WILL NUTTING | from Nutstuff
WILL NUTTING | from Nutstuff
How do you construct a portfolio like you’d choose a sports team? And why is it that something everyone hates can still go up in value? Joining me today in the search for meaningful market fulfilment is Will Nutting. Will is the Founder and CEO of Nutstuff, a no-nonsense, 3X a week newsletter that helps readers sift through the noise and identify investment opportunities. It offers in-depth research and data on global events and how they influence financial markets.
(0:00:01) - Building a Portfolio (6 Minutes)
We explore how to construct an equity portfolio, the background story of the founder and CEO of Nutstuff, and the importance of taking ownership of a portfolio. We also discuss the rise of passive investing in the US, the potential catalyst for change, and the importance of looking at the areas of the market that are under the radar.
(0:06:21) - Changing Investment Dynamics Around the World (6 Minutes)
How to generate better returns by understanding the psychology behind the world, Maslow's hierarchy of needs, the disconnect between the stock market and society, the trajectory of debt in the Western capitalist system, and the energy bridge from the old world to the new world are discussed. The implications of money printing and inflation, and the themes worth investing in are also considered.
(0:12:30) - Geopolitics, ESG Investing, and Global Opportunities (10 Minutes)
ESG investing should reward the worst performing companies for becoming better actors. Countries like Norway may be re-rated due to their clean energy resources. The New Crescent of Eurasia and the geopolitics of investing offer opportunities that may arise from a change in geopolitics. Central Asia provides historical and demographic perspectives.
(0:22:12) - Investing in Equities (5 Minutes)
We discuss the importance of equities as a way to double money in 10 years and how to use the sports team analogy to think about portfolio construction. We look at how the end of free money and a value bias is changing asset allocation and how young people can become interested in markets - read as much as possible, run a paper portfolio, and understand success stories and failure stories to inform investments.
(0:27:25) - Investment Tips and Stock Recommendations (10 Minutes)
We review the current state of mid and small cap companies and how to guard against losses. We also review Veon, Macau de Libre, Petrobras, Uranium and Camaco as stock tips for Q4 2023, as well as the flow on effects of the Inflation Reduction Act.
TRANSCRIPT FOLLOWS AFTER THIS BRIEF MESSAGE
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0:00:01 - Chloe
Stocks for Beginners. Phil Muscatello and FinPods are authorized reps of Money Sherpa. The information in this podcast is general in nature and doesn't take into account your personal situation.
0:00:12 - Will
I try to think of ways of explaining to young people how to think about an equity portfolio. So one of the ones I have is you know, get a piece of paper out, put a line down the middle on the left hand side, put down all the companies and all the things in your life that you couldn't do that and then think the cost of having all those things. If you were to double the cost, which ones would you stick with? And then, to the right, right down the names of all the stocks the publicly traded companies could sell those products. And that's the essence of your portfolio.
0:00:45 - Phil
G'day and welcome back to Stocks for Beginners. I'm Phil Muscatello. How do you construct a portfolio like you choose a sports team, and why is it that something everyone hates can still go up in value? Joining me today in the search for meaningful market fulfillment is Will Nutting. G'day, Phil. You almost said it like almost like in Australia. That was very good. Will is the founder and CEO of Nutstuff and no nonsense three times a week newsletter that helps readers through the noise and identify investment opportunities. It offers in-depth research and data on global events and how they influence financial markets. So tell us a bit about your background story, which I believe involves financial services industry and the military.
0:01:32 - Will
So Phil, thanks, great to be here, great to chat to you. The background of Nutstuff came from my nearly 30 years of working in the equity world and I was just someone, I think, caught in the concept of equities as stories and bonds, as math, and so 30 years of telling stories and I live at university. I left school, I traveled, I messed around in the world a bit and then I ended up falling into the equity world. And I started in the world to Japanese equities, which is kind of interesting as we see what's going on in Japan Even today. I think the yen is sitting 36 year highs. That's another thing we can talk about later.
