Sep 9, 2021
Summary:
Today, Val Hughes comes on the podcast to discuss active
management, public/private equity, and the leveling of the playing
field that is occurring in the current market. We talk about many
of the changes that have occurred over the years that cause
companies to function differently, and how the economy is growing
in areas where you don’t need a lot of capital to be involved. Tune
in to hear some insight from Hughes about a variety of financial
topics, and to also get general advice pertaining to the current
investing climate.
Highlights:
-If humans can’t beat a computer at chess, then how can they win in
investing? Does it require someone that understands businesses and
finances?
-Why do you need active management when CEOs and accountants
frequently mislead?
-ETFs act as a distribution system, but are different from mutual
funds
-ETFs trade on the exchange, so there’s no platform fee
-They are only a few spots where active management can win, like in
small cap value investing
-Small cap value is the best performing asset class, and the data
goes back to 1928
-If you like puzzles, there are still puzzles to solve in small cap
value that can deliver alpha
-The trend of concentration - companies buy out competitors and
consolidate the industries
-Publicly traded stocks have declined and companies buy out their
own shares, becoming a homogeneous blob
-Why are there public companies? They came about to raise money to
build things that individuals couldn’t afford on their own
-It’s a richer world now and we don’t need as much public money
-More of the economy is growing in areas where you don’t need a lot
of money
-The government is turning our public companies into more of a
social good
-Is private equity good or bad? You have to get back to the purpose
of a company
-Private equity is still in the business of turning equity into a
bigger equity, creating new niches within a service/product
-It is important to promise rewards to innovators so that they
don’t stop—they fuel decades of hard work
-Robinhood Reddit phenomena - bringing something to the masses that
used to belong to middle men. Technology is disruption the
traditional process
-There has been a leveling of the playing field, and the
professional investors have to compete with the guys on the
streets. These two camps evaluate different criteria, one being the
value of companies/what the stock is going to do and the other
entails looking at what the game says it’s going to do. They don’t
care about the actual attributes of the company
-Within small cap equities, there are products that serve needs
-It’s good for investors to talk to people on the street daily
Useful Links:
Financial Survival Network
The Value
Guys