1 00:00:00,000 --> 00:00:12,480 Welcome back to the Rated Change with York Wealth Management. 2 00:00:12,480 --> 00:00:16,680 As advisors to some of the wealthiest families in the country, the Rated Change is a podcast 3 00:00:16,680 --> 00:00:20,680 designed to help you in the pursuit of building long-term wealth through the insights of some 4 00:00:20,680 --> 00:00:23,200 of the brightest minds in asset management. 5 00:00:23,200 --> 00:00:27,080 I'm your host Murdoch Ghani and in today's broadcast we're speaking with Andrew Mitchell, 6 00:00:27,080 --> 00:00:30,480 one of the founders at Ofea Asset Management. 7 00:00:30,480 --> 00:00:34,680 Andrew alongside Stephen Yang and other colleagues manage all funds. 8 00:00:34,680 --> 00:00:40,040 Ofea has a fundamental bottom-up research approach aimed at identifying businesses domestically 9 00:00:40,040 --> 00:00:45,640 and internationally with the ability to meaningfully grow and compound earnings over time. 10 00:00:45,640 --> 00:00:50,760 To put it in another way, they want to find new companies before they end up in vogue. 11 00:00:50,760 --> 00:00:56,680 For me, I really enjoy delving into the process of the how, in particular, how they go about 12 00:00:56,680 --> 00:01:02,400 trying to first discover a new business before it gets into vogue. 13 00:01:02,400 --> 00:01:09,080 Andrew unpacks Transmedics and Life360 plus others and discusses their process, which 14 00:01:09,080 --> 00:01:14,200 enabled them to be confident enough to commence buying into these businesses before their 15 00:01:14,200 --> 00:01:17,760 good old friend Mr. Market. 16 00:01:17,760 --> 00:01:21,840 Also before we get in this conversation, let me put to you a question which Andrew put 17 00:01:21,840 --> 00:01:32,480 to me, how long does it take to make 10 times your money compounding at 22% per annum? 18 00:01:32,480 --> 00:01:35,440 If you have the answer, you're pretty good at maths. 19 00:01:35,440 --> 00:01:38,680 But if you don't have it, don't worry. 20 00:01:38,680 --> 00:01:46,260 Andrew is going to dig into the answer and explain why this number is an exciting number 21 00:01:46,260 --> 00:01:47,260 for them. 22 00:01:47,260 --> 00:01:51,880 So before we get into this podcast, please remember this podcast is intended for entertainment 23 00:01:51,880 --> 00:01:57,640 purposes only and should not be construed as any form of financial advice. 24 00:01:57,640 --> 00:02:02,320 Be sure to listen to this glam at the end of this broadcast and to keep your feedback 25 00:02:02,320 --> 00:02:03,420 coming. 26 00:02:03,420 --> 00:02:08,120 You can reach me at mgatti at ywm.com.au. 27 00:02:08,120 --> 00:02:12,680 So that being said, I hope you find this conversation enjoyable as much as I did. 28 00:02:12,680 --> 00:02:24,720 So sit back, relax and enjoy it. 29 00:02:24,720 --> 00:02:26,840 Andrew Mitchell, Ofir Asset Management. 30 00:02:26,840 --> 00:02:29,600 Welcome to the rate of change with your cloth management. 31 00:02:29,600 --> 00:02:31,360 Well thanks very much for having me Murdoch. 32 00:02:31,360 --> 00:02:33,240 Mate, good to be here. 33 00:02:33,240 --> 00:02:34,240 Good to actually finally meet you. 34 00:02:34,240 --> 00:02:36,720 I haven't actually met you and I've known you for years. 35 00:02:36,720 --> 00:02:37,720 He's probably better. 36 00:02:37,720 --> 00:02:42,400 I've seen you on a Zoom, on the other end of a Zoom many times before. 37 00:02:42,400 --> 00:02:46,920 I feel like I have met you before, but I think it's just been all the Zoom calls. 38 00:02:46,920 --> 00:02:48,720 This is the benefit of stalk book. 39 00:02:48,720 --> 00:02:50,680 Every single social media these days. 40 00:02:50,680 --> 00:02:52,160 You're a lot better looking in real life. 41 00:02:52,160 --> 00:02:53,160 That's the only thing. 42 00:02:53,160 --> 00:02:54,160 I forgot the glasses. 43 00:02:54,160 --> 00:02:58,440 Anyway, Andrew, good to be sitting here in your offices. 44 00:02:58,440 --> 00:03:02,240 Why don't we, for people that don't know you, why don't we kick things off and tell everyone 45 00:03:02,240 --> 00:03:06,400 a little bit about yourself and how you got into this beautiful world of financial markets? 46 00:03:06,400 --> 00:03:07,400 Yeah. 47 00:03:07,400 --> 00:03:13,400 Andrew Mitchell, when people ask me this question, I've obviously listened to many podcasts in 48 00:03:13,400 --> 00:03:19,760 my life and everyone seems to have this fantastic story about their grandfather taking their 49 00:03:19,760 --> 00:03:24,480 hand and walking them down to the stock market and sitting in the corner and watching the 50 00:03:24,480 --> 00:03:26,840 tickers roll over and just becoming hooked. 51 00:03:26,840 --> 00:03:28,800 I don't have that story. 52 00:03:28,800 --> 00:03:35,740 For me, I was just like any other kid looked up to their father. 53 00:03:35,740 --> 00:03:37,240 My father worked for the government. 54 00:03:37,240 --> 00:03:40,400 He was an economist. 55 00:03:40,400 --> 00:03:42,320 I just wanted to be like my dad. 56 00:03:42,320 --> 00:03:50,080 I studied finance and economics at university and when worked at federal or Commonwealth 57 00:03:50,080 --> 00:03:55,840 Department of the Treasury when Peter Costello was the treasurer and did things like forecasting 58 00:03:55,840 --> 00:04:03,680 international economies for the treasury forecasts. 59 00:04:03,680 --> 00:04:10,440 After that, I went to Commonwealth Bank as an economist and I got into equities research 60 00:04:10,440 --> 00:04:14,640 at ComSec when they had an institutional equities research team. 61 00:04:14,640 --> 00:04:19,080 Met David Paradise through that and had been doing that for a very short time and then 62 00:04:19,080 --> 00:04:24,600 became a fund manager at Paradise Investment Management. 63 00:04:24,600 --> 00:04:32,480 In 2011, 2012, I went out with Stephen Ng and myself and we both went out and obviously 64 00:04:32,480 --> 00:04:39,240 went out with myself and we started Ophiur Asset Management and that's the quick story 65 00:04:39,240 --> 00:04:40,240 of how I'm here. 66 00:04:40,240 --> 00:04:41,240 The quick story. 67 00:04:41,240 --> 00:04:45,280 There's an article in the AFR, two young guys giving it a go and here we are today. 68 00:04:45,280 --> 00:04:46,280 I was 32. 69 00:04:46,280 --> 00:04:47,280 I'm 45 now. 70 00:04:47,280 --> 00:04:54,520 So yeah, it's many years and the great thing and about that story Murdoch is that we invested 71 00:04:54,520 --> 00:04:59,280 all our money in the funds when we started and that's compounded. 72 00:04:59,280 --> 00:05:02,760 I'll ask you this question. 73 00:05:02,760 --> 00:05:09,320 How long does it take to make 10 times your money compounding at 22% per annum? 74 00:05:09,320 --> 00:05:12,080 Well, I know what is it? 75 00:05:12,080 --> 00:05:15,040 7% over 10 years gets 100%. 76 00:05:15,040 --> 00:05:17,080 So what's the answer to the question? 77 00:05:17,080 --> 00:05:25,400 Well the answer is 11 years and 8 months and the reason I know that is because we have 78 00:05:25,400 --> 00:05:32,480 just made in the month of March 10 times the money for our original investors in our original 79 00:05:32,480 --> 00:05:41,680 Ophiur Opportunities Fund who invested right at the start 10 times and we've done 22% after 80 00:05:41,680 --> 00:05:47,560 all fees per annum in that original fund for now 11 years and yeah, I was just counting 81 00:05:47,560 --> 00:05:50,600 back from August where we are now. 82 00:05:50,600 --> 00:05:55,240 So if anyone's wondering why I wanted to get Andrew on the podcast, you may have an 83 00:05:55,240 --> 00:06:00,120 idea just to kind of throw that out there but look for people that don't know Ophiur 84 00:06:00,120 --> 00:06:03,000 and besides those numbers, who is Ophiur? 