But, as I say, I fell into the equity world and as I worked through a bunch of investment banks and I used to deliver equity research to clients, increasingly I found that equity research was increasingly influenced by editors and it was increasingly influenced by compliance people and it just became so sanitized that I was never sure that it had a tangible, investable conclusion. And so eventually I came out about three, four years ago. My last place I worked was Stiefel Nicholas and London, which is a US regional house, and I set up on my own and I'd always written something called Nutstuff inside equity research firms, which is kind of my view and my take on what was going on in the world, and so this is the natural extension of that, and what I try to do is I don't think of it as a newsletter really. I think of it as a kind of a fact and conclusion letter, which maybe sounds a bit pompous, but it's trying to do the so what on what's going on in the world. It's trying to connect the macro, the geopolitics, with the real world, which then connects into the financial world and asset allocation and also goes down to individual stock ideas and investment thematics, investment, the themes.
I sort of think of myself as a proudly a non-graduate in terms of university, but I kind of look out the window. I believe in the elevator test on anything that I'm being pitched or pitching, I think it has to have joined up thinking and no babble speak. And I think when you combine all those things and you look at what's going on in the world and you have to have a portfolio that you have to take ownership of, which I published every Monday, I think what that does is it forces you to have some investable conclusions and I think, in all honesty, that's probably quite a valuable asset to have at the moment.
0:03:47 - Phil
I think it's always interesting to reflect on research and analysis that a lot of the big broken houses and the research analysts come up with, because, as you say, it's sanitized and it's often conflicted as well, because the people that are doing this research out for their own interests in terms of their clients, who are also the people and the companies that they're doing research on. I think it's really important to have your own individual views of things and take all of this research with a grain of salt, don't you?
0:04:13 - Will
I think that's right. I feel very fortunate that I have access to an enormous amount of research, an enormous amount of different views. Most of the big firms give a lot of their stuff away for free, now or next to free, and so I think it's incredibly important, incredibly interesting to see how different firms approach different subjects. I also think it's interesting to look at the areas of the market that the big firms are given up on, and very often the areas of the fur the market that are not being looked at marries into the phenomena in equity markets, especially in the US, I think, where you've got it's active versus passive investing, and I don't know what the real number is. I don't think anyone is real numbers, but I've heard the real number of active versus passive is something like, you know, it's 92% passive versus 8% active, and so when you then think about, you know where people are and why we are in such a mega-captro in world. You know, I still think in the US the S&P 400 and the smaller make up indexes are trading at 20 year lows, and they're trading at 20 years lows because it's all the money's going to the bucket of market cap and no money's going into the shot glass or the pint mug, market capitalization. And so I guess the question is what's the catalyst to change that?
And secondly, as I say, it's, you know, it's trying to find the areas of the market, to be honest, that I think that the world isn't looking at, and some of those examples I would give is Calibre and marijuana. Today, two and a half years ago, three years ago, we were picked up and we're talking about coal stocks. You couldn't find a coal and it's left on Wall Street, despite the fact that, you know, the world was still addicted to, and remained addicted to, fossil fuels and coal. And so I think there are those pockets of opportunities and we try and find them, try and do some work on some rudimentary work on them. We're just trying to lead to some of these things, and that's what makes our job interesting. So I think, as I say, it's very interesting to look at what the competitive sell side is doing, but I think it's also incredibly important to also focus on whether or not we're focused.
0:06:02 - Phil
So you mentioned your research into global events and how they influence markets. What's your view of the current over supply of global events?
0:06:11 - Will
I think you've got to pick your spots. I think you and I talked before we came on this. You know that there are many other people who will qualify talk about the Middle East than me. I think it's the so what and the conclusions. I think the overall thematic that I see at the moment is it wasn't my original theme. I think it came from Kirill Sokolov and it was a description of the rise of the oppressed and the revenge of the colonized.
And I think, when you add to that the notion that we're moving from a unipolar world to a multipolar world, and you look at the fact that most politics, especially Western politics, is based on a world of free money, which we've had for the last 20 years, a world of what's happened and worked for the last 40 years, without, I think, giving enough acknowledgement to the fact that the Middle East has changed, the Eurasia has changed inexorably, china has changed, the US has changed, societies in Europe have changed, demographics has changed and I think, therefore, when I look at the oversupply of all the macro stuff, the spots that I'm trying to pick are how does the world convert from a unipolar to a multipolar world? How do we get our heads around, not starving the energy bridge from the old world to the new world, capital. Are we going to get revolution or resolution to the things that are going on at the moment in the Middle East? And then I think it's even more simple things. Just where is all the market? Asset allocation, fund managers, iras, 401ks, retirement funds, private clients, stop brokers, all the people that you speak to?
