Why you should play the long game on this big market theme

Note: This interview was taped on Tuesday 3 September 2024. 

They say history does not repeat but it often rhymes - and just like in markets, history often seems to spit out patterns for those astute and dedicated enough to recognise them. 

A perfect example of this concept is occurring in front of our eyes right now. Proponents of the Artificial Intelligence megatrend describe the technology's potential as something akin to a "Fourth Industrial Revolution". Its opponents say that it is resource-intensive and expensive to fund, to say nothing of its ethical or legal implications.

And while the run-up in share prices for stocks linked to this theme is undeniable, professional investors like Iain Fulton, Portfolio Manager for the Yarra Global Share Fund, are preaching patience.

"Alphabet didn't IPO until 2004, Meta didn't IPO until 2010, and Netflix didn't go fully online until we had broadband availability and that was much later. From the infrastructure being built to the applications in the media and advertising industries, it took up to a decade for that to develop. I think it will be similar for AI," Fulton said. "It will take time. To expect a return from that investment immediately is probably a little bit hopeful."

So will he be proven right, or will history rhyme in the style of a dot-com bubble burst?

In this edition of Views from the Top, we'll discuss the AI theme in-depth. We'll also talk about a part of the global stock market that has been unloved - healthcare stocks. Will long-suffering shareholders be rewarded for having diamond hands? Finally, we'll talk about what happens when an investment thesis doesn't pan out the way you expect it to.

Timestamps

• 0:00 - Intro
• 0:56 - Have you seen anything like this before in markets?
• 3:22 - When uncertainty hits, what types of companies do you put your trust in?
• Stocks Mentioned: Compass Group (LON: CPG)
• 5:07 - How do you identify future quality winners and is there one example you can share?
• Stocks Mentioned: Curtiss Wright (NYSE: CW)
• 7:19 - Can the Magnificent Seven's remarkable run continue and what have you been doing with your positions following earnings?
• 9:21 - Can AI really become the spark of the Fourth Industrial Revolution?
• 10:50 - Are healthcare stocks due for a revival and which stocks do you want to be positioned in when the recovery comes?
• Stocks Mentioned: Danaher (NYSE: DHR) and Bio-Techne (NASDAQ: TECH)
• 12:03 - Is there a stock you have held for the life of the fund? (Nearly 10 years)
• Stocks Mentioned: Sony Group (TYO: 6758)
• 13:37 - What do you do when your investment thesis doesn't pan out as expected?
• 15:17 - Iain's View from the Top

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The future return on investment and the growth of a company's cash flows are key focus points. Iain's team seek companies where the future is not reflected in today's valuations. 

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Note: The Nikko AM Global Equity Strategy referenced in the introduction to this video is marketed in Australia as the Yarra Global Share Fund. In April 2021, Nikko AM Australia became part of the Yarra Capital Management Group, with Yarra Capital Management assuming responsibility for the distribution of the Fund in the Australian market.