85 00:06:03,000 --> 00:06:05,320 What do you do and what's the investment philosophy? 86 00:06:05,320 --> 00:06:09,600 Maybe I'll start with where Ophiur, I didn't come up with the name Ophiur, it was Stephen. 87 00:06:09,600 --> 00:06:11,960 We had some really terrible names. 88 00:06:11,960 --> 00:06:12,960 Stephen wanted Pursuit Capital. 89 00:06:12,960 --> 00:06:13,960 Sounds like prosciutto capital. 90 00:06:13,960 --> 00:06:16,960 Sounds like trivial Pursuit Capital. 91 00:06:16,960 --> 00:06:20,840 It's a horrible name and I told him no, go away. 92 00:06:20,840 --> 00:06:29,120 Let's research famous things that happened in history but let's also think about what 93 00:06:29,120 --> 00:06:36,960 we're doing and we sort of we said, you know what, we're looking for gold nuggets and 94 00:06:36,960 --> 00:06:41,560 we're looking to be the first to find it and so we said, okay, well, let's have a look 95 00:06:41,560 --> 00:06:43,520 at the gold rush. 96 00:06:43,520 --> 00:06:45,600 What happened around the gold rush? 97 00:06:45,600 --> 00:06:53,240 Well in 1851, in a little place just outside of Orange in New South Wales, some gentleman 98 00:06:53,240 --> 00:06:58,080 I do not know the name of found gold and that led to the gold rush. 99 00:06:58,080 --> 00:07:03,600 So Ophiur or Ophiur as it's called in New South Wales was the place where that first 100 00:07:03,600 --> 00:07:09,280 gold was found and we want to be, we are small cap investors, we want to be the first to 101 00:07:09,280 --> 00:07:16,720 find that gold nugget because you read about the stories of the gold fields and my mother's 102 00:07:16,720 --> 00:07:22,360 family and my mum is from Ballarat so I grew up learning about them. 103 00:07:22,360 --> 00:07:25,840 It's the first guys to the gold fields that make all the money and then everyone, the 104 00:07:25,840 --> 00:07:32,040 people who come at the end, they don't have, they have to be very lucky to make money because 105 00:07:32,040 --> 00:07:34,720 the first people are the ones that clear out all the easy gold. 106 00:07:34,720 --> 00:07:38,200 And the people that make a lot of money, people sell you the tools to go scourge. 107 00:07:38,200 --> 00:07:39,200 The shovels. 108 00:07:39,200 --> 00:07:40,200 The shovels. 109 00:07:40,200 --> 00:07:42,240 Don't forget about those boys. 110 00:07:42,240 --> 00:07:43,240 Yeah, exactly. 111 00:07:43,240 --> 00:07:44,240 The picks and shovels. 112 00:07:44,240 --> 00:07:45,680 They're maybe a bit smarter than us. 113 00:07:45,680 --> 00:07:52,680 We want to be the first to the, that's maybe Bloomberg, make all the money as you know. 114 00:07:52,680 --> 00:07:55,320 Well without the potential sniff of gold, you wouldn't have an industry. 115 00:07:55,320 --> 00:07:56,320 Yeah, exactly. 116 00:07:56,320 --> 00:07:58,920 So speaking of industry, for funds, right? 117 00:07:58,920 --> 00:07:59,920 Yep, that's correct. 118 00:07:59,920 --> 00:08:01,680 So why don't we just quickly knock that out. 119 00:08:01,680 --> 00:08:02,680 So what are the four funds? 120 00:08:02,680 --> 00:08:03,680 What do you cover? 121 00:08:03,680 --> 00:08:05,520 And you know how much money are in the funds? 122 00:08:05,520 --> 00:08:06,520 What's under management? 123 00:08:06,520 --> 00:08:07,520 Yeah, right. 124 00:08:07,520 --> 00:08:12,120 So we've got a few billion under management, but it's broken into, as you said Murdoch, 125 00:08:12,120 --> 00:08:13,120 four funds. 126 00:08:13,120 --> 00:08:15,520 The Ofea Opportunities Fund, that is the original fund. 127 00:08:15,520 --> 00:08:18,200 It's been going for just under 12 years. 128 00:08:18,200 --> 00:08:23,600 It's done 22% per annum after all fees. 129 00:08:23,600 --> 00:08:27,480 And obviously there's some significant outperformance there. 130 00:08:27,480 --> 00:08:32,080 So there's been quite a bit of performance fees taken out. 131 00:08:32,080 --> 00:08:39,920 That I think is outperformed by 14%, something like that per annum. 132 00:08:39,920 --> 00:08:40,920 Then we had our second fund. 133 00:08:40,920 --> 00:08:43,280 Now this is the High Conviction Fund. 134 00:08:43,280 --> 00:08:49,300 It has around a 40% overlap with the Opportunities Fund, which is a small cap fund. 135 00:08:49,300 --> 00:08:52,960 Now the High Conviction Fund has less stocks, 30 stocks. 136 00:08:52,960 --> 00:08:55,640 It's still Australia and New Zealand. 137 00:08:55,640 --> 00:08:58,880 25% is actually in the top 100. 138 00:08:58,880 --> 00:09:03,440 75% are the bigger small caps. 139 00:09:03,440 --> 00:09:07,120 That fund is listed on the ASX. 140 00:09:07,120 --> 00:09:14,480 It is a listed investment trust and it trades under the ticker OPH. 141 00:09:14,480 --> 00:09:18,440 And I think it's trading at a 10% discount at the moment, which we think is pretty good 142 00:09:18,440 --> 00:09:22,120 value because we've seen it before when it trades at a 20% premium. 143 00:09:22,120 --> 00:09:29,920 And generally, LITs, LICs, they trade on discounts when asset prices are low because Mr. Market 144 00:09:29,920 --> 00:09:30,920 is fearful. 145 00:09:30,920 --> 00:09:36,720 And they trade on premiums when your taxi driver is telling you how they're buying Bitcoin 146 00:09:36,720 --> 00:09:40,160 and all the different stocks in the share market. 147 00:09:40,160 --> 00:09:44,720 And so when things get frothy again, we'd be expecting that to go from a discount to 148 00:09:44,720 --> 00:09:48,200 a premium and obviously the unit price to go up. 149 00:09:48,200 --> 00:09:52,440 So that's ticker OPH, our High Conviction Fund. 150 00:09:52,440 --> 00:09:54,120 Now then we have two global funds. 151 00:09:54,120 --> 00:09:56,920 So these have a lot of overlap. 152 00:09:56,920 --> 00:10:02,760 We're talking 80% plus overlap, the global opportunities and the global high conviction. 153 00:10:02,760 --> 00:10:06,680 The difference is the global high conviction has 30 stocks, the global opportunities has 154 00:10:06,680 --> 00:10:09,240 35 to 40. 155 00:10:09,240 --> 00:10:14,500 Now with these two funds, they invest in the Western world. 156 00:10:14,500 --> 00:10:28,440 So global funds, 60% is the US, 7% is the UK, 20% is Western Europe, 3% is Canada. 157 00:10:28,440 --> 00:10:29,440 This is very rough. 158 00:10:29,440 --> 00:10:33,520 You've got 2% Australia, we don't have any Australian investments and around 10% is Japan. 159 00:10:33,520 --> 00:10:36,660 We don't have any Japanese investments. 160 00:10:36,660 --> 00:10:41,920 So we're investing really in US, UK and Western Europe and Canada. 161 00:10:41,920 --> 00:10:47,760 And yeah, that funds been running for the global high conviction funds been running 162 00:10:47,760 --> 00:10:53,000 and global opportunities been running since 2018, I think maybe a bit earlier. 163 00:10:53,000 --> 00:10:57,880 And I think, so just be careful when you look on our website and check these numbers because 164 00:10:57,880 --> 00:11:00,640 I could very well get them wrong. 165 00:11:00,640 --> 00:11:08,280 But we've done something like 14, 15% per annum for six, seven years versus the index, 166 00:11:08,280 --> 00:11:10,720 which has done something like 8%. 167 00:11:10,720 --> 00:11:13,760 As I said, go to our website and check those numbers are right. 168 00:11:13,760 --> 00:11:17,280 Don't make an investment on those numbers. 169 00:11:17,280 --> 00:11:19,560 But that's what I think the performance is made for those. 170 00:11:19,560 --> 00:11:25,480 Well, why don't we kick straight into macro first and then we'll get into how you look 171 00:11:25,480 --> 00:11:26,480 at for competition. 