It seems to me that they are still betting everything that's worked for the last 20 or 30 years. It's going to continue to work in the same way, and politicians are doing the same thing. Politicians. The US still thinks that saving a carrier group into the Gulf is going to strike as much fear into the hearts of people as it did in 1991. And, as I say, others are better qualified to analyze the difference in warfare and the difference in defense platforms and drones versus F-22s and F-35s. But I think, as I say, some of those bigger thematics are really really important things to consider, and that's the stuff I spend my time looking at.
0:08:19 - Phil
So this leads you to believe that to generate better returns, you need to understand the psychology behind the world and how it works. Tell us about that, because it's almost like you've got the world on the couch now, haven't you?
0:08:31 - Will
Yeah, I'm not. What is it? I mean it's think about Maslow's hierarchy of needs, right, think of that triangle of needs, you know, and think about how, when you come off a a binge of free money, when you've been buying lottery tickets, when you've ended up with an incredibly indebted, incredibly entitled society that's addicted to government spending, and you think about where that focus takes you. It takes you to the top end of the pyramid, and the top end of the pyramid is all the stuff that the fang stocks. So you know, it's people call it woke or it's it's the indulgences and all the things that I think are some nonsense and some boils down to just good manners and respect to people being having differences of opinion on things. But the reality is that we sort of forgot the bottom end of the pyramid of needs and the pyramid almost got rotated, and I think what we're now doing is from a stock market perspective and a societal perspective.
I think the pyramid is now back with the point upwards and I think we're just trying to get our heads around the fact that actually, you know, 5% of the S&P's weight sitting in energy and 30% plus sitting in a bunch of companies that you know, on the whole, maybe sell productivity, maybe we'll sell the AI solutions of the future, but also encourage young people to waste an enormous amount of time and take away productivity.
I think that disconnect is going to, in some shape or form, meet somewhere in the middle. And so I think, from an investment perspective and you asked me, with money costing something, whether it's returned to positive real rates you know Stan Drucker Miller was out this week. You know, saying the system doesn't work. You know when you look at the debt that's being created, you look at where, what the trajectory of debt is. The Western capitalist system cannot continue to work in the system. And so I think the, I think the opportunity is trying to think about what next, what if? Looking again, as I say, at the Masloff's pyramid of needs and trying to use that as an analogy to understand what the opportunities in markets, sectors and themes are.
0:10:32 - Phil
We've actually covered that on the podcast quite a bit the amount of debt that's being created by Western governments, and including the United States as well, and you know it's an insane amount of debt and they can keep on printing money. But do you think that inflation is a secular theme that's going to be with us for a long time because of this money printing process?
0:10:49 - Will
Well, I mean, I always struggle to think about things in our personal lives that cost less, and it's quite difficult to find much deflation in our individual lives. You know, and I think we forget my father's 88 years old, and I constantly have conversations with him and he reminds me about what the cost of money, where inflation was, and how society and economies function entirely normally with 8% or 9% money. But of course, 8% or 9% money doesn't work when you have the degree of debt that you have in the economy that we have today. So I think, to a degree, that's the problem we have.
0:11:22 - Phil
So, just taking that on board, what are the kind of themes do you think are worth investing in at the moment? What are you looking at?
0:11:29 - Will
I can say again to me it's again. I go back to the energy bridge and I look at the fact that I think we starve parts of the economy that we need to keep alive in order to get us to the other side of the chasm. So I think about coal, I think about oil, you know. I think about the North Sea, I thought about exploration, production in the North Sea and, as I say, of course, I think you know, if we're sitting down with our children, we're all able to understand and want to get to a world of carbon neutral, or certainly, you know, we want to abuse the planet less than the planet is being abused, although I think I subscribe to the notion that the planet's a little bit like babies, you know, which is? I think they're reasonably human proof and so I think, as I say, I worry more about the human race than I worry about the planet. Long term, I think the planet will be able to heal itself and survive. So I think I look at that. I think to go back again when I think about ESG and I look at the kind of two trillion or so of assets flowed into ESG. I think the next iteration of the GSG is going to be much more common sense. Cool.
