Welcome And General Advice

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Well, welcome to another episode of On the Couch with myself Henry Jennings from Marcus Today. And today I am absolutely delighted to be joined by an old mate of mine, Alex Pollock. We go back a long, long way. And Alex is the founder, CIO, and the driving force, I think it's fair to say, for Loftus Peak. So that is a very, very well performing fund, very much concentrated on the tech space. And Alex and I do go back quite a long way. So it's absolutely delightful to have Alex on today. And we're going to be talking AI, we're going to be talking tech, we're going to be talking all things that are racing ahead at the moment. So welcome, Alex. Thanks very much for coming on. Henry, that's a that's about the best intro I've had for a very long time. We do go back a long way. We uh we both worked at Macquarie, um, different sort of little areas, but on the same floor. I know. And um, yeah, we're um here here we both are all these years later, still kicking it along. I know, it goes back 30 years. Well, we go back 30 years. It's it's crazy. And I have and I have watched your success from the sidelines and uh congratulations on the success of the fund. Uh just before we kick off and I'm told yours is doing quite well as well. I I've got to say ours is doing all right, I have to say. It's not not too shabby. So um, yeah, it's it's not uh it's not considered well, it's a team effort, I would say. Marcus drives it, but we all uh get behind it and we all we all make decisions uh based on what we see. So it's been going well, I have to say. Sounds like a good culture. Cannot complain. Well, I've been here 11 years now. It's um it's crazy. But uh there you go. Um just before we start, though, I just must say that this is general advice only. So please do your own research, etc. Contact your own financial advisor regarding any of the thoughts, ideas, or insights that we talk about here. So we're here to talk about you, we're here to talk about Loftus Peak, uh, we're to talk about your performance and your strategy and your philosophy.

Why Loftus Peak Backs Disruption

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Run me through, I guess, we've talked before and we've done a podcast before, so some of our uh listeners will be familiar with your fund, and a lot of people will be familiar with your fund because you do a great job marketing it. But what is the strategy and philosophy behind your fund, Alex? So you will recall you know, from the days going back when I sort of we used to work at Macquarie and covered the um the media and and uh sort of tech sort of technology space as well. And you will recall that we were kind of early into the whole understanding of how because we we don't call it a technology fund, we call it a disruption fund. And the the roots of that disruption fund come from the way that Fairfax, the newspaper company, was dis was um uh disrupted by Seek and Car Sales and Realestate.com. In other words, they took the classified advertising, which formerly was distributed on the back of the newspaper, they took that and and turned it into a very natural product for narrowband internet as it was then, and put the what the the uh cla the job ads, the car ads, not different companies, the job ads, the car ads, and the uh real estate ads online and this and disrupted the Fairfax business model. And in fact, that was the experience of newspaper companies all the way around the world. And you know, different companies like Facebook came along and Google came along and further disrupted all that stuff as well. And so that was the genesis of the um this idea about you know disruption. And and the point was that what while it started in sort of narrowband industries, it quickly became apparent that it was going to disrupt, as long as the bandwidth was there, things that were traditionally broadband experienced. Like if you go down to a shop and you buy something, right? It's kind of a broadband experience because you walk into the shop and you see the stock and you feel it and all that sort of stuff, and you understand more about what the pro what the product is. And and you know, Amazon, as it were, uh disaggregated the um the purchase decision uh of retail from being just I want to buy a book to being like separate out the transaction from the delivery, from the quality, from the location, so you could be, you know, go around the world, etc. And so Amazon disrupted retail in that way. And I'm going back 10, 15 years now, but and all industries, you know, when we started this fund, which was actually now 12 years ago, uh, all industries um, it it was obvious to us were subject to this kind of disruption of in one way or the other. And so um we just kicked it on from there through through Amazon and through cloud service providers like Google and through through Meta and through all and and then ultimately, not ultimately, but in 2016 through Nvidia, which we understood as one of the first machine learning companies in the and machine learning is a little bit different to AI, but frankly not that different in the underlying technology. Um and so and we've just rolled with that disruption thing as it's gone from industry to industry to industry, and um and then you know, in 22 AI and then all of the things that have happened of AI, etc. So that's where we are. It's a sort of windy explanation, Henry, but you can you can chop it out a bit if you like. No, I wouldn't dare chop it out, mate. You you're you're too good to chop out. Uh I I I remember uh back in the dim distant past when we were both in Macquarie. I mean, you were you were way ahead of the pack analysing um satellite TV. Yeah, well uh yeah, we we did understand you know there's certain things around satellite television, which is that it didn't require you to lay a broadband connection on the street. And so, you know, it had different kinds of economics, so to speak, relative to a cable product. Um, and so you know that was but but the disadvantage, of course, of satellite TV was that it was one way only, right? It was satellite to you. The the U back to the satellite, which is what you can do on cable, the U back to the satellite didn't really work. So anyway, so there's all this kind of you know different stuff around how it all

