Ouch! 12 painful calls from 2023

James Marlay: I'm James Marlay, and we all make mistakes, particularly when it comes to investing.

Emma Fisher: I think the only fair way to answer that is to just look at the stock that was the biggest detractor for the fund over the year, and that was undoubtedly Tabcorp Holdings (ASX: TAH). Now we like demergers, and part of that demerger was very successful in The Lottery Corporation (ASX: TLC). That did very well. We sold out of that after they had a string of luck on jackpots. Unfortunately, in our infinite wisdom, we recycled the capital back into the wagering business. 

Now, I could show you any number of charts about how resilient wagering revenue is in a downturn, but this year has proved the exception, and we got that wrong as consumers have put away their wallets.

Chris Stott: Where do I start? How long have you got? We got a lot wrong this year. It's been a very difficult year as an investor for 2023. The one thing I'd call out, which I saw as an unforced error, the old tennis term, was we sold our consumer discretionary stocks too early, which in hindsight, was a consensus trade and we hate being consensus. 

So the lesson from that was you always want to go against the pack. Selling out of companies like Super Retail (ASX: SUL) too early was a mistake, but we've certainly learned from that, and we'll continue to try to go against consensus going forward.

Mistake #4: Not backing all of the Magnificent Seven 

Last year, the decision was to own the Magnificent Seven or not own the Magnificent Seven. I think this year it's going to be really important to stock pick within the Magnificent Seven. So Microsoft (NASDAQ: MSFT) and Google (NASDAQ: GOOGL) are the two largest positions in our fund, and we think those are the winners within the Magnificent Seven.

Mistake #5: Being too bearish 

So everyone was focused on QT, but those other factors offset that liquidity and we were actually in a bullish environment for assets. I probably read the economic situation a little bit wrong. I should have been looking at liquidity.

Mistake #6: Taking the gouda with the bad

However, the commodity side of the business, so the Farmgate milk price, was a little bit too high for the year. And with global commodity prices coming off at the same time it wasn't a great combination. So the earnings weren't quite what we thought they would be for the year, but we still like the thesis. We think it's still very strong. It's evolving into that branded food business, which we like, but we've always got to understand what the potential threats are to your investment thesis. That's a good example for us in 2023.

Mistake #7: Not recognising the full ramifications of rate hikes

Bob Desmond: It's worked out well for us, I wouldn't call it a mistake, but what we definitely didn't see was how big AI would be. The murmuring started with ChatGPT and then just how big that was through the year. I wouldn't say it was wrong, but certainly, we didn't anticipate that. Our tech shares have done really nicely out of that, but it wasn't why we bought them in the first place. So it was a very pleasant surprise, I think, coming into this year. We just didn't see that being so big.

Mistake #9: Calling the bottom too soon

Dr. Philipp Hofflin: We started talking about a downturn in Chinese residential property back in 2019, and that started to play out. Because of that, we thought the iron oil price would be much closer to cost support at US$80. As you know, it's US$135, so we got that completely wrong. Fortunately, we don't buy themes, we buy stocks. So we actually have a big position in Rio Tinto (ASX: RIO), which we like - despite the fact that we thought iron oil prices were going to be lower. 

In terms of lessons, our first one is obviously that you can't forecast commodity prices, nobody can. But the second one is probably when the Chinese are your customers and your competitors are the Brazilians, you end up doing well a lot of the time.

Mistake #11: Common sense isn't as common as you would think (particularly when it comes to regulation) 

Vihari Ross: So I think in 2023 it was the US macro. I think we expected it to be slow - slower than what proved to play out. I think we saw that wealthy cohort of households, that 30% of households that make up 50% of spending, really benefit from this higher rate scenario. What we saw was it blunted the tools of the Federal Reserve. They're putting rates up and it's not getting that traction that it used to have in the past, and that's something we've learned is that wealth disparities made the job so much harder. 

On top of that, you had the US fiscal deficit being among the highest in history also actively offsetting what the Fed's trying to do. I think that was something that surprised us, and it was something that really made the outcome turn out differently from what we probably expected at the start of the year.