I thought about ESG who should be rewarded in the ESG world. I feel like looking at a school where you get the prize giving giving the best performing prize to the goody tissues child who was a goody tissues in day one, and state of goody tissues was pointless. The most valuable prize was to be given to the worst offender, the most badly behaved child, who then became the most improved child. And what we've done is we've rewarded all these green companies. They were already green from their inception. They were created under green mandates and actually what we should have done is you looked at all the brown companies. There were serial offenders, but actually then we're taking on board what they needed to do to become better actors in this new world. And so I think there's going to be a really seminal change in the way we look at ESG investing and I think that's going to be immensely positive. So I think the BX on mobiles, the Occidentals, some of the fertilizer companies and all the companies that feed into them, I think are potentially actually going to get re-rated under this basis, and I think there will be an expansion of buyers because I think that some of these ESG mandates will be expanded in order to take into the fact that they'll be able to. I don't think coal will ever get included in that because I think it's too far down the line. But, as I said, I think on oil and gas, I think is also interesting. And then I think some of the other themes I've come to mind is I think we've got so obsessed by indexes and we look at the index weights, you look at the constraints of index weights, and I said almost like to think about countries rather than indexes, and I think you have to look around the world and try and work out who the winning countries are going to be. You know, is Norway going to be a winning country? Because ultimately they will be able to provide some of the cleanest gas in the world for the foreseeable future, and that's exactly what Europe needs. With what we've seen with Russia, ukraine, etc. What does that mean? A significant re-rating for the Norwegian economy.
One of the things I do is I spend a lot of time travelling, and I travel not just because I like travelling, but also, you know, this year I've been in. I was in Namibia, I was in Central Africa, I was in South Africa a bit. I then travelled out to Eurasia. I was in Uzbekistan, I was in Kyrgyzstan, and the reason I do that is to try and go and just explore interesting places, meet government ministers, meet business people and just try and get a sense as to what the Delta is in some of these economies. And what you find in all these places is incredible demographics, you know, formally toxic political environments in the case of Kyrgyzstan, obviously part of former Soviet Union, come out of this and with incredible opportunities. So what I then look at, there's a guy who I speak to who describes that as the sort of the Fertan New Crescent, and I think the Fertan New Crescent of Eurasia. It is fascinating and I think you have to look at that from the perspective of maybe, etfs or maybe just, you know, country specific exposure. I'm sure the other thematics that I think come to mind. I guess those would be the key ones.
And then I think the other thing is when I look at the geopolitics of investing, you know it's what is price for perfection and what is priced for death, you know, and I think trying to look at some of the derivatives on what if we to get a peace dividend in Ukraine, you know, if Mrs Zelensky is not able to negotiate, then maybe Mrs Zelensky has to go and somewhere else has to come in and negotiate. But peace we've got to try and get peace in some shape or form in Ukraine. If we were to get that peace dividend, how would that translate into an equity investment? Does that mean a? The former Vimplecom, vion, for example?
You know which is the cheapest low our phone provider in the world over 200 billion customers. You know tiny arp, whose huge opportunity I should be in a good stock this year so far but I think still has, you know, massive opportunities. So I think there are some really good special situation ideas. You know that I think of that might be beneficiaries of a sudden change in geopolitics. What was the name of that stock? Again, the mobile phone, the on Vion. It was the former Vimplecom and then they sold their Russian assets and they now have a huge amount of mobile assets across a lot of very toxic places. But I think what we know is that the most important asset to anybody at the moment is their mobile phone.
0:16:42 - Phil
Just a little bit of a sidebar here. I'm a great fan of do you know, the Peter Frankapan books, the Silk Roads.
0:16:47 - Will
Yeah, I know I know of Peter and I have some great friends of mine that are great friends of his, and so I followed him and read and spent a lot of time looking at it.