Fund Scale And Global Information Edge

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works. Yeah, yeah. So so how big is uh the fund now at Loftus Peak? The fund uh at Loftus Peak just cover just go went through $1.5 billion under management. Wow. Uh yeah, so it's a it's um it's a product, right? And it's it's we we've got uh we we're a retail advised product, which means that virtually our entire makeup of the fund is is um private uh people, families, people, uh that are advised by a a wealth consultant, a wealth advisor. And um we have uh I want to say uh it is we have tens of thousands of account of account holders, possibly more. We don't even kind of know how many we actually have. Right. But it's but it's in the it's more than 10,000, that's for sure. It could be 20, it could be 40. We're not sure because you just can't you see the you see the advisor, but you don't know how many people are being put in on the back of it. Uh and when you started out on this journey, Alex, this is probably getting a little bit off topic, but when we when you started out on this journey 12 years ago, did you have any idea how big it was going to get or how big it could get and uh and where you'd be now? Well what we knew what we knew is that unlike a small cap fund, that that we could be a five or a ten billion dollar fund, certainly a billion dollar fund, and it didn't even have to move the needle. So if you're a small cap fund in Australia, for example, you really run into capacity constraints at a billion dollars because at a billion dollars your biggest positions are large enough that you move the share price when you try and get in or get out. Yeah. But we knew from uh attacking the big capitalization companies two things. One, even at $10 billion or even $50 billion, we wouldn't move the needle when we got in and out of a position for a trillion dollar company. And we and so we we stuck to the big end of town uh because uh you know, for that reason. And then the second reason is one of the really big advantages that that uh came as a result from the global financial crisis, etc., was the was the clampdown on regulators over making all information that was coming out of a company public. Right. So we you know we we were then no longer at an information disadvantage to somebody that was actually based in San Francisco or New York or Berlin or London, etc. Anything they could do, pretty much, that we had access to the same quality of information that they have access to, which means that as long as we understood it well enough and and uh you know knew how to kind of weight it, etc. meant that we were not trading at an information disadvantage. And so it has been, right? Our numbers are you know comparable to the best of the numbers coming out of um coming out of the US, whether tech funds or other things besides. So yeah. So all right, here we are 12 years later.

