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.
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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
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