0:16:55 - Phil
No, it's just interesting to reflect on that book and how you can look at world history from a central Asian or Eurasian point of view rather than the traditional European point of view, and how much perspective it gives you on how history has developed and also those kind of geopolitical imperatives that are really created out of Central Asia that we often don't even think about.
0:17:18 - Will
I think that's right. And I think when you marry the demographics and the economic vibrance with what is under the ground and with what we need as a result of our desire to pursue a, you know, carbon neutrality and net zero, etc. You know if we're going to get to the stage that we're going to get to, then it's obviously incredibly important that you know we have access to the rare earth materials the lithium, the copper, etc. Etc. And so I think when you look at the demographics and you look at the population shift, you just think simplistically about you know the worth of demographic center of the world and it's undoubtedly Moved East and arguably it probably is somewhere between Singapore and the Middle East, I guess. So I think you're right. I think when you back up and you think about it, that kind of focuses your mind on you know where the center of the world is in that perspective.
0:18:06 - Phil
And also, interestingly, I've doing this podcast and talking to several players in the energy space and investors in the energy space. How much now Europe is opening up exploration again for gas resources because you know they don't want to get their gas from Russia. So whereas in the past they were almost regulated out of existence, now there is exploration actually going on in the European continent itself.
0:18:30 - Will
Yeah, but I think it needs masks, doesn't it? That's hugely exciting.
0:18:35 - Phil
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0:19:26 - Will
It's just that there are geopolitical realities in play here, what goes back to Mazdan's hierarchy of needs. You need security. We've all got back to it's a very real issue the last three weeks. There's a lot of people in a lot of parts of the world. People are feeling unsafe and non-secure. I think that's a hugely important thing. I've done a lot of work on the defence stocks and we made a very good performance in defence stocks in the last couple of years, but actually we cleared a lot of them out at the beginning of this year, not because I thought the world was going to become a more safe place, but because I felt that the trends in warfare which I talked about in the beginning warfare on the cheap and I think the potential risks to the big platform defence companies are that in fact, some of these low cost drones and such like are going to render some of these very expensive platforms obsolete.
0:20:13 - Phil
So I just wanted to throw a quote of yours back at you, which is something everyone loves can go down, while something everyone hates may go up. What's the lesson behind that quote?
0:20:24 - Will
Well, I always think about the paradoxes of investing. It's contrarianism, isn't it really? But I think the detail of the quote is you know, when everyone loves something, it must go down, and when everyone hates something it may go up. I think what I talked about earlier almost was in the case of coal stocks. You know, everyone hated coal stocks. No one could invest in coal stocks. No Wall Street firm employed a coal analyst.
In fact, when I was a steafel, I think, we had the last coal analyst almost on the street and he was retired. At which stage he suddenly looked and said is coal demand going down? No, are the stocks hated? Yes, are these stocks throwing off enough free cash flow they can start to pay down their debt, which is the reason that everyone disliked them in the first place. Yes, and you suddenly begin to connect the dots. And so we got lucky, smart, lucky, whatever it was. And you know we were buying CEIX and Peabody. You know incredibly low prices and they'd been 10, 15, 10 X stories. You know, and I think it's trying to find some of the hated stocks and trying to find things that are hated for good reason, or trying to find things that are hated just because they've gone out of fashion, or because the spotlight has just gone on to something else.
0:21:33 - Phil
So tell us about your idea that a portfolio should be constructed like a sports team.
