... or looking at that one? [laughs]

Yeah, no, absolutely.

'Cause you know, we saw the massive ramp up in terms of price about a year ago.

Um, but it's actually kind of corrected.

Um, it seems to be very popular, of course, with the acquisition proposal from Hanwha and, um, of course today a new, new bid coming in.

Um, I guess the question is really, uh, whether they'll get approval in terms of foreign acquisition, uh, because it is a strategic asset for Australia.

So, um, from a pricing standpoint, I think there's a lot more that Austal could go, uh, go back up.

... uncertainties, and the fact that, you know, this war that started in, in February is still going?

but a really solid one today.

Yeah, no, exactly.

I think it's probably been one of the best earning days, uh, in, overall in the market for about, uh, two, three weeks, right? So, um, you know, we are seeing very good, uh, you know, strong rallies in the resource sector, especially in gold, as well as in, you know, for the large mining stocks like BHP.

Um, BHP is almost at, uh, you know, highs, um, and it's led by copper growth and as well as the gold prices well coming back.

So, you know, very solid performers.

We've seen, um, you know, the resurgence of healthcare as well.

Um, and you know, some of the larger healthcare stocks, of course, CSL, Cochlear, um, you know, it's obviously had a very difficult time in the last half year, but, uh, we're finally seeing a bit of recovery from it.

What are we seeing more broadly? Because we've still got these, you know, conflicting concerns about what's happening, and really the demand here for, for defense stocks.

But is NextDC how you would look to gain exposure to that?

Oh, I think this one I'm gonna disagree with Howard.

This is, um...

Yeah, no, I mean, look, uh, as with all CapEx and infrastructure spend, you're building capacity for the next couple years, right? So you're not gonna see any returns that's gonna come in in the next year or two.

And, you know, you can argue from a business, a stable business point of view, if, if a company's immature and they're not spending on CapEx, they're not growing and they're delivering returns, that's fine.

But I think for a growth company, uh, where, you know, w- we're trying to...

What they're trying to do is to tr- trying to capture the deba- demand of AI in about two, three years' time, right? So we've gotta look at what is the capacity that is being used, right? And let, let's really look at the broad general industry at the moment, right? So I was on the other day at OpenRouter.

... now seeming a bit overdone, right?

What are we seeing?

Yeah, no, a bit of a relief, um, rates being on hold, you say, with the RBA.

But, you know, as, as Michelle said, um, they won't hesitate to, uh, raise rates again should inflation come back into play.

Um, but again, you know, that's against the backdrop of, uh, the federal budget, which came through and, you know, it's really flowing through to the market.

Uh, you know, we've seen auction clearance is really low in the Australian property market, so, you know, that, that's bound to flow on, uh, into the rates as well as the banks as well, where, where we're seeing lower applica- loan applications.

Um, and yeah, you know, with the banks reporting fairly weak, um, we're seeing the market come off a little bit.

Are you sort of quite positive overall on what the earnings momentum we're gonna see?

Yeah, it's interesting, you know, because like if you look in the US and what's happening, what's caused this rebound, um, a lot of the SAS stocks which have been been down have come back to life.

Start with the 60-second elevator pitch and why you like it.

Raytheon.

It is one...

It is the second-largest defense, uh, contractor in the world.

Um, so you know, big names out there like Pratt & Whitney.

So basically if you're looking at the F-22 jet and jet engines, they make all that.

They've got, uh, they make, you know, some of the, the best engines in the world.

What is PTC Incorporated, Ty? What does it do?

Oh, every day that we see this chip destruction sort of makes you a little bit more nervous, doesn't it?

Certainly.

I mean, there, there's certainly volatility in these chip stocks, and, you know, given the way that they've gone up, uh, I'm not surprised there's, uh, you know, short-term, uh, profit taking and, you know, the, these corrective moves are gonna be vicious.

And, um, y- you know, it's the same on the way up.

We were all scratching our heads going, "How, how could it be so high?" Um, and, you know, we gotta remember that this is kind of a supply story still.

Um, you know, again, the, the HBM market, uh, it is still supply-constrained, but, uh, in the short term, you're gonna see these, uh, stocks being very volatile.

These corrections, uh, given that up move, uh, is not surprising.

... you know, a bubble bursting.

... what do you think?

S- the world certainly needs more GPU compute, right? So, um, NVIDIA, fantastic stock and, um, again, just to clarify why NVIDIA is the most valuable company in the world, it's not the hardware, right? So in terms of hardware, AMD actually produces really, really good, uh, GPUs as well.

