HALO investment guru shares hard-earned tips for reflationary times

A fund manager and software innovator, Nicolas Bryon has experienced it all when it comes to market navigation.

The fund manager behind APSEC Funds Management – an equity fund focused on delivering strong performance across all investment cycles – and the creator of HALO Technologies’ (ASX:HAL) unique global equities research and trade execution software, Bryon’s expertise lies in capturing upside and minimising downside.

The figures would suggest he’s got a pretty good record of it too. At the end of April, Morningstar ranked APSEC’s flagship Atlantic Pacific Australian Equity Fund in its top 3% of ~360 funds for one-year returns across all strategies.

The fund was also top-ranked in the Australian long-short category over the same period.

As global equities and the investors trying to read their trajectories grapple with the implications of a reflationary world, Bryon tells Stockhead that the writing has been on the wall for some time. Kind of.

“What we’re seeing at the moment, in our view, was sort of well telegraphed,” Bryon told Stockhead.

“We’ve been preparing for this since September of last year, because we knew the world’s central banks would be forced to raise rates sooner than they wanted to.

“We’ve always spoken about this concept of reactionary tails related to central banks. There’s a certain amount of inertia for these groupthinks to change policy direction – they are very reactive to data.”

Sending up the Fed signal

The big shift pointed out by Bryon in the messaging of the central banks is a move away from the concept of ‘transitory inflation’ – a term which was used by the US Fed to describe inflationary pressures which were not expected to leave a permanent mark in the form of longer-term higher inflation.

The Fed retired the term late in 2021 – a significant move which highlighted the reflationary policy decisions to come.

“Back in September last year, we were talking about the sectors we felt would perform in a reflationary environment – and essentially they have,” Bryon said.

Against the prevailing sentiment of the moment, Bryon and the funds under his management saw opportunity in thermal coal, among other commodities.

“Thermal coal is one which had the double whammy from the Ukraine invasion, which essentially created supply questions on the reliability of supply from Russia,” he said.

“We’ve then seen utilities, as their economies have reflated, wanting increased power for use across all industries. Coal, obviously, is a key baseload for many countries – especially in Asia.”

Since the beginning of November 2021, thermal coal prices in US dollar terms have risen from around $150 per tonne to $414/t.

On the contrary, Bryon felt expensive US technology plays like Microsoft, Apple, Amazon and Facebook were thought to be candidates for derating.

Over the six months prior to time of writing, Amazon had lost more than 37% of its overall value, Facebook parent company Meta Platforms more than 40%, Apple Inc more than 5% and Microsoft almost 22%.

The Atlantic Pacific Australian Equity Fund’s monthly performance has returned positive performance each month since October 2021, with the highlight a 7.3% increase in February.

Words to the wise

What lies ahead is less clear – Bryon has a close eye on US bond rates, which he considers to be normalising near 3%, but could impact equities if they continue to rise.

“You really have to be watching what the US is doing, because that’s typically going to come back and impact every global equity market,” he said.

Bryon’s basic advice to retail investors is simple – make sure you get your timing right and pay attention to the macroeconomic influences which could lead certain sectors to outperform others.

Keeping track of multiple global market trends and movements and timing your decision-making is not the easiest thing to do, even when you have tools at your disposal.

That’s part of the premise of the software behind HALO, which Bryon created on a research-first philosophy and uses to guide his investment decisions domestically and internationally.

“What I’ve created in HALO is a range of signals that give me information on various securities at any point in time,” he said.

“It could be a blend of fundamental data, a blend of revision data, or the more traditional technical analysis type price formation models.

“At any point in time I have a time series which allows me to either say ‘yes, stock XYZ looks like a good buy’ or ‘stock ABC looks like I should liquidate’.

“Having this systemised framework within HALO enables me to either make decisions for the medium term on the buy side, or if I’m shorting, on the short side.

“But it also enables me to think about price, where I am in a position and whether or not I should be liquidating – it’s a pretty powerful tool… when it’s used correctly.”

Offering institutional-level analysis and trading in markets locally and abroad, HALO’s typically high net-worth userbase of self-directed investors and financial advisors has seen the company grow at a compound annual rate of 173% in pro forma revenue between FY2019 and FY2021, with subscriber base recording a CAGR of +115% over the same period.

The company listed in April, and on the back of $36 million raised plans to expand its B2B and B2C subscriber base internationally through distribution channel partnerships and deals, and acquisition of complementary businesses.

That should allow it to scale up rapidly – at a time when its level of analysis should logically be in hot demand.

Taming the titans

Bryon said the difference between HALO and the bigger players in the research analysis space was the level of integration provided in the information on offer.

“The industry titans – Bloomberg, Refinitiv, FactSet, S&P Capital, these sorts of institutional grade platforms, are great,” he said.

“But they don’t integrate multiple strategies in the same way that HALO does.

“You’re looking at a snapshot, whereas HALO is all about time series and looking at the relativity of a signal over time. I don’t know of any other platform that tries to blend fundamental revision with technical analysis and price formation models.

“I’m sure if you put a lot of effort into it you could probably do the same on those titan platforms, but the beauty of HALO is that it’s already there because I designed it that way.

“I use it every day.”

This article was developed in collaboration with HALO Technologies, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.