0:21:38 - Will
I think this goes this sort of feeds into the what not stuff wants to do. The classic kind of nut stuff reader is either a seer and experienced fund manager who wants a kind of good read that covers quite a lot of bandwidth on a reasonably regular basis. That means that he sort of picks up on things that maybe he or she haven't picked up on, and the flip side of it, too, is I want lots of young people to get excited about the stock market and I want them to feel especially in an inflationary environment, where we talked earlier on having higher structure inflation. At the end of the day, if you make any money, you have any money or inherit any money. The kind of key question is how do I double my money in the next 10 years? Maybe you double your money quicker by investing in the crypto or investing in something else betting on the horses but if you can compound your money at 7% and double your money in 10 years, my point is equities has been the way to do that, and I still think equities is the way to do that, and so what I try to do is I try to think of ways of explaining to young people how to think about an equity portfolio. So one of the ones I have was you know, get a piece of paper out, put a line down the middle on the left hand side, put down all the companies and all the things in your life that you couldn't do that and then think the cost of having all those things. If you were to double the cost, which ones would you stick with? And then, to the right, write down the names of all the stocks and part of the traded companies that sell those products, and that's the essence of your portfolio. Right To go to your question about the football team is you know football, you have offense, defense, goalkeeper, and so when I think about a portfolio construction, I think you know, start with the goalkeeper.
The goalkeeper is kind of gold and arguably actually crypto, which is he or she's never going to be your highest paid player, but you're not going to play without a goalkeeper. So gold, crypto, whether it be an ETF or what have you is your goalkeeper. Then you kind of have your defense, which traditionally was your dividend paying stocks. Now I think you have to think about that now, in a world of 5% rates, you know, a 6%, 7% equity yields just is not that exciting anymore. You know, when the rates were zero, that was exciting. So they're probably your lower risk, they're your lower risk stocks.
You then have your midfield, which is your classic kind of growth stocks, and then your front row was traditionally your highest growth, your invidias, your, you know, your Googles, your Netflix is your, your AI stocks, or whenever it was, you know, I think, from the left, in the middle of your team and on the front end. Now you know you actually got to have some fairly heavyweight, you know, cheap players and so the traditional way of thinking about the sports team. You know, I think it's more. That, I think, is actually an interesting exercise on thinking about that sports team analogy and thinking about how, with the end of the year of free money ending and more of a value bias and a free cash flow bias and a shorter duration bias coming into asset allocation, how that actually makes you think differently about the sports team, and it's probably something inspired me to have a look at it. You know, maybe write something on how a sports team has changed.
0:24:45 - Phil
Are there any other suggestions you've got for young people to become interested in markets? Because it is important, even if you're not going to be investing in individual companies. It is always worthwhile knowing about your finances, how your money is used, where your money is invested, whether it's in a 401k or a pension plan or whatever to have actually some understanding of markets and how they work.
0:25:07 - Will
Well, I think you know, read as much as you can about what's going on in the world. Try and identify people that write readable, sensible analysis and sensible thoughts about. You know, connecting the macro and stocks and then try and run a paper portfolio. Try and find a teenager that doesn't buy training shoes or you know sport shoes, you know, and go and read Phil Knight and Nike's biography and then look at why Nike was a success, that it was and look at why Nike has ended up having some of the problems it has, and some of it goes down to the nonsense that we discussed, where they started chasing rainbows and chasing a lot of things that they shouldn't have chased. And then look at the opportunity that came from on running. You know Swiss company Roger Federer put some money into it. You know, huge, exciting, hugely interesting. How has a company like on running come up behind them? You know there isn't anyone there that probably hasn't seen. You know our generation. Or buy these on shoes and try to do some real world examples of success stories that kind of plateaued and then the opportunity that was created for another company to come up underneath it. You know. Look at Victoria's Secret. You know Victoria's Secret was this unbelievable success story. You know there wasn't a fund manager on Wall Street that didn't want to be invited to the Victoria's Secret one way, so in Central Park or London. But also look at how Victoria's Secret lost. They kind of they disappeared inside themselves and they lost sight of what they were and who their customer was. And so, consequently, you know, this is a stock that went from the six or seven billion dollar valuation back to a billion dollar valuation. You know, now, with the UK CEO, I think they're healing and they are going back to basics and the world has changed, and so they have to do things differently. But I think they're realizing that actually, like a lot of companies, they didn't really appreciate why they were as good as what they were and they allowed a younger generation of management to come into the company and assuade them to do things differently. They're detracted from their core excellence and expertise.