AI Adoption And Explosive Growth

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Um there are some obvious questions because the AI story has accelerated out of all belief. I was just watching CNBC uh a minute ago, and S uh SK Heinex is up a thousand percent. Yeah. I know I mean and that's that's not over five years, that's in the last year. And like that is the point, right? Yeah, uh you and I have both been through a few of these cycles one way or the other, but I don't think either of us, I certainly I have never seen growth of you know $100 billion companies, $500 trillion companies. I've never seen them double and redouble their capitalization in a shorter space of time. So that is challenging from the perspective of making sure that you've got the portfolio just right. Um so that's point one. But then point two is never before have we been, you know, invested in a group of companies that are literally controlling the mechanisms by which the whole of global business can operate in the next five years through you know transformative large language models. I mean, and I and I we used one, we used them all the time uh yesterday to help write the monthly performance review. And you know, honestly, Henry, we had to give it a lot of instructions on this and that, but the product that it can it constructed, I couldn't have done any better. Yeah. And the next time we use it, which will be it'll be you know better again and it'll take a shorter amount of time. So we can see the timeline can contracting. So on the one hand, massive price appreciation, at the same time, massive uh utility for the product, uh, and it's global, right? It's you're not like you have to build a Coca-Cola bottling plant to sell your billionth can of coke. You know, to the extent that there are broadband internet connections all over the world, mobile or fixed, that is the distribution capability of this to hit everybody, as it were, at once. So, yes, the numbers are huge in terms of the stock price appreciation, but yes, the numbers are equally huge if in terms of adoption by you know the great, you know, by the by the globe, by people all around the world. Now, we have seen in recent times or in recent weeks, um there's been reports that some companies have blown through their entire AI token budget in a month because they've opened it up to all and sundry to have a go at. And you get the feeling, you know, that it's a bit like that you know, a drug dealer out there. And I wrote this this morning, you know, that they they just taste. Just a little taste, it won't hurt you, just a little taste. And then before you know it, you're absolutely addicted. You've got this stuff embedded in your business, and you can't you can't prize it out, and it's costing you more money than the people that it's replacing. Is that is that a concern that it just escalates out of control in terms of the cost? Well, uh it won't be if it is, it won't be a concern for long. So point one, that company that's with the half a billion dollars, half a billion dollars, that it's Facebook, it's better, it's Facebook, right? Because it's not Google, we know. Yeah, it's not Amazon, it's not Microsoft. Um, we and it's not one of the Chinese companies. Uh and I can't remember who else we we considered. So it could we're pretty sure it's Facebook, point one. Point two, we're also pretty sure that within the context of what Facebook is doing and the use of its AI, it's generating revenue against that, right? Because uh, you know, if you've had a look at your Instagram feed lately, yeah, uh you know, people are going to black and white so that they or even switching it off because it's just like so compelling. Yeah. So um and so that's point one and then point two. If it is half a billion dollars, I mean CO CFOs, Chief, they're gonna put their foot on that very quickly and just say, yeah, okay, so you the this token maxing, that's what you're kind of referencing here. How many can I use? It's a you know, it's a it's a you know measuring competition of some sort. Yeah. And and it's got to stop, right? You can't be just you know doing this for the sake of it. So like everything else, right? Yeah, you can't just have a taste with if you can't have a taste without getting addicted, then you don't want to taste.

Token Budgets And The Surveillance Internet

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Yeah, it's funny, isn't it? You talk about the Instagram feeds, etc. I've got some friends who came back from a Scandinavian holiday, and the first thing they did was order a sauna. Uh and we we were talking about it at dinner on Sunday night, and my Instagram and Facebook feeds have been full of people trying to flog me saunas ever since. How about that? It's it's I'm I'm nearly I've nearly signed up and they look good. I know. So there it is, right? They're following you, they're using that AI to follow you around. It's it's quite Mark Zuckerberg doesn't know what you're doing, but the AI does. Yeah, and that and that's the same with your email. I mean, it's been that's the way it's been going for years. The internet is a surveillance tool in the in the final analysis. Yeah, uh, it's not a um when I mean a surveillance, it's a tool for selling you things. Yeah, the incidental part of it where they give you some value for it, that's just the mechanism, right? Yeah, the real purpose of it is they want to sell you something, and that's their dead, that's what they do. So I know it's it's fascinating though how quickly they were onto it, and and not even from you know, I Googled it once, you know, sauna, and and that was it. I was I was up for Western Red Cedar and it was all over Red Rover, you know. There you go. I was wondering where to put it in the garden. Uh that's right.