172 00:11:26,480 --> 00:11:31,360 The reason I want to get into that is what two nights ago, now we had the Fed come out, 173 00:11:31,360 --> 00:11:35,600 put the rate range and hold a signal that they're going to work. 174 00:11:35,600 --> 00:11:38,000 Sorry, I believe the exact language. 175 00:11:38,000 --> 00:11:41,920 They're not going to increase rates by the back end of the year because their inflation's 176 00:11:41,920 --> 00:11:44,080 kind of economy is doing well, right? 177 00:11:44,080 --> 00:11:45,080 And we've seen equity. 178 00:11:45,080 --> 00:11:46,720 I don't see any stag or any inflation. 179 00:11:46,720 --> 00:11:47,720 Yeah, it's weird. 180 00:11:47,720 --> 00:11:50,440 I love statements that don't mean anything. 181 00:11:50,440 --> 00:11:53,560 And then all it means is essentially the market didn't get sold off dramatically. 182 00:11:53,560 --> 00:11:59,240 And why this is interesting is, would you say that the economy feels like global markets 183 00:11:59,240 --> 00:12:04,640 running a two stage economy, you have a number of companies that are all uplifted, absolutely 184 00:12:04,640 --> 00:12:08,240 hammering associated with AI and then you've got companies like Google, Microsoft coming 185 00:12:08,240 --> 00:12:11,240 out saying that we're going to invest more in this space than essentially the picks and 186 00:12:11,240 --> 00:12:13,720 shovels of the same before all kind of getting dragged along. 187 00:12:13,720 --> 00:12:14,720 There's that happening. 188 00:12:14,720 --> 00:12:18,280 But on the other side of things, there's a whole lot of businesses that can't catch a 189 00:12:18,280 --> 00:12:21,720 bit, but wouldn't you agree they're probably looking healthier than they've looked since 190 00:12:21,720 --> 00:12:25,920 COVID times because they've tightened the belt, fired everyone, really reduced. 191 00:12:25,920 --> 00:12:31,480 And there's businesses out there that from a value investing perspective look fabulous. 192 00:12:31,480 --> 00:12:35,200 It's kind of not traveling that particular direction. 193 00:12:35,200 --> 00:12:36,240 Would you agree with that? 194 00:12:36,240 --> 00:12:41,520 And the reason where I was going with this was I remember you put out a chart where you 195 00:12:41,520 --> 00:12:45,600 showed the Russell, like if you literally followed and made investments based on how 196 00:12:45,600 --> 00:12:49,960 the Fed was going with the 10 year bond rate, it pretty much mimicked how the Russell was 197 00:12:49,960 --> 00:12:50,960 performing. 198 00:12:50,960 --> 00:12:53,680 Yeah, I don't remember that chart. 199 00:12:53,680 --> 00:12:55,360 That is the car put out. 200 00:12:55,360 --> 00:12:57,760 We do a lot of charts. 201 00:12:57,760 --> 00:13:09,040 So the question is, is there opportunity in terms of value elsewhere in the market outside 202 00:13:09,040 --> 00:13:11,480 of the AI and those things here? 203 00:13:11,480 --> 00:13:16,440 So I guess you have a look at the factors that are working the greatest. 204 00:13:16,440 --> 00:13:28,120 Momentum is working very well and if you're in AI or obesity drugs, electrification, those 205 00:13:28,120 --> 00:13:34,080 thematics, well, you're going to have to have done a lot of work to have not made a lot 206 00:13:34,080 --> 00:13:37,440 of money because that is where the momentum is. 207 00:13:37,440 --> 00:13:44,400 Now obviously, and you look at the big seven and maybe big six, if you take out Tesla, 208 00:13:44,400 --> 00:13:46,880 there's huge amount of momentum there. 209 00:13:46,880 --> 00:13:54,960 They're driving the whole share market higher and that capital is coming out of small caps, 210 00:13:54,960 --> 00:14:01,040 less so mid caps and less so other large caps, but still coming out of those. 211 00:14:01,040 --> 00:14:05,240 When it comes out of small caps, maybe it's not in quantums actually more, but when it 212 00:14:05,240 --> 00:14:09,920 comes out of small caps, it sends their share prices lower because everyone's chasing the 213 00:14:09,920 --> 00:14:14,920 momentum and small caps have less liquidity. 214 00:14:14,920 --> 00:14:19,960 What that has meant is that small caps in the US, and that's when Murdoch was just saying 215 00:14:19,960 --> 00:14:28,400 the Russells, that's US small caps, the Russell or US small caps are trading on some metrics 216 00:14:28,400 --> 00:14:34,040 at the cheapest level compared to large caps in the US than they have since the dot com 217 00:14:34,040 --> 00:14:35,040 bubble. 218 00:14:35,040 --> 00:14:37,560 And that is just that bifurcation of the market. 219 00:14:37,560 --> 00:14:42,960 The large cap, big winners, the large caps S&P 500 is trading I think at 23, 24 times 220 00:14:42,960 --> 00:14:49,320 PE versus its historic average of 18, whereas small caps are trading at 15, 16. 221 00:14:49,320 --> 00:14:55,360 But then if you go to the smaller end of small caps where we operate, say the 2, 3, 4, 5, 222 00:14:55,360 --> 00:15:05,160 6 US billion dollar small caps, they're still top 100 Aussie companies, they've underperformed 223 00:15:05,160 --> 00:15:09,280 again the bigger US small cap companies. 224 00:15:09,280 --> 00:15:14,440 So if liquidity is what's driving this because interest rates have gone higher, money's come 225 00:15:14,440 --> 00:15:19,960 out of the market and it's gone into these bigger companies, and you're taking a view 226 00:15:19,960 --> 00:15:28,120 that inflation, and you listen to what Powell said, that inflation is under control and 227 00:15:28,120 --> 00:15:33,520 the next interest rate move is more likely to be down than up. 228 00:15:33,520 --> 00:15:38,520 When liquidity comes into the market, where is it going to flow when interest rates actually 229 00:15:38,520 --> 00:15:39,520 go down? 230 00:15:39,520 --> 00:15:43,240 Well, I can tell you what happened in 1973, 74. 231 00:15:43,240 --> 00:15:49,720 So for people listening to this, in 73, 74, you had a similar recession to the one you're 232 00:15:49,720 --> 00:15:51,160 having now. 233 00:15:51,160 --> 00:15:59,800 OPEC lifted, well, cut production and oil price soared, and it created inflation spiraling 234 00:15:59,800 --> 00:16:03,240 out of control right around the world. 235 00:16:03,240 --> 00:16:10,440 The Fed raised rates to try and get a hold of the inflation and small caps were hit for 236 00:16:10,440 --> 00:16:16,240 6, so too were growth companies, similar to what's happened in the last couple of years. 237 00:16:16,240 --> 00:16:21,960 But in the end of 74, so in December 74, the Fed went right, enough's enough, we're cutting 238 00:16:21,960 --> 00:16:24,960 rates. 239 00:16:24,960 --> 00:16:35,960 Small caps put on 420% over the next five years return after falling 50%, 60%. 240 00:16:35,960 --> 00:16:42,440 It was the best performing sector of the US share market for five years running. 241 00:16:42,440 --> 00:16:47,640 Liquidity flowed back and small caps went from being massively undervalued to massively 242 00:16:47,640 --> 00:16:48,640 overvalued. 243 00:16:48,640 --> 00:16:55,320 Now, I don't know if they're going to become massively overvalued in five years time, but 244 00:16:55,320 --> 00:17:01,000 I do believe in mean reversion and on every metric, they are undervalued at the moment. 245 00:17:01,000 --> 00:17:06,600 And so if you want to be the first to the gold nugget and you believe, I don't think 246 00:17:06,600 --> 00:17:16,480 going out there and putting your incremental dollar into an AI mega cap, you are going 247 00:17:16,480 --> 00:17:26,600 to be the first person on the gold field who's picking up the dollar bills or they're picking 248 00:17:26,600 --> 00:17:28,600 up the easy gold. 249 00:17:28,600 --> 00:17:33,440 You're the person who's probably selling, starting to sell to the smarter investors. 