Sep 9, 2021
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.
-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