Bubble Risks And The Capex Boom

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So now I guess the big question, Alex, is um, you know, is this a bubble? Is this whole um thing a bubble like we saw with the dot-com? I know the dot-com was all about eyeballs and it was all real rubbish at the end of the day, but that this is genuine, isn't it? This is earnings, this is real earnings, real dollars. But is it a bubble? Is there a danger that it becomes a bubble? Of course, there you cannot have stocks appreciating at the rate at which they're appreciating now. You cannot have that and not ask have the question asked, is this a bubble? It's like the very nature of the speed of the increases at the size of the company that's doing the increasing means the qu the bubble question has to be asked. Um but I make one or two observations about the dot-com crash, right? The dot-com crash happened because the burn rate, you'll recall this, of companies um was no longer credible, in by which I mean um they didn't have real revenue models. The internet in those days was narrowband, not broadband. So now you can do video, you know, over your over you know everyone's got a video connection, whether they're on a mobile or fixed. Yeah. Uh, but in those days, you if you wanted waited for a picture to come down, it could take you 10 minutes, right? So the rate at which connectivity and internet delivery was actually happening was completely different from the amount that was being spent by these uh internet companies, and I'm talking about pets.com here, etc., etc. So this time round, uh you know, history never repeats, but it does rhyme, right? This time around we know that there that that the product is real and that the monetization of it is real. We can see that whether you equip it with the you know open AI or Lanthropic's $40 billion annual run rate revenue or whatever, you know, there is a serious bit of demand on the back of it. But again, that doesn't tell you whether it whether that amount of demand uh should can only be monetized on the basis of you know you that that amount of demand won't support the level of investment that we currently have. We don't know the answer to that yet, right? It's different to dot-com because we knew the burn rate was faster than the demand could be created. In this case, uh we know that the demand is being created. The question is whether the level of investment is appropriate for that level of demand and revenue that we see. And the answer is nobody actually knows. What we people do know is that there's a run of there's a freight train of demand coming, and that and the question is how do they price it? How do they how much capital should they throw at it? It's interesting when you look at you know, a trillion dollars worth of capital being chucked at it in a year, you know, that's nearly the same as the US is spending on their interest bill on their $39 trillion of debt. It's it's it's extraordinary. And one thing that struck me this week, I guess, is um, you know, we've we've seen uh Alphabet moving towards uh raising equity. Um, you know, initially when this all took off, the the companies were were chock full of cash, weren't they? They had tons of cash. They went through that like I would on a Saturday afternoon at the pub after a long lunch. Um and then they went to debt, and then there was lots of debt issuance, and now we've gone to actually getting shareholders to tip in as well, and of course we've got anthropic open AI and SpaceX coming along. Is is there a is there a danger that we just get saturated with the demand for capital as investors in in this environment? Well, the first thing to note is we we Loftus Peak, we are not the we are not the market. Right. We uh you know have very strict valuation measures that we adhere to, and that has and those those appro that approach has steered us through many, many, you know, bad times, and we've come out with the performance that we've come out with. So so we're not the same as um the market in that respect. Um now what the the I had a secondary point on that, but it's just as uh what was repeat your question. Um it was more about whether we sort of got sort of peak saturation in terms of the amount of money that's being raised, anthropic AI, etc. So so Google, Microsoft, and um and Amazon are all they're not in net in a net debt position yet. No, they're they're still in a net cash position, even after they do this 0.1, 0.2. Remember, this is a generational thing, right? So big capex going through now, but that will stop at some point in the next two or three years, it will stop, but the revenue won't. No, right? So in the end, you might have had a a company that was worth $2 trillion with $300 billion of cash, and now you've got a company with $2 trillion of revenue or trillion dollars of market value, and it's got um a hundred billion dollars of cash, so it's reduced by two hundred billion dollars. But the cash that's coming into it over the next 10 years will continue even after the capex stops. And then point three on that, you know, NVIDIA has they've just formalized it. We already know it because we see it in the numbers. They're going to return via dividends and capital a half a trillion dollars to shareholders in the next two or three years. Half a trillion dollars. I mean, and that's just their capital return dividend program, buyback program, right? So, and they're they're not making it up, right? That's like you can see it in the numbers that that's where they're they're heading towards. So um, so the numbers are huge all around. Yeah, what what are you gonna do with that, right? What are you gonna do with the company that's NVIDIA is our biggest position, right? Yeah. It's on a market multiple of like 20 times, 19 times, 18 times PE, right? That is not a ridiculous PE. And you know, it's gonna it's half a trillion dollars is a tenth of its market cap that's gonna return to shareholders. Yeah. In that tenth of the five trillion, it's gonna return to shareholders out of cash flow. They're not borrowing to do this. Yeah. That's coming out of free cash flow. So I don't know, numbers are big. They're big everywhere, right? They are big everywhere. Just think, you know, CBA, um, PE of twenty-six. C B A P of twenty-six, you know, what would you rather? Which would you rather own? Oh, exactly. Yeah, right. Crazy. Would you rather? It is crazy.