250 00:17:33,440 --> 00:17:34,680 So how am I dealing with this? 251 00:17:34,680 --> 00:17:36,080 And I'll just finish with this. 252 00:17:36,080 --> 00:17:40,520 I have a direct debit every month going straight into our global high conviction fund, my bank 253 00:17:40,520 --> 00:17:46,440 account, bang, money goes in and then it goes out and goes into the high conviction fund. 254 00:17:46,440 --> 00:17:48,840 I don't know when it's going to turn. 255 00:17:48,840 --> 00:17:51,360 Inflation is stubborn above 3% at the moment. 256 00:17:51,360 --> 00:17:56,360 So the amount of rate cuts that we've been expecting this year, next year, they're getting 257 00:17:56,360 --> 00:17:58,760 pushed out, all that for granted. 258 00:17:58,760 --> 00:18:02,640 I don't think it's a question of if though, it's just when. 259 00:18:02,640 --> 00:18:07,360 And for the patient investor, there's a lot of money to be made in US and global small 260 00:18:07,360 --> 00:18:11,440 caps at some point in time. 261 00:18:11,440 --> 00:18:16,920 So now we've set the scene or framed the picture, so to speak. 262 00:18:16,920 --> 00:18:25,040 When you look at essentially putting the paintbrush to the canvas, what's the process? 263 00:18:25,040 --> 00:18:29,840 What I love about investing is, as you said correctly, if you want something to happen 264 00:18:29,840 --> 00:18:33,000 tomorrow because you've made the decision, the probability of that happening is not going 265 00:18:33,000 --> 00:18:34,000 to happen. 266 00:18:34,000 --> 00:18:35,600 Nearly nine times out of 10. 267 00:18:35,600 --> 00:18:39,560 But as you're saying, if you go find companies that meet essentially what you're looking 268 00:18:39,560 --> 00:18:43,560 for and then you back them at the right time and then you're patient with them, then essentially 269 00:18:43,560 --> 00:18:44,560 it comes through. 270 00:18:44,560 --> 00:18:53,080 So what is OFIA's process to go find the next gold nugget? 271 00:18:53,080 --> 00:19:02,720 The process is complicated because there's not some straight formula. 272 00:19:02,720 --> 00:19:04,040 There's a lot of people at OFIA. 273 00:19:04,040 --> 00:19:08,840 I wish it was simple and to say it was just myself and Stephen, but no, there's quite 274 00:19:08,840 --> 00:19:10,480 a big investment team here. 275 00:19:10,480 --> 00:19:15,000 There's in excess of 10 people and we all have our different methods of going out and 276 00:19:15,000 --> 00:19:17,040 finding that idea. 277 00:19:17,040 --> 00:19:22,680 Some people are reading newsletters, other people are speaking to other fund managers, 278 00:19:22,680 --> 00:19:26,600 others are speaking to brokers, newspapers, doesn't matter. 279 00:19:26,600 --> 00:19:28,360 We get the idea. 280 00:19:28,360 --> 00:19:32,200 But an idea is just an idea. 281 00:19:32,200 --> 00:19:33,520 That doesn't make an investment. 282 00:19:33,520 --> 00:19:40,920 How do you get the conviction to put an idea into the fund and think, right, this is how 283 00:19:40,920 --> 00:19:42,120 we're going to make money? 284 00:19:42,120 --> 00:19:45,880 So we need to get an information edge to do that. 285 00:19:45,880 --> 00:19:50,080 And so how are we going to generate an information edge? 286 00:19:50,080 --> 00:19:52,280 Well, we need to be clever. 287 00:19:52,280 --> 00:19:54,520 One thing, let's work out what the market knows. 288 00:19:54,520 --> 00:20:01,640 So speak to the brokers, speak to other fund managers and know where they're at. 289 00:20:01,640 --> 00:20:07,040 But the next thing is, and there's many different ways to do this, you've got to go out there 290 00:20:07,040 --> 00:20:15,640 and you've got to find the data, find the person who works at the competitor, all the 291 00:20:15,640 --> 00:20:21,480 different people who are in the ecosystem that will let you work out whether this company 292 00:20:21,480 --> 00:20:29,040 is going to do very well or not so well over the next one, two, five, 10 years. 293 00:20:29,040 --> 00:20:35,040 And so that's basically Howard from a top level, how it works. 294 00:20:35,040 --> 00:20:36,040 It's interesting you say that. 295 00:20:36,040 --> 00:20:40,680 I remember someone telling me this a while ago when you're trying to find companies that 296 00:20:40,680 --> 00:20:43,820 people don't know about or new products coming out. 297 00:20:43,820 --> 00:20:46,080 As you said, you go speak to the industry. 298 00:20:46,080 --> 00:20:50,480 And like say medical, medical is fascinating because things come out all the time. 299 00:20:50,480 --> 00:20:55,480 And one thing someone said is you go to a particular event where the doctors are, right? 300 00:20:55,480 --> 00:20:57,280 And you go up, you just chat to doctors, have a chat. 301 00:20:57,280 --> 00:20:58,800 Oh, have you heard about this one? 302 00:20:58,800 --> 00:20:59,800 Who's even you said? 303 00:20:59,800 --> 00:21:00,800 I kind of remember. 304 00:21:00,800 --> 00:21:01,800 Have you heard about this particular product? 305 00:21:01,800 --> 00:21:05,880 Maybe you tell the story, right? 306 00:21:05,880 --> 00:21:07,640 You tell the story, but there's essentially. 307 00:21:07,640 --> 00:21:09,360 I'll tell you the story. 308 00:21:09,360 --> 00:21:12,920 There's a company Transmedics, one we've owned for several years and done very well 309 00:21:12,920 --> 00:21:15,920 out of. 310 00:21:15,920 --> 00:21:19,080 We did exactly that. 311 00:21:19,080 --> 00:21:23,640 There was a conference where, so Transmedics for people who don't know, and I imagine most 312 00:21:23,640 --> 00:21:33,280 people won't know what it does is it's involved in the removal, storage and transportation 313 00:21:33,280 --> 00:21:38,300 of hearts, lungs and livers used for transplants. 314 00:21:38,300 --> 00:21:45,560 So there's a huge conference once a year in the U S where all the transplant surgeons 315 00:21:45,560 --> 00:21:46,560 attend. 316 00:21:46,560 --> 00:21:51,480 Well, not all of them, but a lot of them, they go, it's a big junket and we just rocked 317 00:21:51,480 --> 00:21:58,800 up and we spoke to as many of these doctors, but also other companies that are in the ecosystem 318 00:21:58,800 --> 00:22:01,320 and we asked them about Transmedics. 319 00:22:01,320 --> 00:22:08,600 And what we got was one, the market's numbers for Transmedics about the number of heart 320 00:22:08,600 --> 00:22:17,600 transplants that were going to occur in this year was going in the U S was under undercooked, 321 00:22:17,600 --> 00:22:19,280 massively undercooked. 322 00:22:19,280 --> 00:22:24,160 And the reason was, was because Transmedics was growing the market. 323 00:22:24,160 --> 00:22:31,500 So because Transmedics is a lot more, has a lot better system, a lot more hearts actually 324 00:22:31,500 --> 00:22:37,200 when you're competing against an ice cooler, a lot more hearts are actually making it to 325 00:22:37,200 --> 00:22:39,000 a recipient's body. 326 00:22:39,000 --> 00:22:46,200 And so we could see that the market was underestimating how this Transmedics was going to go, but 327 00:22:46,200 --> 00:22:54,100 also how warmly the surgeons spoke about Transmedics and what it was doing for their business. 328 00:22:54,100 --> 00:22:58,360 And the great thing about, you know, one thing I can tell anyone is probably doesn't surprise 329 00:22:58,360 --> 00:23:04,320 anyone, but in the U S healthcare market, it's follow the money. 330 00:23:04,320 --> 00:23:09,080 And so the one thing about Transmedics is the patient's happy. 331 00:23:09,080 --> 00:23:10,280 Well, they got a new heart. 332 00:23:10,280 --> 00:23:14,640 So that might not have made it that far. 333 00:23:14,640 --> 00:23:19,760 The doctor's happy because they're not up in the middle of the night performing this 334 00:23:19,760 --> 00:23:25,560 emergency surgery and having to remove this, this organ. 