203. Why the stocks everyone falls in love with can end up being the riskiest of all

Nick Clay, manager of the TM Redwheel Global Equity Income fund, explains why the days of getting rich quick are over and how compounding dividend income will once again become the biggest building block for wealth generation. He also talks to us about why there’s likely to be more pain ahead for the large technology companies and why a number of cyclical sectors, like luxury goods, look attractive from here. Nick also explains why a number of companies are simply not set-up to handle the threat of inflation and why it is important to go against the consensus view when markets are difficult.
Apple Podcast Spotify Podcast

While the TM Redwheel Global Equity Income fund may be new, the team – led by Nick Clay – is highly experienced, and the investment strategy is well-proven. It has a true contrarian nature backed up by a logical and disciplined philosophy. This leads to an attractively yielding income fund (every holding must yield at least 25% more than the broader market at the point of purchase) that also allows for capital return from a concentrated portfolio.

What’s covered in this episode:

  • Why people have to get used to building their wealth at a steadier pace
  • How a permanent inflationary backdrop will “crush the margins” of many businesses which are dependent on keeping their prices low
  • Taking advantage of opportunities while active investors obsess about the threat of recession
  • Why big tech companies like Apple and Microsoft may face even more pain in the future
  • Why the compounding of dividend income (not capital growth) will be the biggest driver of returns from here
  • The importance of going against the market consensus – particularly when things look difficult
  • The challenge of spotting when disruption or controversies in companies will have a permanent impact or not
  • The opportunity in the luxury retail space
This article is provided for information only. The views of the author and any people quoted are their own and do not constitute financial advice. The content is not intended to be a personal recommendation to buy or sell any fund or trust, or to adopt a particular investment strategy. However, the knowledge that professional analysts have analysed a fund or trust in depth before assigning them a rating can be a valuable additional filter for anyone looking to make their own decisions. Past performance is not a reliable guide to future returns. Market and exchange-rate movements may cause the value of investments to go down as well as up. Yields will fluctuate and so income from investments is variable and not guaranteed. You may not get back the amount originally invested. Tax treatment depends of your individual circumstances and may be subject to change in the future. If you are unsure about the suitability of any investment you should seek professional advice. Whilst FundCalibre provides product information, guidance and fund research we cannot know which of these products or funds, if any, are suitable for your particular circumstances and must leave that judgement to you. Before you make any investment decision, make sure you’re comfortable and fully understand the risks. Further information can be found on Elite Rated funds by simply clicking on the name highlighted in the article.