Michael Smith, Senior Investment Advisor, Capital 19
My mission is to help my clients safeguard their financial future by making the right decisions today to build their wealth. But the best decisions aren’t always the most obvious. They require forward vision, spotting the innovators set to disrupt the market and the technology that will transform our lives. In every respect, catching sight of tomorrow’s trends, today.
All too often, advisors look backwards and don’t take heed of these signals early enough. By then, the next big technological breakthrough is already in motion. But to look forward, it’s important to have an outlook shaped by key principles that lend themselves to discovering the next opportunity. These five principles underpin my investment philosophy and the way I manage my portfolio, enabling you to capitalise on the future before everyone else arrives late to the party.
When I look for companies to invest in, I don’t necessarily consider what has been successful to date. Sure, some stocks like Apple and Amazon have demonstrated an extraordinary journey of rags to riches. But tomorrow is what counts. And what drives the story of tomorrow? Growth. However ordinary growth isn’t enough if you want to set course for a journey that will greatly enhance your wealth. You need companies that operate in a huge growth channel that have the ability to consistently expand their revenue at a rate of knots. This is the journey we want to share together.
Even though technology is the way of the future and advancing at a rapid pace, that’s not to say any and every savvy start-up fits the bill. While a rising tide lifts all boats, it’s only the sturdiest ones which make it back to shore when market conditions deteriorate. And in this respect, revenue is as good a foundation that any tech business could hope for. So if it isn’t generating revenue, it’s out to sea. Beyond revenue, I look for proof of concept, a company with a minimum viable product or service that can play a central role in bringing change to an entire sector or industry.
While I embrace a particular focus on the technology sector to leverage tomorrow’s growth opportunities, it’s also important to know when the market is telling you otherwise. That includes cyclical opportunities, where history often shows an uncanny habit of repeating itself. Now that we’re entering an environment with increasing interest rates, it pays to capitalise on other trends. The financial sector and banks offer great exposure to this, with their historical performance demonstrating consistency under such conditions. So even if the journey is about tomorrow, it doesn’t hurt to stop for a moment and pay respect to today.
US markets have staged a multi-year bull run, but as we know it pays to look to the future when things aren’t as rosy. But until then, I invest 100% in US markets. They offer the biggest future opportunities in the world and have allowed me to leverage a declining Australian dollar for years to significant advantage. However, even when markets go pear-shaped, you don’t need to see your wealth diminish. The best portfolio is an agile one, so I always retain the flexibility to hedge the portfolio if and when necessary. Not only does this flexibility offer peace of mind, but it ensures that I don’t have to sell everything if US markets turn negative, or when the Australian economy picks up.
One of the most fundamental aspects of my investment philosophy is to manage the capital as if it were my own. This isn’t just some noble aspiration, it is a belief put into practice. I have invested and still regularly contribute a large portion of my own capital into the portfolio. I believe it is just as important to have skin in the game, so my interests are always in alignment with my clients. A team is only as committed and motivated as their leader, so by having personal conviction in the positions I open, we all stand to share in the benefits. Our investment really is a collective and united journey into the future.
If you’d like to learn more about my journey and investment philosophy, please contact me below to arrange a time for us to chat face to face.