335 00:23:25,560 --> 00:23:33,800 They are, they go in, the patient goes into surgery at, I don't know, 10 AM, 11 AM at 336 00:23:33,800 --> 00:23:35,360 a really good time. 337 00:23:35,360 --> 00:23:38,080 But also the doctors are now doing more. 338 00:23:38,080 --> 00:23:40,280 And so they're making more money. 339 00:23:40,280 --> 00:23:44,640 Furthermore, the hospitals are making money because they're doing, they make money every 340 00:23:44,640 --> 00:23:50,000 time one of these transplants happens and Transmedics is growing the industry. 341 00:23:50,000 --> 00:23:54,440 And finally, the insurers are better at making more money because it's a lot cheaper for 342 00:23:54,440 --> 00:24:02,980 them, believe it or not, to get someone a heart than it is to have them going in and 343 00:24:02,980 --> 00:24:08,960 out of hospital and on medication and in ICU and out of ICU and all those sorts of things 344 00:24:08,960 --> 00:24:12,880 that go with these terrible ailments. 345 00:24:12,880 --> 00:24:20,160 So what we learned very quickly, walking the floor of this big conference was everyone 346 00:24:20,160 --> 00:24:22,760 wants Transmedics to succeed. 347 00:24:22,760 --> 00:24:26,360 And that was, that's a pretty good one. 348 00:24:26,360 --> 00:24:31,080 Normally there's someone trying to block and tackle her business if there's a competitor. 349 00:24:31,080 --> 00:24:35,320 Well, the Yeti, Yeti ice cool is your number one competitor, right? 350 00:24:35,320 --> 00:24:37,360 Like, so there's a lot of Yeti ice coolers. 351 00:24:37,360 --> 00:24:38,440 Like everyone loves them. 352 00:24:38,440 --> 00:24:41,320 They're expensive, but they don't have any bloody wheels and they're massive. 353 00:24:41,320 --> 00:24:42,320 It just makes no sense. 354 00:24:42,320 --> 00:24:44,760 It's a listed company in the US. 355 00:24:44,760 --> 00:24:47,680 We know it well and I don't think it's done too well recently. 356 00:24:47,680 --> 00:24:49,480 So you might, you might need to... 357 00:24:49,480 --> 00:24:52,840 Everyone loves a Yeti, but can we have some wheels please? 358 00:24:52,840 --> 00:24:54,440 Back on the Transmedics. 359 00:24:54,440 --> 00:25:00,240 The one thing I find fascinating is, do you mind giving a bit of color around the statistics 360 00:25:00,240 --> 00:25:05,020 about how much organ loss there was? 361 00:25:05,020 --> 00:25:08,360 And then with the use of what they're doing right now, how much they've actually been 362 00:25:08,360 --> 00:25:13,840 able to reuse and save, like they would have not made it, you know, dead on arrival. 363 00:25:13,840 --> 00:25:14,840 Yeah. 364 00:25:14,840 --> 00:25:21,880 So I'm, I'll need to maybe brush up on all these, all these statistics, but I think lungs, 365 00:25:21,880 --> 00:25:29,760 80% of lungs don't make the, don't make it to a recipient being removed. 366 00:25:29,760 --> 00:25:34,340 And I think it's 50 to 60% of hearts. 367 00:25:34,340 --> 00:25:40,260 So Transmedics is obviously improving this dramatically and that is what is growing the 368 00:25:40,260 --> 00:25:41,680 market in the US. 369 00:25:41,680 --> 00:25:51,180 And you can actually plot how many heart transplants, lungs aren't so big, how many heart and livers 370 00:25:51,180 --> 00:25:54,160 that Transmedics is doing. 371 00:25:54,160 --> 00:26:01,640 And the amazing thing about this business is you can see that they've actually growing 372 00:26:01,640 --> 00:26:07,840 the US market because their, the amount of hearts they're doing is just on, is basically 373 00:26:07,840 --> 00:26:08,840 maps out. 374 00:26:08,840 --> 00:26:14,400 You look at the last 20 years, how many extra hearts getting transplanted a year and then 375 00:26:14,400 --> 00:26:19,200 Transmedics hits the market and it's just jumped up massively. 376 00:26:19,200 --> 00:26:23,040 And that is the amount that Transmedics are effectively doing. 377 00:26:23,040 --> 00:26:26,880 So yeah, it's good to, you know, this is a great thing about my job and yeah, we're talking 378 00:26:26,880 --> 00:26:32,160 about a company here, but every company we look at is fascinating and they're solving 379 00:26:32,160 --> 00:26:40,320 real world problems with some very, very smart people mixed with some very smart entrepreneurs 380 00:26:40,320 --> 00:26:44,000 and they're solving world problems. 381 00:26:44,000 --> 00:26:50,200 And the beauty, if you're listening to this podcast, I'm sure you're, you believe in capitalism. 382 00:26:50,200 --> 00:26:51,300 I certainly do. 383 00:26:51,300 --> 00:26:55,920 And I'm looking at the world we live in now and just where we were when I was here 30 384 00:26:55,920 --> 00:26:59,560 years ago, when I was 10 years old and it's just amazing the leaps and bounds that we're 385 00:26:59,560 --> 00:27:04,360 doing and just to be able to allocate capital and get to meet these people that are actually 386 00:27:04,360 --> 00:27:08,200 changing the world is fantastic and Transmedics is one of those. 387 00:27:08,200 --> 00:27:09,520 It's a really interesting story. 388 00:27:09,520 --> 00:27:10,520 What else are you seeing these days? 389 00:27:10,520 --> 00:27:13,520 What are the, have you also got, that's a silly question. 390 00:27:13,520 --> 00:27:19,360 Why don't you give a couple of, but you know, what's the, what's the, also something, you 391 00:27:19,360 --> 00:27:22,160 know, quite interesting that comes to mind at a company that you're following or something 392 00:27:22,160 --> 00:27:23,160 that you're about to. 393 00:27:23,160 --> 00:27:30,040 Well, there's a lot of companies always in this, you know, I'm, I'm, I'm in the mind 394 00:27:30,040 --> 00:27:37,560 you to, but to, to sort of take myself out of that and look at what companies people 395 00:27:37,560 --> 00:27:42,840 listening might find interesting in our Aussie funds. 396 00:27:42,840 --> 00:27:45,640 We have a business called life 360. 397 00:27:45,640 --> 00:27:47,200 It's actually a U S business. 398 00:27:47,200 --> 00:27:55,960 Um, for those who don't know what it is, it is a family safety app lead leading globally 399 00:27:55,960 --> 00:28:03,320 leading family safety app and enables you to see where loved ones are, um, see that 400 00:28:03,320 --> 00:28:06,280 they're safe, um, all via an app. 401 00:28:06,280 --> 00:28:08,960 I'll give you an example, a sort of thing. 402 00:28:08,960 --> 00:28:10,400 It does. 403 00:28:10,400 --> 00:28:16,680 If you have a 15 year old, that's too young, 16, 17 year old son or daughter who's just 404 00:28:16,680 --> 00:28:22,920 started driving, uh, you and they're speeding or they're on their mobile phone. 405 00:28:22,920 --> 00:28:28,120 Um, when they're driving, uh, as a parent, you'll get an alert. 406 00:28:28,120 --> 00:28:36,320 Likewise, uh, if they, uh, were to start wagging school and leaving at lunchtime, uh, unless 407 00:28:36,320 --> 00:28:42,120 they're leaving their phone in their locker, um, you'll get an alert that your kid is leaving 408 00:28:42,120 --> 00:28:45,560 school, but maybe more from a safety aspect. 409 00:28:45,560 --> 00:28:48,680 You know, your son or daughter has left school. 410 00:28:48,680 --> 00:28:49,880 They're 11 years old. 411 00:28:49,880 --> 00:28:51,640 They've got a phone. 412 00:28:51,640 --> 00:28:55,600 You'll get an alert that they've left at this time and they've come back and they've got 413 00:28:55,600 --> 00:28:58,120 to school at this time and those sorts of things. 414 00:28:58,120 --> 00:29:03,240 And they've got home after leaving school at three 30, they got home at four, all that 415 00:29:03,240 --> 00:29:04,240 sort of stuff. 416 00:29:04,240 --> 00:29:06,200 So you really can see where your loved ones are. 417 00:29:06,200 --> 00:29:08,120 Um, why do we like this business? 