Hedge Clippings | Friday, 07 August 2020

Although Hedge Clippings tries to steer a steady course between seeing the opportunities that abound when looking into the future, and concerns about the risks that are all too apparent, the current relentless stream of seemingly negative news particularly re COVID, does provide some challenges.

Possibly it is the reversal into lockdown in Victoria and the seemingly impossible task of eliminating COVID there that fans the negativity. Meanwhile, on the positive side, the relative absence of infection in SA and WA to the West, and Queensland to the North (with NSW hovering dangerously in the middle - literally) gives one confidence, albeit with some trepidation.

And so it is with many of the fund managers we talk to or meet. Actually, we don't meet that many of them in the current environment, but Zoom has become such a way of life and business that it's now a new normal. Depending on their view, and no doubt their strategy and current performance, they're either a glass half full, or a glass half empty of confidence.

Occasionally there are those who, far from being merely half full of confidence, are overflowing with it. This may be due to their age, or relative youthfulness. It might be their fund's performance - it being difficult to remain confident while losing other people's money. It might be the sector they invest in - which in the case of tech and disruption probably equates to good performance.

But more likely, and more often than not, it's about their attitude and approach, which in turn no doubt dovetails with their fund's strategy and therefore performance. We're in a changing world where, for example, Tesla is worth more than Ford and a range of other manufacturers because it is looking to the future and, love him or loathe him, is run by one of the great enthusiasts of the corporate world. To be long Tesla requires conviction, and an eye for the future. Doubtful? You're probably short, and financially painfully so.

Next week we're interviewing a young and exuberant fund manager, Michael Frazis, who embodies the positivity and enthusiasm referred to above. Michael's fund is just 2 years old, and it endured a torrid first six months in 2018 before posting returns of 24% in 2019, and 25% YTD in 2020. There are others who embrace change and disruption as a strategy or theme. Invariably they're full, or overflowing, with positivity.

Finally for this week, a mention of a book - available as an audio download - we've recently read - or listened to - called Black Box Thinking by Matthew Syed. Highly recommended. And certainly likely to raise the positive views in any pessimist!

News & Insights

Will the US Dollar Become Another Casualty of COVID-19? by Arminius Capital