It's the software stack behind it.

So the whole, the whole...

E- everyone who is doing machine learning and TensorFlow and, you know, PyTorch and all this, uh, AI stack, it is written to NVIDIA.

In order to transfer it to another platform, it's incredibly difficult because if, if you think about it, the software is at hardware level.

So it's very, very deep in terms of the stack, and to transition from that, it's incredibly hard, and that's why AMD is not say- seeing the same growth as NVIDIA.

[laughs] Kai?

Do you agree?

Yeah, no, absolutely.

And, you know, going back into the price of gold, it is seeing a bit of consolidation in this area.

So, you know, obviously last year it's had a spectacular run in the precious metals, but I think this year it's really about consolidation, and the, the risk is really inflation.

So, um, you know, given i- if there is a po- potential of higher inflation or sustained inflation, uh, it really puts pressure on the central banks here in Australia as well as in the US to, to either hike rates or keep rates high, and that's not good for pre- precious metals.

Um, so that's really what's been reflected in the market.

Um, having s- having said that, you know, we are seeing a bit of support around that 4,000 level for gold and silver.

I mean, are you f- where are you finding your sort of contrarian ideas?

And a bit more broadly, I mean, w- with that, with what's happening in the Strait of Hormuz, with what's happening with the BHP strike, I mean, why would you wanna be invested [laughs] at the moment? It's, it's quite tricky.

It, it absolutely is.

You know, there's still a lot on the board, and, you know, we kinda joked about it in a way where it's like the thing is, the peace treaty hasn't been resolved, right? So at any point it could flar- flare up.

And, you know, the thing that really gets me a bit confused is why oil prices back down at s- you know, the mid-60s, it dropped as low as that.

Um, because there's still quite a lot of, uh, supply disruptions, and they're obviously kicking back up again.

So I think, you know, the, the thing that stands out to me on the board is, uh, crude oil.

So yeah, it's to be seen whether this goes away quickly or it's, um, you know, it's a bit more long-term.

Well, let's talk then about maybe where there is opportunity or, or what you're seeing with some of these chip players.

So how do you view those sectors now?

Yeah.

You know, it's really interesting because I think every- before Kevin Welch came along, everyone ex- was expecting him to be a dovish, uh, Fed chair member.

Um, and then, you know, he came about and he was actually quite sensible.

So, uh, you know, given the conditions that we are in, uh, I know in Australia the inflation has been very high at above 4% most of the time.

Um, the US is expl- experiencing a similar situation, but not in- not as bad in the inflation terms.

Um, but it does cause the Fed to actually think about hiking rates.

Can it continue? What's your view?

That, you know, all of that sort of really emotive language around that.

You know, it's really interesting because when I look at this whole, uh, tech and AI space, I break it into three layers.

So you've got the infrastructure layers where, for example, you're talking about data centers, you're talking about the hardware components like RAM, GPUs, all that stuff.

You've got the cloud service, which goes above that, which, uh, uh, gives ability for people to use that, uh, base infrastructure.

And then you've got the app- application level above, right? So most of the money at the moment is going into the infrastructure, and it makes sense because people gotta build that compute capacity to actually service all the applications that they make.

Uh, the cloud also at the same time has benefited in some form, as we see with w- AWS and Google, uh, s- growth in their cloud service.

But I think the application layer hasn't really experienced that.

Oh, wow.

But how does it compare with global markets? Because we've underperformed, right?

Absolutely.

So, you know, in comparison to the US market or the Korean market, it's been buoyed by a lot of the tech stocks.

So in the US, you know, you've got the likes of Nvidia, Micron, Lam Research, all the big chip stocks.

The tech, the AI thematic has been very strong this year, especially in the data centers, as well as the chip sector, which has buoyed the AI theme.

So we continue to see that rally.

And in Korea, similar story with SK Hynix and Samsung.

Is that still something the market believes will happen?

But how does it compare with global markets? Because we've underperformed, right?

Absolutely.

So, you know, in comparison to the U.S. market or the Korean market, it's been buoyed by a lot of the tech stocks.

So in the U.S., you know, you've got the likes of Nvidia, Micron, Lam Research, all the big chip stocks.

The tech, the AI thematic has been very strong this year, especially in the data centers as well as the chip sector, which has buoyed the AI theme.

So we continue to see that rally.

And in Korea, similar story with SK Hynix and Samsung.

Is that still something the market believes will happen?

the e- you know, the energy space?

No, absolutely.

