SIMON BROWN: Chatting now with our Kyle Wales, portfolio manager at Flagship Asset Management. Kyle [I] appreciate the early morning time. A note that you sent out basically [says it’s] time to buy consumer discretionary and tech stocks, looking here at the US rather than local[ly]. And a lot of folks are going to be [saying]: ‘Have you seen those prices? They’re under pressure, results weren’t excellent.
KYLE WALES: Absolutely. It’s always very hard to call the bottom of a bear cycle and people that try to do so normally fail. But when you do find good companies trading on compelling valuations and you have a long-term view, I think that’s more often than not, the time to buy. SIMON BROWN: You make a great point about this. You’re not sitting here bravely putting your head on the block and saying ‘the bottom is in’. Prices can go lower. There are still challenges out there. It’s just simply [that] we are not trying to predict prices. We are just looking at valuations in a sense.
So if I look at Adobe, for example, it trades on 28 times earnings, which is not cheap by any means, but it has grown at 34% per annum over the last five years. Colgate Palmolive trades on a similar multiple. Its earnings have gone backwards at a rate of 1% per annum over the last five years, but it currently has this halo around it because it’s a consumer staple stock, which investors believe will be more defensive in a market like this.
Yes! Markets are going higher. The fed is having to slow down.