Last Thursday, the Melbourne contingent of our research team ventured to the 'Paris end' of Collins Street for lunch with Magellan Financial Group’s (ASX:MFG) Hamish Douglass and 597 of his close personal friends. Jon Mills even donned a suit jacket for the occasion.
The room was dimmed and filled with foreboding music and, although there were no sparks on Douglass’s arrival, he did have more hair than I expected. Disruption was in the air.
The tone was set right from the start with clips of Joaquin Phoenix falling in love with his operating system, a naked robot temptress and Johnny Depp downloading his brain onto a computer. A digital Barnaby Joyce lay in wait for Pistol and Boo.
A new technological era
The talk was about the rate at which technological advances were being made and the impact that had on investment decision-making.
Core themes were tied together by grand (but closer than they seem) futuristic ideas. Artificial intelligence, cloud computing, medical advances, IT platforms and the cashless society are all themes that drive Magellan’s stock selection.
After Douglass's impressive presentation, a member of the audience asked how modern technology companies were different from the disasters of the dotcom era. In response, Douglass noted that these companies are real businesses with real earnings and real market share.
Other questions seemed to be driven by a desire to recognise The Next Big Thing and to jump on the back of it but Douglass was quick to bring the discussion back to individual businesses. Backing a ‘theme’ is all well and good, but price and value always need to be kept in focus. Don’t get so caught up in an idea that you ignore what you're paying for a business.
Thoughts on management
Gaurav Sodhi and Alex Hughes discussed the importance of management in one of our Stock Trek videos recently, and Douglass touched on this subject at the lunch. Magellan places management high on its list of investment qualities, particularly for fast-moving companies – the disrupters as opposed to the disruptees.
Fast-moving businesses need good managers at the helm, but they can also become self-fulfilling prophecies by attracting the most capable employees. With the likes of Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN) and Google parent Alphabet (NASDAQ:GOOG) hiring the best and brightest from top American universities, this again differentiates the current era from the dotcom bubble.
Walking back to what real estate agents call the ‘New York end’ of Collins Street, I was struck by three thoughts (it was a long walk). Firstly, while it’s important to be mindful of the future, it’s crucial not to forget real earnings in the present. Second, Hamish Douglas gets a tick in my book for being a dachshund owner. Finally, looking around the room of well-heeled advisors and brokers and with the pressure building on fees and commissions, could the very people looking to invest in the next disrupter become the disrupted.
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