418 00:29:08,120 --> 00:29:11,840 Well, it's been a bit of a roller coaster of a ride, but we've always believed that 419 00:29:11,840 --> 00:29:13,920 this is a platform business. 420 00:29:13,920 --> 00:29:20,560 When I say platform, it is actually going to be an amalgamation of many businesses running 421 00:29:20,560 --> 00:29:26,040 from a running from the platform with these huge amount of customers that have one thing 422 00:29:26,040 --> 00:29:27,040 in common. 423 00:29:27,040 --> 00:29:30,280 They really care about the safety of their loved ones. 424 00:29:30,280 --> 00:29:35,980 Um, and they just announced in February that they're going to launch advertising. 425 00:29:35,980 --> 00:29:40,600 So for your listeners, what does Ofea do when we hear that? 426 00:29:40,600 --> 00:29:43,840 Well, we need to work out how much they're going to make for advertising. 427 00:29:43,840 --> 00:29:47,520 So they've disclosed that they've got to make five to $10 million. 428 00:29:47,520 --> 00:29:53,080 They think this year from advertising, our view is this is likely to going to be a conservative 429 00:29:53,080 --> 00:29:54,080 number. 430 00:29:54,080 --> 00:29:57,600 Why would they go out there with a big number when they actually don't know at this point 431 00:29:57,600 --> 00:29:58,600 in time? 432 00:29:58,600 --> 00:30:00,240 So we all become problem solvers. 433 00:30:00,240 --> 00:30:04,680 We put our hats on and we go and try and work it out. 434 00:30:04,680 --> 00:30:10,680 So I went through all their presentations first thing and you can see they've got 65 435 00:30:10,680 --> 00:30:18,440 million users around the world, monthly users, but they have 20 around 25 million daily active 436 00:30:18,440 --> 00:30:25,240 users and there's a slide in one of the packs that says, and those daily users use the app 437 00:30:25,240 --> 00:30:26,520 five times a day. 438 00:30:26,520 --> 00:30:31,720 They're checking probably worried mum or dad checking, not so much the kids checking where 439 00:30:31,720 --> 00:30:35,840 their parents are, but, um, I know that that's the fact. 440 00:30:35,840 --> 00:30:39,840 It's actually the parents that are using it so much. 441 00:30:39,840 --> 00:30:51,760 They are generating on my calculation around 50 billion to a hundred billion impressions 442 00:30:51,760 --> 00:30:54,320 a year where people are getting on that app. 443 00:30:54,320 --> 00:30:58,320 Now, so if you have advertising, you're generating a banner. 444 00:30:58,320 --> 00:31:03,360 You can, you're, they're putting a banner ad on the, on this app. 445 00:31:03,360 --> 00:31:04,360 So what did I do Murdoch? 446 00:31:04,360 --> 00:31:06,580 I'm trying to get to the interesting point. 447 00:31:06,580 --> 00:31:09,800 We have to be faster than the market and we have to work this out. 448 00:31:09,800 --> 00:31:12,320 We've gone and spoken to all the top brokers. 449 00:31:12,320 --> 00:31:18,920 Digital advertising is a sector in itself in the U S think Snapchat recently IPO, Reddit, 450 00:31:18,920 --> 00:31:24,120 duo, well, not duolingo so much, but you can put that in there. 451 00:31:24,120 --> 00:31:26,880 Duolingo, Pinterest. 452 00:31:26,880 --> 00:31:28,920 So it's a, it's a big market. 453 00:31:28,920 --> 00:31:31,860 Let's go and speak to all these analysts and I'm going to sit down. 454 00:31:31,860 --> 00:31:34,560 We actually pay some of these places quite a bit of money. 455 00:31:34,560 --> 00:31:39,000 So they sat down with me and they found it really interesting and we problem solve people 456 00:31:39,000 --> 00:31:42,760 who have looked at this market for years. 457 00:31:42,760 --> 00:31:47,240 And the conclusion that everyone's getting to, and so your listeners is going to hear 458 00:31:47,240 --> 00:31:53,440 this before other people in the market do, is that they should be earning over $1 to 459 00:31:53,440 --> 00:32:01,920 $2 initially per thousand impressions, but ultimately they should be getting somewhere 460 00:32:01,920 --> 00:32:06,520 between $3 to $5 per impression. 461 00:32:06,520 --> 00:32:15,640 Now if that, the numbers become really big on this very quickly. 462 00:32:15,640 --> 00:32:25,520 And given advertising should be a 70% plus margin business, this has the ability to absolutely 463 00:32:25,520 --> 00:32:31,400 just skyrocket their earnings when it comes, it comes through like we expect. 464 00:32:31,400 --> 00:32:38,320 So the reason we were able to get that edge was moving faster than everyone else. 465 00:32:38,320 --> 00:32:42,480 Now there's a couple of analysts in the last week or two, so they're months behind us, 466 00:32:42,480 --> 00:32:45,560 are starting to do this similar work. 467 00:32:45,560 --> 00:32:46,560 Does that worry us? 468 00:32:46,560 --> 00:32:48,040 No, the share price is going up. 469 00:32:48,040 --> 00:32:53,780 You know, it's up, up a lot last month, the month before, the month before that. 470 00:32:53,780 --> 00:32:58,000 We know that we're still, we're a couple of it, we've done some very far more clever 471 00:32:58,000 --> 00:33:04,400 work than that now in terms of this whole business as we've extended this. 472 00:33:04,400 --> 00:33:10,800 And so we're a couple of iterations in front of the market in terms of our knowledge on 473 00:33:10,800 --> 00:33:13,960 the business. 474 00:33:13,960 --> 00:33:22,120 And you know, it's got to the point where we're saying, hey, there is a chance and 475 00:33:22,120 --> 00:33:30,160 you can certainly point a map, point a picture where they end up with 150 million active 476 00:33:30,160 --> 00:33:31,160 users. 477 00:33:31,160 --> 00:33:38,940 They're making something like a $250 million of EBITDA from their subscription business 478 00:33:38,940 --> 00:33:44,680 that they currently have, but from their advertising business, they're making something like $400 479 00:33:44,680 --> 00:33:47,160 million of EBITDA. 480 00:33:47,160 --> 00:33:54,680 And so that's $650 million of EBITDA US or a billion dollars Aussie put that on 25 times 481 00:33:54,680 --> 00:33:56,560 EBITDA multiple. 482 00:33:56,560 --> 00:34:00,520 And you've got a $25 billion business or $30 billion business. 483 00:34:00,520 --> 00:34:03,960 And it's currently a $3 billion market cap. 484 00:34:03,960 --> 00:34:05,960 Now what timeframe to get there? 485 00:34:05,960 --> 00:34:10,120 Maybe it's 10 years, maybe it's faster at six to seven. 486 00:34:10,120 --> 00:34:15,080 Either way, we can see that this business, if they do execute really well and it plays 487 00:34:15,080 --> 00:34:20,080 out like we think it can, there's a big chance that this is going to make multiple times 488 00:34:20,080 --> 00:34:21,080 the money. 489 00:34:21,080 --> 00:34:22,080 There's also a chance that we're going to be wrong. 490 00:34:22,080 --> 00:34:23,080 And we do get these. 491 00:34:23,080 --> 00:34:24,840 Just a simple question, devil's advocate. 492 00:34:24,840 --> 00:34:26,960 I haven't looked into this company. 493 00:34:26,960 --> 00:34:33,320 Isn't this feature like inbuilt on most androids and Apple phones, like, you know, find my 494 00:34:33,320 --> 00:34:39,320 find my phone or is this not find my family's phones, find my family's phones. 495 00:34:39,320 --> 00:34:40,320 Right. 496 00:34:40,320 --> 00:34:43,200 No, that's not just, I'm just curious as in like, no, no, no. 497 00:34:43,200 --> 00:34:47,240 So the, like, I could talk about this company for a long time. 498 00:34:47,240 --> 00:34:50,760 And it was just one question I had as in the inhale, like everyone goes like companies. 499 00:34:50,760 --> 00:34:53,120 What's the, what's the fine, my, this find my friends. 