What are your Investment Rules?

[kiora]

"How to identify consistent compounders"

https://www.livewiremarkets.com/wire...%20COMPOUNDERS
Consistent compounders are businesses that are out to deliver persistent earnings and revenue growth over long periods of time. They are not exposed to underlying economic or commodity price cycles. At their core, they are the ASX's most consistent long-term growth stocks."
"Your odds of long-term investment success are far higher if you focus on businesses that have proven their capacity to consistently grow their earnings over time."
"These are businesses that are price makers, not price takers, and typically they aren't as exposed, or not exposed at all, to the underlying economic cycles. Certainly, they're not exposed to things beyond management's control, for example, commodity prices."
"It's a high-quality business with a dominant market position, typically they're able to set their own prices to a degree without the influence of global financial markets"
"If these stocks outperform over the long term, why would people invest in anything else?"
" people often try and overcomplicate investing."
"from a total return standpoint, the chances of success are higher if you're focused on businesses that can deliver compounded and persistent growth'
"Common factors in defining these quality compounders are things like return on equity or return on invested capital,grow those margins over time,consistently deliver earnings throughout the cycle and a line of sight on future growth opportunities"
"balance sheet strength and a stable balance sheet are important."
"management is very important, and things like governance and having internal rules around payout ratios, buybacks and capital management decisions"

"no commodities, resources, or materials companies would be consistent compounders?"

"The same goes for the banks as well. Banks are very much dependent on the economic cycle."

"look at the balance sheets of businesses in the tech space, for instance, or the healthcare space, these are typically happy hunting grounds for compounders. And again, it goes back to what I was speaking about earlier. They provide a service or a product that people are increasingly dependent on."
"these sectors are shielded against the broader economic cycle, and they're operating a system or delivering a product that isn't easily replicated by competitors."

"we are more "buy and hold" investors. Certainly, if the conditions are right, these are businesses that we see no reason for investors to be buying and selling them. You let the compounding do its job. Over time, the share price should follow the compounded earnings higher."

" if multiples are constant, then it makes a lot of sense if earnings and dividends are growing over time, then the share price should mathematically (at least) be higher as well"

[kiora]

Not yet ?

https://www.livewiremarkets.com/wire...erm=FIND%20OUT

"Why investors in ‘quality’ are headed for a fall

When the market wakes up to the rich prices it's paying for quality stocks, investors could be in for a shock
"If you’ve bought these companies at a fair price, sitting tight is the way to go. Thinking you can take some profits and buy back in when prices fall is a low-probability strategy. Plus, there are transaction costs and taxes to take into account.

So, if you’ve bought right, sit tight! What is quality?
Now, let’s define what we mean by quality. I’m not sure there is an official definition, but I’d say it would be something like this:

‘A company that generates sustained high returns on tangible capital (thanks to a competitive moat) and compounds those returns via reinvestment.’

The US tech companies are the pin-up stocks here. They can compound at high rates of return for years because the US economy is massive, giving them a huge growth profile from start-up phase to national dominance. Then, national success often leads to global success, which offers another growth runway and compounding opportunities."
"‘Higher prices are riskier, not less, and presage lower future returns, not higher. Sentiment can change quickly, and will change eventually, as company/industry specific issues and geopolitics, elections, inflation/stagflation/interest rates assume fluctuating levels of importance for market participants, the vast majority of which are not investing in equity markets for long term exposure to sustainably advantaged businesses."
"The vast majority of activity on the stock market has nothing to do with investment. There’s an army of analysts, brokers, investment bankers and traders that must be fed. If everyone is an ‘investor’, meaning they buy, hold and wait, a lot of stock market participants will go hungry. Activity is the name of the game.

Don’t forget that when you’re scratching your head about share price movements. In the short-term, it is nearly all noise"

"The more well-known one is to invert the P/E ratio and turn it into an earnings yield. So a stock on a P/E of 20 trades on an earnings yield of 5% (1/20)

Another way to assess the earnings yield, and make comparisons across businesses easier, is to adjust for differences in debt and tax payments. You do this by using EBIT (earnings before interest and tax) as your earnings proxy and EV (enterprise value, which is a company’s market cap plus net debt) as the price proxy.

The earnings yield of a company thus becomes EBIT/EV"

[kiora]

Private Equity:Some investors chase Private Equity to improve returns?