Where The Fund Finds New Bets

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So when when you're looking at this market at the moment for opportunities, where where is Loftus Peak seeing the opportunities? Uh obviously, you know, NVIDIA's your biggest position, you're going with the flow, etc. Um, but are there any things out there, sleeper opportunities that you're looking at, thinking, oh, maybe this is one we should be looking at, and maybe we could be first in here. Or is there a sector or a theme that you're looking at? Yeah. So, you know, where we've been obviously chowing down on this for a number of years now. Yeah. And at the same time as that's been happening, we've been increasing our weightings towards China. Right. So, you know, we've got positions in Tencent and Alibaba and and CATL, the big bat the global battery company, and BYD. And so we've been increasing our position, our weightings towards China. And those are not AI companies, so to speak, although they're they're companies that use AI to do things. So we've got weightings in China, which is, you know, it's more than 10%, and it's going, I suspect, to go significantly higher over the next um uh you know few months, to be frank. So that's point one. Point two, we've also got a weighting now in uh um you know biotech. So we've got uh probably less than 10% in biotech, but you know, we've done very well out of the things that we've owned, such as Lily, the weight loss drug. I remember, I remember you pitching that at uh Seone um a couple of years ago, and and uh I thought, oh interesting. Thank thank you for remit for remembering that. I mean, it after I pitched it, it went down 15%. Yeah, that's why I remember it, because I thought we bought we bought more, yeah, and now it's doubled. Yeah. So, you know, which granted. Who's sorry now? Yeah, that's right. So we we you know, son wants you to do a point in time, yeah, but that was our single best idea. But whenever we do things in the fund, you know, we we buy, and if it goes down a little bit, we probably buy more. We check the ass assumptions and everything. Yeah. So a bit of a bit of uh biotech, and that's you know, now we're sort of into some of the cancer things that are coming along, and there's massive stuff going on inside of cancer, and I'll come back to that in a minute if you want to talk about it. We've got a big bet in streaming, which is you know, Spotify, Netflix, Roku, um and you know, that that's uh a a chunky sized bet and it's getting larger. And so we've we didn't just move into these things in the last two months. Um we held some of these positions for three, four, or five years, uh, and that's and in some cases are re-entering them after not being in them for a couple of years. And so we're aware and and and I guess last of all, you know, we with respect to the AI companies, we're we're more into the picks and shovels. Right. So so if you're a you know a transport and logistics company, yeah, you're gonna be using AI, but we're not uh trying to pick the applications that you're gonna use as a transport company. We're picking the picks and shovels that make AI up that then get sold onto you in order that you can maximize your route per kilometer, your revenue per kilometer in your transportation business. Right. So we're we're trying to make sure that our revenue, our exposure, true exposure, by which I mean who's the end user, is not just uh, you know, three AI companies that are you know that are anthropic today or open AI tomorrow. We we want this AI to prove itself to be used inside of transportation companies. By the way, it's not Uber, we know that as well, that's the spending the $500 billion. Right. But Uber's complaining about you know whether they can get any more features out of it, and you know, fair enough. But but but and and Uber's a company we also hold, and we know why we hold it, and and it and it is for the some of the things that they'll get for AI, but not just about that, way more than just that. So um that's that's our answer to all that stuff, I think.