And so I think, for young people, the great thing about it, as I say, I go back to what I said originally, which is that equities are stories and bonds are maths. So for the mathematicians, the bonds and the complicated stuff are super interesting For the young people on the basis of stories. Find stories that you're interested in, find areas of the market that you're interested in, whether it be sports, whether it be, you know, music, whether it be media and entertainment. If you do that as a matrix, on that matrix you'll be able to find private Israeli companies and you can ultimately build a matrix that enables you to do what I tried to do, which is to take the geopolitics and the macro of the world and then connected to the financial world and then connected into a bunch of investment themes. That then produces a portfolio of best of breed stocks, and it's fun.
I've done it for a long time and it makes that whole thing is fascinating. It's like being a restaurant critic, that you can sit and discuss the fashions of food and ultimately, what I want to know from the restaurant critic is what restaurants should I eat in? You know who's the best chef or restaurants are you eating? I always wanted to tell me what I should order off the menu. You know what's the best pudding and what's the best starter and such, and very few restaurant critics will do that. You know they'll hide behind the generalist commentary, and so I think for young people, you know, just get into the weeds and use some real world examples and test it out on the stock market.
0:28:35 - Phil
And the trouble with stories is that people do love hearing stories, but people can persuade themselves of wrong investments, throw their money down the sinkhole just because they believe in a story. I mean, we hear it all the time with you know energy metals of the future, for example, and people tell themselves that these have to go up. How would you suggest people guard against hearing a story and then losing money because they believe in it so much?
0:29:01 - Will
I mean, I think the numbers tell you a lot. So when you look at growth businesses, it's trying to understand what the total and adjustable market is. You know how early are they in their journey? What is it going to cost them to get from where they are to commercial production? And at that stage, I think it's one of the reasons why mid cap and small cap is having such a tough time at the moment is because a lot of small cap companies and mid cap companies are. They may be hyper growth but in a lot of cases they need funding on that journey. And if they need funding on that journey, people need to get a sense of the milestones you know are there, in order from the adjuster by the funding.
And of course, I'm afraid I have an enormous amount of cynicism at this stage of the cycle in private equity and what's going on with private equity and the marking of their own homework and the perpetual kind of marking up seems to portfolios which flies in the face of what's going on with public markets.
And so I think that for a lot of these smaller companies that are on this kind of early in their journey, I think you need to rely a little bit more on some external analysis and industry analysis and I think you've got to be careful. You've got to be especially careful in a world where money is costing what money costs. You know, I think this was a much easier space to make money and where money was free. We're now in a world of businesses that have got to stand on their own two feet without government subsidy. You know, free cash flow, replacement costs of assets, return on assets. You know this is ROE, not Enterprise Value to EBITDA, and if I'm talking double Dutch, then I think you know that's the stuff that I think people need to be careful of.
0:30:40 - Phil
So we've been promised some stock tips for Q4 2023. What are those?
0:30:45 - Will
Well, I think we covered a couple already. My color call option for some piece in some of the more volatile parts of the world is still Veon, which I've discussed as a mobile operator with very low ARPU, with huge footprint and huge opportunity and huge upside. So I think that's more than I would Sorry. What is ARPU? Sorry, it's the average revenue per user. So $5, $6, $7 average revenue per user is, you know, clearly going up, as obviously utilization goes up, data goes up, and so I think you know this is the most lowly valued mobile operation in the world. So I think that's one that I think is worth. It's up 16% this year. It's on the charts. I think that, on my thematic of countries, not indexes, I like the opportunity that I see in Latin America and I think Latin America with, in the case of Brazil, a pretty good central bank that's doing the right thing. On rates and I think you know, with a big commodity type culture, you know I still like Macau de Libre, I still like Petrobras being the best of breed companies.
Uranium has been a big focus of my two years. The stocks are only just really beginning to work properly now and I just look at this as a classic what I think the total uranium space. Probably, even with the moves we've had in the last few days, it's probably $60 billion. So, relatively speaking, trying to find a mega cap stock there is always impossible, but I think the fast money is moving into it. This is the energy bridge, this is base load power. This is a classic kind of supply demand story. You can build a model on the uranium supply and demand fairly effectively, and I think the cure for a high price is going to be a high price and I think production will ramp at significantly higher prices, in which case, in order to, you know, to know the raw commodity. But you can also own companies like Camaco is the big company in the space. You can also own the ZTFs. There's UEC, which I think has, you know, got the unedged production, which is the one that we would own.