"Generate commits NZD55 million to private equity"
https://www.goodreturns.co.nz/sponsored.html

"https://simplicity.kiwi/private-equity"
"The Simplicity Private Equity Fund invests in Venture Capital and Private Equity"

"Bank of England looks to shine a light on private equity leverage"
https://www.reuters.com/world/uk/ban...ge-2024-04-22/
"Regulators need to shine a light on the $8 trillion global private equity sector, as opaque leverage makes it hard to get a picture of the risks it poses to financial stability, jobs and growth, a Bank of England official said on Monday."
""Recent developments in that market have the potential to disrupt the supply of funding to real economy companies in a stress. And to cause systemic institutions – such as banks – to experience significant and correlated losses on their exposures linked to private equity," Benjamin added."
https://www.telegraph.co.uk/business/2024/03/27/private-equity-correction-threatens-financial-crisis/"

"“Private capital is a key partner for driving growth in every nation and region of the UK,” said Michael Moore, CEO at the BVCA, “but investment by the industry could be even greater with the right policy environment in place."
"Private equity and venture capital investment into the UK has crashed since 2021"
https://www.cityam.com/private-equit...ed-since-2021/

"What are the cons of private equity investing?

Private equity investments are illiquid: Investor's funds are locked for a certain period. As such, investors in private equity must have a long-term investment horizon and be willing to hold their investments for a few years, if not more. This requirement makes private equity investments more suitable for long-term investors.
Higher risk: Private equity investments often involve significant risks, including the potential loss of your entire investment, which must be part of the individual investors’ consideration process. While thorough due diligence can vet the project's viability and overall microeconomic risks, external factors can impact the success of any investment, including the private market. Macroeconomic risks are those outside the control of a company and may include political instability, legislative changes, natural disasters, economic recession, or even health crises, and more.
Limited information: Private companies are not required to disclose financial information in the same way as publicly traded companies. The success of the investment is highly dependent on the performance of the underlying company, which may face a range of operational, financial, or market risks. Private equity funds may also invest in relatively early-stage companies, which can be highly speculative and may not have a proven track record of profitability."
https://graniteharbor.com/learning-c...f%20not%20more.
https://theimpactinvestor.com/pros-a...quity-to-know/

"The £5 trillion ‘pyramid scheme’ threatening to wreck your retirement
The ‘Wild West’ of private equity valuations risks triggering a pension funds catastrophe"
https://www.telegraph.co.uk/business...ns-retirement/

[kiora]

From the UK

"Private Equity is eyeing up your pension fund, is there reason to be nervous?

https://championsukplc.com/insights/...-to-be-nervous

"target long term is to make sure around 5% of its portfolio invested in private equity."
" US public pension funds generated more than 12% annualised return from their private equity investments, net of fees, between 2010 and 2020."
"Hypothetically, there are advantages for everyone if UK pension schemes begin to invest in private markets and private equity. Pension schemes could potentially benefit from better returns, and the value creation generated could provide the UK economy and entrepreneurial industries with a lift. The only perceived downside is the slightly higher risk involved in a private equity investment."
https://championsukplc.com/insights/...-to-be-nervous

[kiora]

"https://finance.yahoo.com/news/americans-just-harder-europeans-says-104346801.html"
"‘Americans just work harder’ than Europeans, says CEO of Norway’s $1.6 trillion oil fund, because they have a higher ‘general level of ambition’"

But are they more productive?

"Norway's 'trillion-dollar-man' believes America's attitude towards failure is helping propel the nation ahead of its European counterparts—where workers may have a better work-life balance but aren't as ambitious."
"America's performance, particularly in innovation and performance, is "worrisome" in contrast to Europe, Tangen told the Financial Times.

Part of comes down to mindset, Tangen added, and how accepting each continent is of mistakes and risk: "You go bust in America, you get another chance. In Europe, you’re dead,” he said.

But it goes deeper than that—there's a difference in the "general level of ambition," he added. "We are not very ambitious. I should be careful about talking about work-life balance, but the Americans just work harder,” Tangen continued."
"The longest working weeks recorded were in Greece—41 hours a week"
That is amazing ! ?
" U.S. was 38 hours a week. However, of those employees 13% worked 49 hours or more per week, which outstripped the majority of European nations."
"CEOs who earn more than, say, $20 million a year, are “enriching themselves on our behalf.”"
"the world's largest single owner of global stock markets, controlling 1.5% of shares in the world's listed companies."
"We just invest in America in great companies for the long term. It won’t have any implications for how we allocate our capital. We have nearly half the assets in America, we will stay invested in America.”
"Investments into the U.S. now represent 46.9% of Norges Bank's investment, where a decade ago the U.S. represented just under 30% of its portfolio. Going back a further 10 years, in 2003 the organization's investment in America made up just 26.3% of all investments"
"There is, of course, a common thread between all the Magnificent 7 businesses—and it's the current favorite phrase of Wall Street: artificial intelligence.
Again, this is an area Tangen said Europe was making life difficult for itself. Tech CEOs are frustrated, he said, by the amount of red tape in Europe compared to the U.S."
"“I’m not saying it’s good but in America you have a lot of AI and no regulation, in Europe you have no AI and a lot of regulation. It’s interesting,” Tangen added."

