Podcast Summary
ESG scrutiny and sustainable business growth: Businesses can drive innovation and scale best practices in sustainable business despite increased ESG scrutiny, generating significant tax revenue for governments through savings interest.
The Bloomberg Sustainable Business Summit in Singapore focuses on unlocking business growth amid increased Environmental, Social, and Governance (ESG) scrutiny. Global business leaders will gather to drive innovation and scale best practices in sustainable business. The summit is supported by various organizations, including Standard Charter and the Singapore Economic Development Board. Additionally, Maren will be hosting conversations at the Edinburgh Fringe Festival with notable guests, including Ed Conway and Russell Napier. In the podcast, Maren speaks with Adam Rackley, a fund manager at Cape Wrath Capital, discussing deep value investing in the UK. John Stapleton writes about the significant amount of tax revenue the UK government has been collecting from savings interest, which is often overlooked and can be considered a "voluntary tax" or "apathy tax." This revenue is substantial, with £10.4 billion collected in 2022, surpassing the amount from inheritance tax and coming close to that from property transaction tax.
Means-tested state pension, wealth tax: The UK government's consideration of a means-tested state pension could lead to a complex wealth tax, with potential for asset shifting and administrative complications. Instead, a system of 'lifetime gifts' could encourage wealth transfers and simplify the tax system.
The UK government is considering implementing a means-tested state pension, which would effectively introduce a wealth tax. Rachel Reeves made this point during a discussion, highlighting the complexities of determining what assets to include in the means test and the potential for people to shift their assets to avoid the tax. She suggested that instead, the UK should consider implementing a system of "life time gifts" rather than inheritance taxes, which would encourage wealth transfers and simplify the tax system. Additionally, the discussion touched on the National Wealth Fund, which is intended to provide public subsidies for projects that the private sector is not investing in due to insufficient returns. The fund is designed to "crowd in" private investment by offering incentives or subsidies. Overall, the conversation emphasized the importance of simplifying the tax system to encourage growth and reduce administrative complications.
UK Small Cap Market Opportunities: The UK Small Cap Market offers opportunities for active investors due to less research coverage and potential inefficiencies, historically showing high growth rates and strong performance over longer timeframes.
The UK small cap market offers significant opportunities for active investors due to less research coverage and potential inefficiencies. According to Adam Ragley, fund manager of Cape Breton Capital, the UK small cap market has underperformed larger companies in the last five years but historically has shown high growth rates and strong performance over longer timeframes. The lack of research coverage can create opportunities for active managers to generate alpha. Additionally, investing in one's home market, such as the UK, can provide an edge due to better understanding of the culture and language. Overall, small caps in the UK can be a compelling long-term investment despite their volatility and underperformance in the recent economic environment.
UK market opportunity for value investors: Value investors can benefit from the UK market's relative cheapness, potential catalysts, and political stability. Short-term holding periods can maximize returns by buying at a discount and selling at fair value.
The UK market, despite its ongoing challenges, presents an opportunity for value investors due to its relative cheapness compared to other markets and potential catalysts such as takeovers and buybacks. The perception of political stability following the election also adds to the sense of optimism. Contrary to popular belief, value investors like Nick Train advocate for shorter holding periods to maximize returns by buying at a discount to fair value and selling at fair value, rather than relying on the long-term compounded growth of the underlying company. The investment approach that best fits an individual's personality and a disciplined process are crucial for generating returns.
Value Investing: Successful value investing combines deep analysis of a company's fundamentals and holding for a short period. The approach involves assessing risks, potential catalysts, and using quantitative metrics, but ultimately, human judgment is crucial.
Successful value investing involves a combination of art and science, with a focus on identifying undervalued companies and holding them for a relatively short period of time. The value investing approach advocated by the speaker involves a deep analysis of companies' fundamentals, including earnings and valuation, as well as an assessment of risks and potential catalysts. The speaker's fund, which has a small number of holdings and a low capacity, aims to meet the needs of the fund manager rather than relying on fees from investors. The valuation process is subjective and involves the use of various quantitative metrics, but ultimately, the human brain is the best tool for making investment decisions. One example of a current investment is Marston's, a pub company with a tangible book value per share that is significantly lower than its historical takeover offer and current share price, and which also has a valuable brewing joint venture that is currently undervalued. The holding period for investments is around 12 months on average.
Long-term investing: Successful long-term investing requires patience, understanding of business models, and adaptability. Companies with strong fundamentals, even after share price declines, can present opportunities.
Successful long-term investing requires patience and a clear understanding of a company's business model and market conditions. The investors discussed in the conversation emphasized the importance of sticking to their investment thesis and being prepared to wait for the market to recognize a company's value. They also highlighted the need to be open to acknowledging mistakes and adjusting investment strategies accordingly. One specific example given was the case of Jones, a company that has historically done well in the student housing market but was hit hard by building safety regulations. Despite this setback, the company's business model remains robust, and they are diversifying into other areas. The investors expressed confidence in the company's ability to recover, especially given the renewed focus on house building under the new government. Another important takeaway was the potential value of companies that have experienced significant declines in share price but still have strong fundamentals. The investors mentioned YouGov as an example of a company that may not be cheap yet despite the decline, but could present an opportunity for value investors as quality growth investors sell out. Overall, the conversation underscored the importance of a disciplined investment approach that balances patience, analysis, and adaptability.
Economic climate and value investing: Unexpected events can impact small caps and value investing, underperformance in tough environments, avoiding overpriced sectors, and gold vs Bitcoin debate with underlying business models importance
While the current economic climate may be favorable for small caps and value investing, unexpected events can still derail this trend. Small caps tend to underperform in tough environments and value stocks are often seen as riskier compared to growth stocks. Additionally, avoiding overpriced sectors like tech, especially in the case of a potential bubble, is important. Regarding the age-old question of gold versus Bitcoin over a 10-year period, the speaker prefers gold due to its tangibility and limited need for infrastructure to function. However, the argument for Bitcoin as a limited supply digital currency with political and trust-related benefits is also valid. Ultimately, understanding the underlying business models and sectors is crucial for successful value investing.
Personal finance, Sustainable business practices: Marin and John will discuss personal finance topics like taxes, mortgages, savings on their podcast. Global business leaders will gather at the Bloomberg Sustainable Business Summit to discuss sustainable practices and innovation.
Marin Somerset Webb and John are going to start a new segment on their podcast, focusing on personal finance topics. Listeners are encouraged to suggest topics they'd like to hear discussed, which could include subjects like taxes, mortgages, savings, and more. The podcast will aim to provide ideas and insights on these topics for approximately 10-15 minutes per episode. Additionally, the Bloomberg Sustainable Business Summit is returning to Singapore on July 31st, where global business leaders will gather to discuss sustainable business practices and drive innovation in the face of increased ESG scrutiny. Companies presenting at the summit include Summit Advisors, Bangkok Bank, Fraser's Property, Red Sea Global, RGE, Schneider Electric, and Star Energy Geothermal, among others.