500 00:34:53,120 --> 00:34:58,380 So the biggest risk this business has as an existential risk is that Apple launches its 501 00:34:58,380 --> 00:35:01,600 own app that does this. 502 00:35:01,600 --> 00:35:03,720 The find my phone is that's finding your phone. 503 00:35:03,720 --> 00:35:08,160 It's not finding where you find my phone or like, yeah, like my wife's phone on Android, 504 00:35:08,160 --> 00:35:09,160 you know, find my wife's phone. 505 00:35:09,160 --> 00:35:10,160 Like it just pops up. 506 00:35:10,160 --> 00:35:12,360 It's in coming down the highway. 507 00:35:12,360 --> 00:35:14,760 It doesn't, as you're saying, it doesn't say the speed. 508 00:35:14,760 --> 00:35:16,000 Yeah, this is a freemium. 509 00:35:16,000 --> 00:35:17,000 So you don't pay for this. 510 00:35:17,000 --> 00:35:21,480 This app does, you know, like so much more than all of this. 511 00:35:21,480 --> 00:35:23,680 And so that's a very elementary app. 512 00:35:23,680 --> 00:35:26,000 This app is way better and they're growing. 513 00:35:26,000 --> 00:35:27,000 It's free. 514 00:35:27,000 --> 00:35:28,000 So you're not paying for it. 515 00:35:28,000 --> 00:35:32,120 So basically they've got a subscription where you get all the bells and whistles or you 516 00:35:32,120 --> 00:35:36,400 get the freemium, the freemium version, which just has a banner at it. 517 00:35:36,400 --> 00:35:40,440 And that's all you're paying is that there's an ad that's in there that you probably don't 518 00:35:40,440 --> 00:35:41,440 even notice. 519 00:35:41,440 --> 00:35:42,440 It's free. 520 00:35:42,440 --> 00:35:43,440 It becomes the client. 521 00:35:43,440 --> 00:35:44,440 Yeah. 522 00:35:44,440 --> 00:35:49,240 And so your products, so yes, it comes to, yes, it might be in built into the phone, 523 00:35:49,240 --> 00:35:51,640 but they're growing the number of subscribers. 524 00:35:51,640 --> 00:35:56,880 So I probably really Apple probably buy them or something like that down the track. 525 00:35:56,880 --> 00:35:58,960 I don't think Apple would buy them. 526 00:35:58,960 --> 00:36:03,380 Apple iOS makes a huge amount of money just from their app store. 527 00:36:03,380 --> 00:36:07,600 So they're getting a chunk of every subscription business regardless. 528 00:36:07,600 --> 00:36:09,160 So they effectively do own. 529 00:36:09,160 --> 00:36:10,160 Yeah. 530 00:36:10,160 --> 00:36:13,560 So what's the margin is that is it 30% or something like Google and Apple get from if 531 00:36:13,560 --> 00:36:16,000 you, yeah, that's crazy. 532 00:36:16,000 --> 00:36:17,000 That's right. 533 00:36:17,000 --> 00:36:18,000 Yeah. 534 00:36:18,000 --> 00:36:19,000 So they're getting it regardless. 535 00:36:19,000 --> 00:36:20,000 So they're getting it regardless. 536 00:36:20,000 --> 00:36:21,000 Yeah. 537 00:36:21,000 --> 00:36:24,800 But this is all like, we're getting a huge conversation here because with the game Fortnite, 538 00:36:24,800 --> 00:36:29,200 this is all in the courts in the, in the U S at the moment. 539 00:36:29,200 --> 00:36:31,720 And life 360 is in the courts as well. 540 00:36:31,720 --> 00:36:37,000 Not, they're not in the courts, but they're getting spoken about with Apple because life 541 00:36:37,000 --> 00:36:42,440 360 owns a business which is called tile. 542 00:36:42,440 --> 00:36:45,560 And if you know the Apple, what do you call them? 543 00:36:45,560 --> 00:36:53,040 The Apple, the tags, you know, they're, call them the, no, it's not an I's calling an 544 00:36:53,040 --> 00:36:56,760 I tag, but the Apple tags, you know, so that you put them around your key ring. 545 00:36:56,760 --> 00:36:57,760 So you know, 546 00:36:57,760 --> 00:36:58,760 Oh yeah. 547 00:36:58,760 --> 00:36:59,760 The trackers. 548 00:36:59,760 --> 00:37:00,760 Yeah. 549 00:37:00,760 --> 00:37:01,760 The trackers. 550 00:37:01,760 --> 00:37:02,760 The tiles. 551 00:37:02,760 --> 00:37:03,760 Yeah. 552 00:37:03,760 --> 00:37:04,760 Finally stick to the keys. 553 00:37:04,760 --> 00:37:05,760 Yeah. 554 00:37:05,760 --> 00:37:06,760 Yeah. 555 00:37:06,760 --> 00:37:08,400 And so it integrates into your app. 556 00:37:08,400 --> 00:37:12,800 So you can see where your, where your keys are and all those sorts of things. 557 00:37:12,800 --> 00:37:18,880 But Apple has been, is being mentioned not by life 360 about their anti-competitive behavior 558 00:37:18,880 --> 00:37:21,280 and what they're doing against tile. 559 00:37:21,280 --> 00:37:25,640 So Apple is in the existential risk. 560 00:37:25,640 --> 00:37:29,200 Apple is in the courts at the moment about their anti-competitive behavior. 561 00:37:29,200 --> 00:37:30,200 Yeah. 562 00:37:30,200 --> 00:37:36,120 If they did come and launch a complete competing product and all that, this is not the time 563 00:37:36,120 --> 00:37:40,720 to go and do that is our view, but it is an existential risk. 564 00:37:40,720 --> 00:37:49,040 Apple doesn't have too many of these other than the Apple music, the Spotify competitor, 565 00:37:49,040 --> 00:37:54,760 it doesn't have too many of these sort of style apps or anything that's out of stuff 566 00:37:54,760 --> 00:37:57,600 that should look like it belongs on the phone. 567 00:37:57,600 --> 00:38:02,160 Anyway, I could, I could talk about it for a lot, but it's a platform business. 568 00:38:02,160 --> 00:38:04,280 They have 60 million users. 569 00:38:04,280 --> 00:38:11,960 We think going to 150, they, as I said, you can paint a picture where you get a 25, $30 570 00:38:11,960 --> 00:38:12,960 billion valuation. 571 00:38:12,960 --> 00:38:14,200 Is that going to happen? 572 00:38:14,200 --> 00:38:15,200 No. 573 00:38:15,200 --> 00:38:18,920 But even if half of that came true, everyone's going to be very happy. 574 00:38:18,920 --> 00:38:22,920 There's a lot of margin for error on this business that if they don't do so well, we 575 00:38:22,920 --> 00:38:27,880 can still make good money and they probably won't get to that 10 times. 576 00:38:27,880 --> 00:38:32,500 Chances they won't get that, but if they get anywhere near it in the middle, it's such 577 00:38:32,500 --> 00:38:37,440 a big gap to drive that you can drive through. 578 00:38:37,440 --> 00:38:38,440 They'll make more acquisitions. 579 00:38:38,440 --> 00:38:43,800 We've got an idea of what they'll buy next and they'll be very creative and this is a 580 00:38:43,800 --> 00:38:50,440 platform and you get to monetize these 150 million people by selling them things that 581 00:38:50,440 --> 00:38:52,240 link in with family safety. 582 00:38:52,240 --> 00:38:58,320 And I know when I flick on the news in Australia or in the US, there's a lot of school shootings 583 00:38:58,320 --> 00:39:07,800 and they aren't quietening down and there's a lot of terrible stuff that happens in America, 584 00:39:07,800 --> 00:39:11,600 their biggest market especially and Australia's a big market for them too. 585 00:39:11,600 --> 00:39:15,960 I think that this is only going to be if the consciousness is only going to increase and 586 00:39:15,960 --> 00:39:19,440 the need for these sort of things is only going to increase over time. 587 00:39:19,440 --> 00:39:23,120 The final thing I'll just say, which this is actually just straight out of the presentation 588 00:39:23,120 --> 00:39:30,000 pack, but nobody talks about it and it's huge and what it means, their fastest growing state 589 00:39:30,000 --> 00:39:39,000 is Texas and they're saying their states in America, which are the most penetrated, are 590 00:39:39,000 --> 00:39:41,260 the fastest growing. 591 00:39:41,260 --> 00:39:46,300 So it's not really network effects, but it's a barbecue, you're going around and one friend's 592 00:39:46,300 --> 00:39:51,240 on Live 360 and another friend's on Live 360, so you get on because you're hearing it. 593 00:39:51,240 --> 00:39:54,360 So as it's growing, it's actually accelerating the growth. 