I still like technology, you know, and I think one of the thematic that I think is still, you know, super interesting is capital expenditure in the US, this whole capital spending cycle that's going to happen. One of the things I think is fascinating is the inflation reduction act, and the inflation reduction act is the reshoring, it's the investment spending that's needed in infrastructure in the United States, and I think the numbers I've seen is $365 billion and it's uncapped. I think the Marshall plan after the war was 2% of GDP. This could be 5% of GDP. So when I think of that and I think of that being enacted, it makes me think that the ExxonMobiles and Occidentals, the Floor Systems, bwxt, these are all going to be, you know, excellent companies to own right here in the cycle. I think these are, you know, these to me, are the stalwarts. These are my midfield in my soccer team.
Of the portfolio, I've talked about marijuana and cannabis. My glib comment is that in Western societies, people are going to need to smoke a lot more cannabis to deal with a lot of the things that we're having to face, and I think we're going to end up with a significantly more friendly political environment to cannabis and marijuana. There's ETFs and there's a bunch of companies that I've talked about which I'm very happy to share with them in my letter. We have some fairly significant bets and I still want to run these significant bets in things stocks like Frontline, which is John Fredrickson, who's done the reasonable deal with tankers and ships. I think these tanker fleets become increasingly valuable and the pricing's, super strong Tidewater weather for the deep wind in the offshore space, the Laris in the offshore space. And then I also thought, if I think there's a couple of machine plays in Norway, that would be just a few kind of ideas that we would focus on. I still think BAE Systems is probably the best to breed defense stock probably is due a significant upgrade.
I like some of the UK very, very cheap special situation UK retail company.
We have a couple of specials sit healthcare names company called Cardio, which I think is fascinating, which is dealing with pericarditis and myocarditis, which is that come from obesity, diabetes and also from the aftermath of vaccines. So probably a dozen or so stocks that I think will be the better of what we're doing. And I think in terms of mega cap space, I think Google is still the one of the seven that I would own on. I still think Google and paid search. I think Google will still benefit probably massively from AI. And then for Intel, which I haven't known for a long time, but I think Intel here is probably also a massive beneficiary of the Impletion Production Act and I think, yes, economic nationalism is a strong ongoing thematic. Then the US government is gonna mandate that Intel has to be successful and Intel, of course, is you think of Intel and Taiwan, some of the conductor, and we haven't really talked about China but I think Intel is probably a reasonably good bet. It's very cheap, still, I think, fairly underowned and, I think, probably interesting.
0:35:38 - Phil
That's quite a buffet, Will. Thank you very much for that. And of course these are not recommendations to buy. Do your own research. Of course, you've got to actually understand what you're investing in.
0:35:48 - Will
Absolutely and I sort of feel like I've skimmed over these things. But, as I say, I think what hopefully people will see if they subscribe to that stuff is they'll see that I may know apologies, we just call it a repetition, but I don't really like changing my mind the whole time. It always used to annoy me as an institutional sales guy. I was like what's your idea of the day or the idea of the week? I don't have good ideas the whole time and I wish I did. But, as I say, I think once we have the ideas, what we like to try and do is to run a narrative on them and find out whether things have changed or not. But, as I say, the buy and sell cases on things that we like and we don't are totally simple and want to articulate.
0:36:25 - Phil
So Will. How can people find out more about you and nut stuff?
0:36:29 - Will
Well, we're in all the usual Twitter and in a Twitter sphere and all that, but simplistically it's www.nutstuff.co.uk. I publish our fund report on a Monday with some commentary not in a PDF and then I normally write on a Tuesday or a Thursday or a Wednesday, on a Friday, so that another two times a week. So it's not a once a week, twice a month publication. This is a lot of what goes into this. We have a great team of people. I've got people in different parts of the globe inputting and so, as I say, I think hopefully people will find it. It's a curated narrative but it's got investable conclusions and that's exactly where we wanted to take it to Will Nutting thank you very much for joining me.
0:37:09 - Phil
Well, thank you so much.
0:37:10 - Chloe
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