uppish

Second last is an article from the FT a few hours ago in culmination with the “Kent A Clark Center for Global Markets at the University of Chicago Booth School of Business” (mouthful) which has surveyed economists showing 90% of 40 polled economists think the Fed has more work to do. About another rise, based on stronger than needed economy and oil prices.

There’s a chance to properly load up on treasuries and it’s almost upon us.

Finally this is Apple, including their CEO Tim Cook, play-acting a situation in which Mother Nature comes to Apple HQ to hear their pitch on carbon footprint.

At Apple, we believe that climate change is one of the world’s most urgent priorities and we are deeply committed to doing our part. Today we had a special guest—a real force of nature—stop by to check on our progress. pic.twitter.com/neLSEqPmGu

— Tim Cook (@tim_cook) September 12, 2023

I can’t even…

All the best and stay safe,

James

PS: Eh. It’s nice to make money but it’s nicer to give some back too.

On Thursday 21 September I’ll be the MC for a wonderful evening held by 10×10 Philanthropy.

$100 gets you through the door and you can hear the “shark tank pitch” of 3 great little charities still in startup phase.

Tickets here and I hope to see you there.

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