The global growth portfolios have delivered strong returns on an annual basis, but returns on one-, three- and six-month horizons have been challenged. Why is this, and what’s your outlook from here?
At Munro, we hold the view that the bull market should continue in 2026 and so are constructive on the outlook for growth equities. An important underpinning to this view is that we believe spending on the artificial intelligence build-out will continue throughout this year and beyond, which can support the earnings growth of lots of companies that help build the compute infrastructure that we need for artificial intelligence.
Short-term, we believe we are coming towards the end of the geopolitical conflict in the Middle East that has created some volatility in global markets. In our view, this should only be a relatively short-term issue for the equity market, which is why we remain constructive for the remainder of the year.
What’s your take on US earnings season so far?
We’ve only had a small number of companies report earnings, but overall the results we’ve seen have reinforced our bullish view for growth equities.
One notable result so far has been Taiwan Semiconductor Manufacturing Company, who manufacture the world’s leading semiconductors. They are seeing significant demand from AI and gave another very strong outlook for the business, which reinforces the investment thesis.
What’s a position you’ve exited recently and why?
Recently, we’ve exited our position on Microsoft. We’ve held the company since Munro first started in 2016, so it wasn’t a decision we took lightly. However, our stop-loss process forces us to review any stock which ‘triggers’: in other words, falls 20 per cent from cost or from peak.
During that review, we as a team felt that the business is currently being challenged over whether to invest heavily in its core software offering, or more aggressively invest in the AI opportunity, particularly for its cloud business, Azure. As the company navigates these capital allocation priorities we decided to step to the sidelines for now, but we look forward to re-investing at some point in the future.
What’s a stock you own that (most) investors haven’t heard of?
Many investors might not be familiar with CATL, the Chinese battery manufacturer. While relatively unknown here in Australia, it has a high global market share in power batteries and serves both the electric vehicle and energy storage markets. Based on our research, we see a strong runway for earnings growth for the business over the medium term and we think it is attractively valued relative to that growth runway today.
Which stock in your fund is the most undervalued by the market?
It might surprise some, but we think Nvidia is undervalued by the market. Based on our earnings forecasts, we think it’s currently trading at a significant discount to the S&P500, for a company that is growing considerably fast and is enabling one of the biggest structural changes we have seen, which is AI.
What one piece of advice has influenced your approach to investing?
We focus a lot as a team on managing risk, which often means reviewing and exiting positions that don’t turn out to be what you expected. The best piece of advice in this context I’ve received is: if the facts change for a stock, then change your view.
Are there any books, podcasts or TV shows that you’d recommend?
I’m a consistent listener to the All-In and Dwarkesh podcasts. The hosts are great, and they’ve had some very high-profile guests which makes for great listening.
What is your favourite local bar/restaurant?
Last time I said Scopri in Carlton. I’m doubling down on that.
This article was originally posted by The Australian Financial Review here.
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