Biotech Breakthroughs In Cancer And Obesity

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Okay. Um I'm intrigued about the um the cancer drug exposure. Oh, tell me more. Well, so it's um it's kind of simple, right? Over the last um five to ten years, blood cancers have had remission rates that have gone from zero, so Pete, you just die, yeah, to you know, more than five years and in some cases approaching ten years, blood cancers. So people that have had uh lymphomas and um uh um um the words gone out of my head right now. You know, um leukemias, yeah, right, blood cancers have been surviving in numbers and longer and longer periods of time. But they but they've never been able to work out a way to s to solve this problem, not for what they blood cancers, but for solid uh tumours, right? Now Merck, one of the companies that we consider on a regular basis, has got uh a number of very useful chemo drugs, including you know, Kitruda, etc. And they're pretty hard on you, etc. etc. Um but there are other ways that that cat is now being skinned and using some of the technologies that were available for blood cancers, they're now um moving into remission rates for solid tumors, in particular melanomas. And that there are studies out there now for three and five years showing people in remission rates for melanomas, skin cancer, which were you know unheard of five years ago, right? So we're very interested in that because if you it like weight loss, I think we talked about this at the SON thing. Yeah, yeah. If you if you get the weight loss sorted out, then you then you your heart disease goes away and your liver cancer, liver disease goes away, and your kidney disease goes away. And by the way, this is not well understood, there are cancers that come as a result of obesity. They're not they're not caused by obesity, but they create the preconditions for cancers, obesity creates the preconditions for the cancers to happen. So, so in the same way that um so you know you cure obesity, you cure liver disease, heart disease, blah blah blah, kidney disease, etc., and even some cancers. Um, and so um remove obesity out of there because a result of what's going on. Now we've removed liquid blood cancers as a result of the technologies that are going on. Uh, and now we're attacking this the attack is on for solid tumors. So the only one that's actually really out there as a as a huge killer in five to ten years, I'm it's still a killer today, of course, is Alzheimer's. And they're no for which they are no, they're nowhere on that, right? They've been up a dark tunnel without a light for a long time, and they've made no progress. So, and I'm not saying that they're not smart people, they're very smart people. This stuff is unbelievably complex, and it's it's it's you know, you're doing things at molecular levels, so you can't kind of get in there with a scalpel and do it, right? It's got to be how the how the genes and the and the and the molecules actually interact with one another. So they're nowhere with Alzheimer's, but they're making significant progresses with cancers and with obesity and all the drug, all the conditions that come with that. And so we're into that as well. Right.

SpaceX Valuation And IPO Reality Check

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Interesting, isn't it? Um now we we've come to a point in in time where we're about to embark on the good ship SpaceX. Um, and uh I it's um it's an interesting company to say the least, and and there's it's gonna be the biggest IPO ever. Um, and then you've got Anthropic and OpenAI as well. Uh have you guys looked at SpaceX or have you been there in in some of the private rounds? No, we have not been there in the private rounds, um, and we haven't really wanted to be there in the private rounds. Fair enough. And uh on the numbers that it's demonstrating right now, it doesn't make sense as an investment. Right. That's not to say it won't go up on listing, and we might even, you know, take some on listing. I don't know the answer to those questions, but but the um metrics behind it in a normal world, we wouldn't invest in. And I think you and I had a conversation many years ago with Tesla. Yeah. And I think you said to me, What is it that the market is getting um wrong about Tesla? And I and my response all those years ago, and we did hold Tesla and we made 10 times our money out of it as well. Um, I said the market thinks a lot of things about Tesla, but here's because this was in the days when they hadn't even made half a million cars. Yeah, yeah. I said the market thinks a lot of things about Tesla, but one thing that they don't think is that Tesla can make a million cars at 50,000 US dollars each for a half a trillion dollars worth of revenue. And but we think that's gonna happen. Yeah, and it did, and and then we got out and we haven't been back in, etc. But SpaceX is uh uh order of magnitude uh again above the valuation that Tesla was there in those days. So uh it's not prima facie something that we want to do, but you know, I'm gonna you know uh invoke the hedge fund, the fund manager's prerogative and say, you know, uh actual positions may vary down the track. And I guess it all depends on the price, doesn't it, at the end of the day. 100%. Yeah, you know, if they if they opt for them at a a reasonably good price, then of course it's gonna be far more attractive than if they try and squeeze every last drop of juice out of the lemon. That's right. So we and you know, we'll consider it when there is actually a live transaction to be considered, and until that moment, it's just all talk.

