Data centres, AI and hype missing in action at old-school investing gala

Instead, the majority of the companies picked as potential winners for investors make their crust from old school industries. There’s the German cement manufacturer Heidelberg Materials, US domestic steel manufacturer Steel Dynamics and Brookdale Seniors Living, a company poised to benefit from ageing boomers.

As Vihari Ross from Antipodes Partners, who tipped Airbus last year, told the conference, the first baby boomers turn 80 next year. The number of people over 80 years of age is set to double over the next decade.

Perhaps the most out-there idea came from Qiao Ma of Munro Partners whose pick is TKO, a sports and entertainment company formed in 2023 through the merger of the parent company behind the UFC and WWE – that’s right, theatrical wrestling.

But before the room of more than 700 fund managers and investment analysts could digest the stock picks, Treasurer Jim Chalmers made a pitch for the money to back Australia. Australia was the best place to invest, he reckons.

His thesis is we are a safe, reliable nation in a global sea of uncertainty. And, he says, we are on the cusp of building our fourth economy (the first three being agricultural, industrial and financial services).

There was little mention of the mining boom, other than that critical minerals will help shape the next economic phase for Australia, one he says is shaped by energy and technology.

He rattled off Australia’s impressive statistics. Inflation around a third of its peak, without mentioning it’s above the Reserve Bank’s target range and hampering any chance of a rate cut.

Economic growth in the top 2 major advanced economies, he says.

No mention of course that Australia has one of the highest corporate tax rates in the OECD. The average corporate tax rate in the OECD is in the low 20s. Got a company in Australia? You’ll pay 30 per cent.

Not that long ago, Chalmers was trying to push through a tax on unrealised gains, which would have stymied venture capital and dulled investment in start ups.

So perhaps it shouldn’t have been surprising that not one of the 10 investment ideas was born in Australia, unless you count First Eagle’s Matthew McLennan’s pitch to buy gold. Australia has gold mines.

Chalmers was talking up Australia having the data centres, workforce, quantum and AI know-how. It can be a digital hub in the Indo-Pacific.

It’s easy to get caught up in the latest fads. Tech is booming, so much so there’s warnings we’re firmly in a bubble. With technology coupled with our abundance of sun, wind and critical minerals Australia can be a global leader in the net zero transformation.

I’m not sure if Chalmers was still in the room when Marathon Resource Advisers’ Robert Mullin got up and said his stock pick is SLB, once known as Schlumberger, a traditional oilfield services company and gas producer (albeit part of Mullins’ pitch is that it’s really a tech company).

Apart from Monday.com and PB Fintech, the stocks recommended have businesses based in very traditional sectors: retail, manufacturing, services and entertainment.

That said, technology is driving a lot of what they’re doing. Morimatsu International, the stock pick by Stillpoint Investments’ Eric Wong, makes factories in a box. It manufactures the kit in China, ships them around the world, where they are assembled by companies benefiting from governments trying to resuscitate local manufacturing.

Sohn, which raises money for medical research, is a place to learn about new ideas and thematics. If you bought the 11 stocks last year you’d have a return of about 42 per cent, although keep in mind some went very well such as Couer Mining up 148 per cent over the past year (while ON Semiconductor Corporation tanked 30 per cent.)

Time will tell how this year’s stocks will perform.

There’s little doubt big money has been made in tech. In fact, if you backed Cathie Wood from Ark Invest’s tip for Tesla at the Sohn conference in 2019, and invested $US10,000 you’d have shares worth $201,000 today.

Munro Partners’ Nick Griffin picked Amazon the year prior, when it traded at $US80. If you’d invested $US10,000 then, and held it, you’d have tripled your money with shares worth $US29,697.

But perhaps the big money has been made. As activist investor Dan Loeb says, there’s an AI bubble. But he thinks the bigger players such as Microsoft and Amazon won’t feel the brunt anywhere near as much as some of the smaller players trading on very large multiples.

“There is a bubble but I don’t think the bubble is at Microsoft and Amazon or the hyperscalers,” he told the conference. “We do see real signs of excess. Quantum companies have got very speculative.”

This article first appeared in The Australian as Australia Inc missing in action on day of investment optimism