[kiora]

"Here's 1 big investing mistake you are probably still making"
https://finance.yahoo.com/news/heres...003020722.html

"When you don't even realize your money decisions are keeping you from unlocking greater wealth, you in effect have the "oh sh*t" moment that Yahoo Finance's Akiko Fujita and yours truly had at the Milken Institute conference this week after chatting with Nuveen chief investment officer Saira Malik."
"In effect, we are part of the crowd making one of the biggest investing mistakes Mailik continues to see as she travels the world to communicate with investors.

"Cash on the sidelines [is one of the biggest mistakes], Malik said. "Studies have shown that when you market time, you lose money relative to if you just stayed invested. This started last year as everyone expected a recession to come. They are holding their cash and 5% returns.""
"you're losing relative money. So I really recommend staying invested.""
"Malik unsurprisingly suggests investing in stocks.

She likes defensive stocks that peddle infrastructure. Apple and Amazon could also be viewed as defensive plays, given their strong fundamentals, Malik says.

One other investing mistake to avoid while I have you: going all in on the Mag Seven such as Tesla (TSLA) and Microsoft (MSFT). Top names in finance, like Apollo's (APO) Marc Rowan (Disclosure: Yahoo Finance is owned by Apollo Global Management) and Avenue Capital Management's Marc Lasry, struck a cautious note on the Mag Seven trade in interviews with us at Milken."

[kiora]

"Big banks complete climate analysis for Fed while Powell tries to avoid becoming climate policymaker"
So why RBNZ?
The head count at RBNZ has increased dramatically?
https://www.interest.co.nz/banking/1...years-it-takes
https://en.wikipedia.org/wiki/Reserv...of_New_Zealand
"More Spin Doctors, Fewer Economics Staff At RBNZ"
https://www.scoop.co.nz/stories/PA22...ff-at-rbnz.htm
https://twitter.com/JeneeTibshraeny/...01581606236210
And now 750?

https://finance.yahoo.com/news/big-b...202001519.html

"JPMorgan Chase (JPM), Bank of America (BAC), Citigroup (C), Wells Fargo (WFC), Goldman Sachs (GS), and Morgan Stanley (MS) found that 20%-50% of their commercial and residential real estate loans in the Northeast would be impacted by the most severe climate shock— defined as having no insurance coverage for a once-in-200-year event.

The impact would be a change in the estimated probability of default on those loans.

The banks were tasked with determining how heat waves, wildfires, higher average temperatures, a hurricane in the Northeast, and another hazard of their choosing would affect their loan portfolios."
"But they had a difficult time modeling climate risks to assess the impact on those portfolios, noting significant challenges gathering data and measuring climate-related risks.

The goal was for the Fed to better understand banks' risk-management approaches to this issue so it can manage the risks climate poses to the wider financial system.

The climate analysis was exploratory and did not come with any penalties for banks, unlike a separate annual stress test run by the Fed designed to determine whether banks can withstand severe economic shocks.

Yet the test itself created new political complications for the central bank and Chairman Jay Powell, who has gone out of his way in public speeches to make it clear the Fed would avoid making climate policy.

"Policies to address climate change are the business of elected officials and those agencies that they have charged with this responsibility," he said during a speech last month at Stanford University. "The Fed has received no such charge.""
""We are not, nor do we seek to be, climate policymakers," he said during his speech, pledging to avoid "mission creep."

That hasn’t stopped lawmakers and other policymakers from criticizing Powell on this subject.

His remarks on climate came roughly two weeks after Senators Elizabeth Warren and Sheldon Whitehouse sent a letter to Powell arguing the Fed’s high interest rates were delaying clean energy developments.

Sen. Whitehouse told Yahoo Finance last month that other central banks around the world closely consider climate change because "if left unchecked climate change will pose 'systemic risks' to our financial system and the broader economy."

And Republicans have also repeatedly come down on Powell for considering rules that would test banks' ability to withstand climate-related scenarios, arguing it falls out of the scope of the Fed's authority.

Not everyone within the Fed agrees with the approach, either.

Last May, Fed Governor Chris Waller said he doesn’t believe climate change poses a serious risk to the US financial system even as the central bank tested the resilience of banks under different climate scenarios."