What Retail Investors Should Do Now

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So um as far as the you know the the huge run that we've seen in the tech space goes, uh what advice would you give to uh retail investors, apart from investing obviously in your fund, which does uh shortcut all of this uh in terms of thinking, just lets you guys do the thinking for us. Um, is there any advice you would give people just looking at the tech sector at the moment and going, Oh, have I missed it, or should I, you know, should I jump in or should I be really wary about it? Is there is there some sort of overriding piece of advice you can give? Um I I genuinely think that uh you can still make money out of this, but we've got a team of effectively you know eight or nine analysts, yeah. And all they do is this. Uh three of them currently are offshore, two are in the US, one's in Taiwan right now at one of the big uh Taiwanese Computex technology things. Um and you know, I've I I with our one of our senior guys, Stuart Kennedy, we've both been to China in December, so we had a good long look at what was going on in there. I mean maybe we can just ask AI to do this for us. What should our portfolio be? Yeah, right. But but we actually tried that and it doesn't work very well, so you know and that that ends. So I would just say that you know it's a market for people that can concentrate on it, right? If you can and plenty of people can do the better returns than we can do, uh, but they probably have to spend a bit of time thinking about it. And that's what we that's what we get paid for through the fee structure. We get paid to think about it, and that's kind of all we do, um, you know, inside office hours and outside, and traveling around the world and visiting companies and going to exhibitions and conferences, etc. etc. Uh, I mean uh, you know, you don't arrive at this stuff in a moment, and then there's real real heavyweight tools that we use to understand what's actually going on inside the financial guts of the companies, etc. You know, you you know about all this, it's it is what it is, right? It is what it is, as you say. It's interesting, and I wrote this up the other day. I was um asking my my my Google thing in the kitchen uh um how to pronounce um or how to say hello um in Sicilian because I'm I'm learning Italian at the moment. Oh nice, and I and I thought it was a bit different, and it and it came out with with a word that I thought it meant to say ciao, um, but it was ciao, and I thought, oh that's a that's interesting. So I then asked my Google thing, can you spell hello in Sicilian? And it went H E L L O I N. I thought, yeah, okay. We're still I N? Well, I N, it was doing the whole spelling of hello in Sicilian as opposed to as opposed to the word. We'd like what what could what's Kermit the Frog's middle name? Exactly. It was a bit like that. Uh okay, I'm gonna put you on the spot here, Alex.

