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Scottish Investment Trust: We Don't Like FANG Tech Stocks - YouTube
Channel: Morningstar Europe
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[Music]
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hello and welcome to the Morningstar
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series why should i invest with you I'm
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a wall that I'm joined today by Alastair
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McKinnon manager of the Scottish
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investment trust
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hello Alastair good morning Emma so you
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describe yourself as a contrarian
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investor now this is one of those
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subjects where we are told to be more
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contrarian don't give in to herd
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mentality and investing it seems too
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many investors I think quite opaque
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concept what does contrarian investing
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mean to you well if I just step back a
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level and just look at humans as a
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species and we're really hardwired to
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want to be part of the crowd because
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back in more dangerous times when we
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didn't have this great civilization that
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we have today if you weren't part of the
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group if you weren't getting on with
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your peers then it was very dangerous
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you could you be isolated you could be
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attacked you could be hungry you could
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be cold now that's a very good logic and
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humans working together build some great
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things but in financial markets we think
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this crowding instinct can work against
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the best interests of an investor
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because you don't really want to be
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doing the same thing as the crowd all
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the time so we really think there's a
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great opportunity when the crowd can get
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things wrong and we spend our time
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trying to analyse where we think the
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crowd has got it wrong and that's what
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we define as controlling investing
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because you get eventually popular
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stocks
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the crowd really like become overvalued
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so we don't want to be involved in them
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and in contrast to stocks we do want to
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be involved get unpopular they get
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undervalued and that's where we see lots
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of opportunities so is it as simple as
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being a value investor then are you just
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looking for those stocks whose metrics
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say that they are cheap well we do like
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value metrics you know we do like cheap
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stocks but we take it a slight twist on
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that is we don't just look at is a stock
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keep optically we spend a lot of time
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analyzing whether things can improve not
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just saying is it cheap for the sake of
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being cheap so we want things to improve
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so we don't just buy things that are
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cheap necessarily but we're all
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looking for things to improve but we do
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like cheap stocks that have a great
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place to start looking at this point in
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the market cycle I think even last year
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or even better five years ago there are
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a lot of good opportunities stocks that
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were undervalued by the market but we
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have seen the UK's market rally
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significantly since the credit crisis
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and indeed over the last year's so is it
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much more difficult to be a contrarian
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investor in this particular environment
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I wouldn't say it's more difficult no I
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think it's always difficult investing at
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the time it always seems that markets
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are always a difficult to judge what's
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going to happen next but I think as a
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contrarian investor the great thing
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about it is there's always areas of the
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market that are out of favor and appear
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to be unloved and offer good
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opportunities so there'll be areas of
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the market we don't wish to be involved
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in but there are certain I mean just now
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there are areas of the market we think
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look quite good value and even if
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markets fell we think they probably
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wouldn't join in that general fall so so
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we think there's always opportunities
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what about the stocks that you don't
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like then what - you right now looks
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like herd mentality and you don't want
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to be anywhere near that well the thing
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the areas we don't like just now are in
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particular a lot of the us technology
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names that what's being described with
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this acronym fang's Facebook Amazon or
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Apple Netflix Google these are the ones
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that people put in it now what's
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happened there is they're good companies
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don't get me wrong and they're
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absolutely crushing their competition
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such as it exists but what's happened is
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they've just become too popular
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everybody loves them they've become huge
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parts of indices there's a lot of money
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flowing into markets that's going into
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passive funds and they're buying these
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stocks regardless of their valuation now
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what we think is we you know whilst we
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think there are decent enough companies
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they've done so well that they're now
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valuing extremely good prospects for an
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extended period and what we see in the
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horizon is actually a few headwinds in
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particular regular regulation is got a
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strong
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chance of becoming much stronger and
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there's also a cyclical for if some of
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the hardware names there's they've done
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really well and people are probably
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getting a little bit bored of some of
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their products I'm thinking of the
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smartphone cycle everyone's got a
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smartphone now yes we'll probably all
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buy another one but maybe not as
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frequently as you did in the past if you
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look at what we think is undervalued
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just now and it's potentially
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interesting this is a lot of this might
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make you think gosh that's that's brave
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but that's the sort of approach we have
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to take but oil is interesting just now
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there's a lot of headline bad news in a
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minute there's a concern there's too
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much supply from US shale but the the
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underlying picture is the still growing
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demand for oil and we think the supply
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situation is actually rectifying itself
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quite quickly the other area we like
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generally globally is retail it's almost
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the flip side to that Fang story I was
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talking about because most people people
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have got so blue about Amazon in
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particular they've got so bearish about
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the prospects for real world's retailers
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with good reason in some cases but there
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are a number of really good retailers
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that will survive this and will prosper
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and are really adapting to the new world
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going forward so we we think that's a
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very interesting and a loft area aster
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thank you very much thank you this is
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Emma wall for morning star thank you for
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watching
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