For those who love equities, you’re in for a treat with the latest Rules of Investing podcast. This week's episode features First Sentier Investors’ Deputy Head of Australian Equities Growth, David Wilson.
Wilson's bread and butter is picking high-quality growth companies - a role he executes every day as part of the team that runs the First Sentier Geared Australian Share Fund. He is not afraid to explain how he goes about doing this while acknowledging his missteps and sharing a handful of stocks he likes right now.
When it comes to his process for picking stocks, Wilson says it’s all “pretty logical”.
“We just try to invest in good businesses with management that are trying to do the right thing for you and with the right sort of balance sheet. It's pretty straightforward. You can overcomplicate these things, but generally, that's our approach”, says Wilson. Wilson adds that the team watches company management very closely:
“What they're trying to achieve, what their goals are, but also at their actions, particularly when they make an acquisition or divestment - that's a point where you get a real insight into how a company is thinking," says Wilson.
Wilson points to Car Group (ASX: CAR) as a company with a solid acquisition history. The company is a recent addition to the portfolio, though Wilson acknowledges that he was a bit late to the party.
Another stock he particularly likes right now is pallet-maker and logistics company Brambles (ASX: BXB), saying that “the new management team has brought in a real pricing discipline over the last five years”, which has allowed them to cement a dominant position as a global leader.
In the following episode, Wilson also discusses the Fund's current overweights in tech and healthcare and names one stock from each sector that stands out (one of which is also the stock he would own if the market closed for five years).
In terms of what Wilson doesn’t like right now, he talks about the shrinking position of consumer staples and explains why they haven’t been “quite so staple” over the past year.
He also talks to sector underweights in energy, financials and materials – despite being overweight BHP Group (ASX: BHP) and Rio Tinto (ASX: RIO). For good measure, he also shares his thoughts on Rio’s takeover of Arcadium Lithium.
Finally, in explaining how valuations matter, Wilson shares why he is underweight Cochlear (ASX: COH), despite it being a great business.
Listen to the podcast to learn what keeps Wilson motivated after 40 years in markets, how he sees the current market conditions, and learn a little more about his process for picking stocks. For good measure, he'll even share with you which financial metric is a waste of time!
Note: This interview was recorded on Tuesday22 October 2024.