I think, you know, um, in Australia it's, it's, it's a little bit more difficult to capture that theme and, you know, it's definitely coming back around the uranium theme.

Um-But the reason why is because, uh, a lot of them are smaller miners here in Australia, so, you know, you do see a little bit more volatility.

But Paladin's done incredibly well today.

Um, I think out of the...

There- there's a couple of mid-size to, you know, companies that you would, uh, take on as a ura- uranium play in Australia, so Paladin being one of them.

Well, then let's talk about what we're seeing if the resurgence of some of these SaaS companies too, and, and whether or not there's further opportunity here.

[upbeat music]

You know, there- there's a lot of things going for Pro Medicus.

I mean, they do have a very good moat.

Um, and you know, the- the reason why it fell was people were thinking that AI, uh, would be a challenger to the product, um, where you'd have competing products, but I think this is- this is incorrect.

Um, it's actually an enhancer.

Um, and again, you know, talking about the moat that these businesses have, it's actually the contracts and also the proprietary data that they have behind.

So in terms of Pro Medicus, you know, their contracts are extremely sticky.

Yeah

... you know, we do a lot of these arbitrage spreads, uh, where you're buying something and you're selling something.

So it comes to always the conundrum where it's, if it's undervalued, are you putting on the hedge leg? Uh, which means, you know, if you're buying this company, you're selling a representative- representation of the same exposure on the other side, so shorting the other side.

Um, because the, the tricky bit is basically, like, you don't know whether the market will keep falling.

And the other question is also, is this structural? Because, um, you know, from a s- uh, from an instrument standpoint, right, there's just...

The reason why it's at a discount is because, um, you know, traditionally they've had fund managers to represent an index.

But in obviously today's day, day and age, you have ETFs, brilliant ETFs out there which are extremely low cost, um, that some of them do pay out the dividend as well.

Yeah

Can we start, Kai, with what we're seeing in the bond market and, and just what or how that effect is infect- affecting, I should say, investor sentiment at the moment?

Yeah, no, absolutely.

I think, um, the, uh, you know, the big news, uh, over the last week is basically the upward trajectory of bond markets across the world.

Um, so you know, we're seeing US Treasuries break, uh, new highs, um, in the 30 years and the 10 years.

Um, and what really the... what everyone's really w- afraid of at the moment is the inflation story, right? Because, um, you know, obviously coming off the, uh, war in Iran and com- higher oil prices, that's really, uh, caused a bit of concern.

Um, and the bond markets are finally reacting to it.

So, you know, this is kind of flowing into the equity market and risk assets as well.

What do you think we should expect?

So what do you make of this one?

Yeah.

I'd, I'd say it's probably in the similar category ba- as banks, um, i- in terms of sector view.

Um, you know, obviously it's a, this is a commercial, uh, real estate, uh, portfolio.

Uh, it is, it is very good.

Like, if, you know, taking outside the, the whole macro, uh, lens, um, from a company standpoint, um, it's actually quite good, Arena REITs, right? So its occupancy rate is fantastic, 99.3.

Uh, fantastic wall.

Are we more positive on Superloop after a bit of negativity this half-hour?

So what do you see in terms of further upside for some of these energy players that did get sold off a little today?

Yeah, no, exactly.

I think the, the long-term resolution is still not quite clear.

I think it is gonna peter out and they will reach some form of agreement.

Um, so you know, I think the market's fairly optimistic seeing that play out.

Um, but in terms of the actual supply, uh, coming back online, there's a lot of infrastructure that's been damaged.

Also, a little bit of logistics in terms of how the Strait will be or should be reopened.

What do you think that you're seeing from that reaction there in terms of, you know, whether or not we've had a bit of fatigue with some of these gold tie ups?

Okay

... yeah, a bit of insurance premium pricing and all that stuff.

Um, but you know, like, it's really interesting because, like, we gotta think about how they make their money.

Um, so basically they collect the premiums front up, um, and basically they can...

They create that profit from the risk spread, right? So basically they're getting in fixed rates, and then basically they can reinvest that money in whatever risk they choose to take on a high- with a spread, right? So I think as the rate environment, the rates will increase, um, you know, there's probably a widening in th- in that spread, so they will make slightly higher margins.

Um, how much is a question of, you know, uh, how much it goes up and how well the, the, the team does in investing.

Um, but I think, you know, really the key question from a business standpoint is their sales team, right? Like, how much is, uh, the book actually growing? How much is annuity sales growing? Um, so it's grown by about 33% year on year.

Yeah.