594 00:39:54,360 --> 00:39:58,880 So where the states where they have the least penetration, that's where they've got the 595 00:39:58,880 --> 00:39:59,880 lowest growth. 596 00:39:59,880 --> 00:40:06,400 But in Texas, 20% of people in Texas have got Live 360 on their phones and that's the fastest 597 00:40:06,400 --> 00:40:07,400 growing state. 598 00:40:07,400 --> 00:40:12,240 So that's telling you that as you hit these, it's got an adoption curve, which has got 599 00:40:12,240 --> 00:40:14,840 that asymptotic shape. 600 00:40:14,840 --> 00:40:19,240 It's in the presentation, you can just see this, but I haven't heard anyone talk about 601 00:40:19,240 --> 00:40:20,240 it. 602 00:40:20,240 --> 00:40:21,240 So that's sort of something as well. 603 00:40:21,240 --> 00:40:27,560 It's quite funny you mentioned tile because I'm just thinking all the great products, 604 00:40:27,560 --> 00:40:30,840 you mentioned Fortnite, you mentioned tile, you mentioned these drugs. 605 00:40:30,840 --> 00:40:34,000 It's kind of like you see a mate using them about 12 months ago. 606 00:40:34,000 --> 00:40:35,000 That's really cool. 607 00:40:35,000 --> 00:40:36,000 And you kind of forget about it. 608 00:40:36,000 --> 00:40:38,600 Then all of a sudden it just kind of pops up in the market somewhere and you're like, 609 00:40:38,600 --> 00:40:41,160 I wish I paid more attention to that at the time. 610 00:40:41,160 --> 00:40:42,480 But that tile business is brilliant. 611 00:40:42,480 --> 00:40:43,480 It's genius. 612 00:40:43,480 --> 00:40:47,120 Well, they bought tile and they've dusted a lot of money on it because I think they 613 00:40:47,120 --> 00:40:50,840 would have been able to buy it a lot cheaper, but it's worth a lot more to them than it 614 00:40:50,840 --> 00:40:58,760 is to as a standalone because it's something that it works well with their app that you 615 00:40:58,760 --> 00:41:01,640 can see where your things are. 616 00:41:01,640 --> 00:41:06,820 I know I've got my car, I've got a tile just in my car at home. 617 00:41:06,820 --> 00:41:14,680 So when I go and park in the shopping center, I can find where my car is by using the tile. 618 00:41:14,680 --> 00:41:18,160 It was a beautiful rainy Friday afternoon here in Sydney. 619 00:41:18,160 --> 00:41:23,400 But just before we finish up for the day, we were discussing in the beginning, the two 620 00:41:23,400 --> 00:41:28,040 speed economy and good quality companies, value stocks haven't been found, taking a 621 00:41:28,040 --> 00:41:29,520 bit to get up and going again. 622 00:41:29,520 --> 00:41:34,000 We've currently seen what the IPO and there's a lot of brokers out there doing capital raising 623 00:41:34,000 --> 00:41:36,840 that made a lot of money a couple of years ago and it's dried up a little bit. 624 00:41:36,840 --> 00:41:42,560 What do you think is needed to get the small cap side of the market really hammering again? 625 00:41:42,560 --> 00:41:44,680 I think I said it before, it's interest rates. 626 00:41:44,680 --> 00:41:48,280 So we need to see interest rate expectations go down. 627 00:41:48,280 --> 00:41:51,400 Well, actually, let's take a step back. 628 00:41:51,400 --> 00:41:56,120 We need to see inflation in the US start going below 3%. 629 00:41:56,120 --> 00:42:00,840 What's happening in the moment, Fed raised rates, holding rates and inflation is bouncing 630 00:42:00,840 --> 00:42:04,220 around just above 3%. 631 00:42:04,220 --> 00:42:09,800 We need to see inflation that the financial conditions are at this point, tight enough, 632 00:42:09,800 --> 00:42:14,120 restrictive enough, that inflation starts coming under control and starts trending below 633 00:42:14,120 --> 00:42:16,120 3 towards 2. 634 00:42:16,120 --> 00:42:21,760 Interest rate expectations come down and then effectively, the Fed will cut rates. 635 00:42:21,760 --> 00:42:30,360 When the Fed cuts rates and interest rates go down, more money will flow into small caps, 636 00:42:30,360 --> 00:42:34,900 just like when it goes out, they're the ones that get hammered the most because they're 637 00:42:34,900 --> 00:42:36,100 less liquid. 638 00:42:36,100 --> 00:42:40,600 When it comes in, they go up the most and they're trading well below their historic 639 00:42:40,600 --> 00:42:43,400 average in terms of their valuations. 640 00:42:43,400 --> 00:42:49,060 And so any return to their historic valuation will give a lot of alpha. 641 00:42:49,060 --> 00:42:52,400 And finally, what keeps you up at night and what gets you out of bed in the morning? 642 00:42:52,400 --> 00:42:57,200 What keeps me up at night and gets me out, like work just gets me out of bed. 643 00:42:57,200 --> 00:42:59,160 It gets me out of bed in the morning. 644 00:42:59,160 --> 00:43:02,040 I'm excited to go to work every single day. 645 00:43:02,040 --> 00:43:04,560 I find my job incredibly fascinating. 646 00:43:04,560 --> 00:43:06,560 What keeps me up at night? 647 00:43:06,560 --> 00:43:09,120 It keeps me up. 648 00:43:09,120 --> 00:43:10,120 I sleep pretty well. 649 00:43:10,120 --> 00:43:17,960 I focus on, this is not really the question you're asking, but I go to bed at 9pm every 650 00:43:17,960 --> 00:43:22,400 night and I go straight to sleep. 651 00:43:22,400 --> 00:43:30,960 Sleep is so important for me and I get between 8 and a half hours sleep a night. 652 00:43:30,960 --> 00:43:35,920 I think that's very important to have your mind functioning, you need to be putting the 653 00:43:35,920 --> 00:43:40,200 right food into your body, but also be getting that sleep. 654 00:43:40,200 --> 00:43:44,000 So nothing keeps me up at night. 655 00:43:44,000 --> 00:43:46,080 I couldn't agree more. 656 00:43:46,080 --> 00:43:49,760 Ever since I started crashing out at 9 and going on the carnival diet and eating less 657 00:43:49,760 --> 00:43:54,240 crap, you feel so much better and you feel like you're in your mid twenties again. 658 00:43:54,240 --> 00:43:55,240 Yeah. 659 00:43:55,240 --> 00:43:56,240 And you have clarity of thought. 660 00:43:56,240 --> 00:43:58,520 Clarity, start aching and all that type of stuff. 661 00:43:58,520 --> 00:44:01,680 And you function so much better, advocate for it. 662 00:44:01,680 --> 00:44:03,240 Well, Andrew, it's great having you on. 663 00:44:03,240 --> 00:44:08,160 If anyone wants to learn more about Ophere or where should they go, what's the website? 664 00:44:08,160 --> 00:44:10,400 Yeah, just go to the website. 665 00:44:10,400 --> 00:44:18,680 Just Google Ophere, which is spelled O-P-H-I-R and our website is Ophere AM asset management 666 00:44:18,680 --> 00:44:21,040 dot com. 667 00:44:21,040 --> 00:44:24,800 And yeah, there'll be a lot of stuff there to read and you can just reach out to us at 668 00:44:24,800 --> 00:44:28,080 any time or follow us on LinkedIn, anything like that. 669 00:44:28,080 --> 00:44:29,080 Thanks, Hasee. 670 00:44:29,080 --> 00:44:31,120 Andrew, great having you on and speak to you soon. 671 00:44:31,120 --> 00:44:44,800 Thanks for having me, Murdoch. 672 00:44:44,800 --> 00:44:48,880 Any views expressed in this recording do not represent a view of any other third party and 673 00:44:48,880 --> 00:44:51,440 other sole personal opinions of the speaker. 674 00:44:51,440 --> 00:44:55,160 Any reference to financial product does not constitute advice or recommendation. 675 00:44:55,160 --> 00:44:59,400 And before any action, you should seek proper advice from your financial professional. 676 00:44:59,400 --> 00:45:06,240 Australian listeners should head to www.moneysmart.gov.au to find more information on obtaining financial 677 00:45:06,240 --> 00:45:07,240 advice. 678 00:45:07,240 --> 00:45:26,240 To get in touch with York, head to our website www.yorkwealth.com.au.