Best Ideas: CATL And Eli Lilly

35:37

This is probably a little bit of uh question without notice. Is there one stock out there? You pitched Eli Lilly in that sewn thing that I was at in Adelaide a couple of years ago. Is there is there one stock at the moment that stands out as your best idea um for here and now uh going into uh northern hemisphere summer? Um my answer to that question is um uh I I can go to two. Oh, good. Um, but the I I think the number one is um this company, CATL, the battery company in China. Right. And the reason that I say the bat this company, CATL, and it's a company we're we have a sizable position in, and you know, it's done well for us, is that as big as the battery business is globally now as a result of electric cars, as big as that is, and and it's a mighty large business, the energy storage and solutions business, in other words, the batteries that are used in your home and in data centers and for all the other things in the world that you need power for power for, that's at least as big as the car business, and probably multiples of it. And by the way, I also include the ship business. I mean, you know, battery companies in China are already powering uh Embraer CRJ 900 regional jets with batteries, right? So this is doable. So this has got an incredibly long way to run. And I'm not saying there won't be competition and yeah, etc. etc. But I think we're at the beginning of this journey right now in terms of batteries, and it's not a ridiculously overvalued company at all. And the other one, we've touched on it already here, is Lilly, right? I mean, we just think that's an amazing you know, for humanity to solve obesity and all the things that come from it through a pill, that is a significant uh uh burden that's lifted from the human race as a whole. So that that's super important. So those two interesting, isn't it? I uh when you talked um about CATL, I guess one of the biggest markets is gonna be at some stage robotics in terms of didn't even touch on that. I mean if Musk gives us a billion um you know androids, real androids, to do the washing up, etc. Yeah, that's right. That's gonna all need to be powered, you're not 100%. Yeah, 100%. So it it it's this is big, right? What's happening globally is the you know, end of fossil fuels and the beginning of you know harvested energy. We one of our themes at the very beginning of when we started was we had six themes. One of them was energy is a technology, not a fuel. Right. So, you know, uh up until then, essentially, the human race had used energy by burning it and to create heat or power or whatever. But you don't have to energy can't be created or destroyed. If you can take solar energy and take it or wind energy and through a technology, convert it into a different kind of energy to heat your house, for example, um, then that's that you know, that's got significant climate impacts and all the good things that flow out of that. Now, that doesn't mean people don't gain the system and there aren't a bunch of crooks out there and you know it's not easy to play. But though those are the facts, right? Yeah. You're gonna have to address sooner or later, we are gonna have to address that if it's already happening, and um we want to be there. I I guess in some ways maybe the um the the war in the Middle East is actually hastening that um that you know, addressing those issues that we have relied too long on fossil fuels and and we need to to make that leap as energy as the technology. So it would be interesting to see what um it was always cause and effect, isn't there? Yeah, well, you know, frankly, the the situation in the Middle East is is a result of oil in the very first place. Yeah. It's not anything else. No, no, it's all to do with oil then, and it's still to do with oil, but it's the other end of oil, it's the end of it, not not uh not the burning of it. Yeah. Um, just one final question before we wrap up because you've been very generous with your time as always.

Black Swans And Closing Thoughts

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My pleasure. Is there a is there a catalyst out there? Is it a sort of worrying black swan on the horizon that you think maybe because we we did see a bit of a saspo, you know, we've seen the sass pocalypse, sasmegeddon, or whatever you want to call it. All those, you know, with uh Mithras coming and all that sort of stuff. Is is there a is there a black swanny event that you're just keeping an eye on the back of your mind thinking, yeah, we just need to keep an eye on this one. You know, honestly, it's all a black swan, Henry. Maybe we should be looking for white swans then. Well, you know, I mean, we we subscribe to uh uh a um uh one of the brokers, Victor Schwetz, who I'm sure you know. Love Victor Schwetz is fine. And that's right, it's great, it's fantastic, right? Because it's a whole sweep of history. Yeah, and Victor says there's plenty of problems, but you know, we are here and it's a we're at a different place, so I don't really know. But actually, it's all a bit of a worry, right? Middle East is a bit of a worry, you know, USA, you know, rule of law is a bit of a worry, rules-based order is a bit of a worry, you know, Russia's a bit of a worry. Every, you know, the speed at which companies are doubling is a bit of a worry. Well, like what's not a worry? Yeah, yeah, you're right, you're right. Yeah, it's all a bit of a worry. Uh and as human beings, we we do seem to have a history of kind of muddling through. Yeah, you know, well, you look back at history, and Victor Schvetz is fantastic. This, but you look back at some of the you know, the great changes in history, um, and and human beings have a pretty good track record of you know making the best of it and pushing on. I think that's right. So I I I choose to believe that we'll muddle our way through this. Um but it you know, it won't be simple. Um it won't be simple. Never is. Alex, congratulations on your funds, your performance the last 12 years. Well done. And congratulations on yours too, Henry. Oh, it's not mine, it's it's it's ours. It's yours. It's it's mine, it's not mine either. It's all the people in this office. They're fantastic. What do they say? Success has many fathers. That's true. So, Alex, it's been an absolute joy to catch up with you again, and I really do appreciate your time. So, thank you so much for being here. Anytime, Henry, anytime. That's great, mate. I really do appreciate it, and look forward to catching up in person. Excellent. Thanks, mate.