This week on Equity Mates

Hey there Equity Mate,

This week was a big one for us as we released our interview with Professor Scott Galloway.

Professor Galloway (aka Prof G) is a professor at the New York University Stern School of Business and host of some of the world's biggest podcasts - The Prof G Pod and Pivot.

In case you missed it, here’s a preview we put together for the interview.

That’s just one of many episodes we released this week on Equity Mates Investing and Get Started Investing.

Equity Mates Investing (Spotify | Apple | YouTube)

• Monday - Why companies die but indexes are forever, Pimp my portfolio & ETF overlap

• Tuesday - Expert: Professor Scott Galloway - The formula for building wealth

• Thursday - Lessons on valuation, Pimp my portfolio & is the stock market predictable long term?

• Friday - Uncovered: Sparc Technologies - 3 big decarbonisation bets

Get Started Investing (Spotify | Apple | YouTube)

• Tuesday - Emma Edwards: How to know if you’re good with money

Your questions, answered

Heath asked via email:
‘“Assuming property is not an option in the short term, whats the recommended portfolio split across cash, fixed income, equities, crypto? In my early 30s.”

We put Heath’s question to Luke Laretive, CEO & Portfolio Manager Seneca Financial Solutions.

Book a call with Luke for professional investment advice.

While bonds have delivered more stable returns (6% volatility, 15% max drawdown) equities have made investors a lot more money (12% total return) - assuming you stuck with it and held your nerve during the drawdowns.

In your early 30’s, chances are you’ll be making many more contributions to your investment account and as such, you want to take advantage of your long investment runway and compound at the highest possible rates of return. Any volatility you experience is only an opportunity to pick additional shares “on-sale”.

However, what you actually should do depends on more than your age.

Generally speaking, it's not unusual for young people to have between 70-100% of their assets in shares and the balance in defensive asset classes like bonds/fixed income. While we can debate the value of active management in equities, I think that’s a much harder case to argue in the fixed-income universe.

I think many people mistakenly neglect the benefits of an allocation to defensive absolute return strategies and liquid alternatives, as opposed to bonds - where you can generate higher rates of return, but with lower volatility and little to no correlation to traditional equities. Selecting the right mix of managers to achieve this requires some knowledge and skill - at Seneca, we use ours to manage our Absolute Return SMA that invests in these sorts of strategies.

These concepts can also be applied to pre-retirees and retirees, for whom managing the risk associated with a potential drawdown becomes critical. Given we don’t know when these equity drawdowns are going to occur, it would make sense that as we near retirement (or some other catalyst where we need to realise our investments), we reduce our exposure to that sequencing risk, and increase our allocation to fixed income or other low/uncorrelated investments.

If you have a question you’d like answered, hit us up at [email protected] 

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What we’ve been reading

These lifestyle gyms aren't competing with Ozempic — they're embracing it

If you were to make a list of the industries facing the biggest disruption from GLP-1 drugs like Ozempic, the gym and fitness industry would be close to the top of the list. If these weight loss drugs genuinely work, which all evidence suggests they do, then a lot of people will choose the drug route rather than the exercise route.

It seems like many of America’s largest gyms are taking a ‘if we can’t beat them, join them’ approach to the rise of GLP-1 drugs. A recent Morgan Stanley survey found that after starting a GLP-1 drug the percentage of users that worked out weekly rose from 35% to 77%.

If that trend continues these drugs may actually be the best thing to happen to the fitness industry. Rather than existing gym users opting for an easier alternative, these drugs may be creating a whole new group of gym users who previously weren’t confident, physically able or motivated enough to workout in the first place.

As a result, America’s biggest gym chains are betting big on GLP-1 drugs and designing programs and even offering prescriptions for these drugs.

This seems to only be the tip of the iceberg. Morgan Stanley estimate GLP-1 drugs will be a $105 billion industry by 2030, and in the United States alone they believe 31.5 million people, or about 9% of the population, will be using them by 2035. Gyms may be about to get a lot more crowded.

Snap says total watch time on its TikTok competitor increased more than 125%

It is earnings season in America and we’re enjoying hearing how some of the largest and most well-known companies have been going.

One company that continues to surprise us is Snap. Maybe we’re just getting old, but we always wonder ‘who is still using Snapchat?’. Turns out, plenty of people as the company released a bumper set of numbers and saw its stock jump up 30%.

Daily active users rose 10% to 422 million people (that answers our ‘who is still using Snapchat question’) and revenue for the quarter was just over $1 billion, up more than 20% from last year.

The company remains well off it’s 2021 highs, but then again, so do most tech companies.

This article covers Snap’s results but also gives an insight into how the company is positioning itself against TikTok. Like all social media platforms, they are moving into public short form video and in Q1, Snap announced that Spotlight watch time had increased more than 125% year-over-year.

As the prospect of TikTok being banned in the US grows (although we’d still give it a pretty slim chance at this point), we should expect to see Snap, Meta and X all working to solidify their short-form video offering. If a sale doesn’t happen in the next 8 and a half months, all of these platforms will be competing to fill a TikTok-sized gap in the market.

This post contains sponsored content 

Uncovered: Toubani Resources (ASX: TRE)

Uncovered is our exploration of smaller Australian companies that don’t receive as much media attention or analyst coverage. We believe every company has an interesting story to tell and we want to help tell it.

Today we’re sharing the story of Toubani Resources, a company that may be listed in Australia but has ambitions on the other side of the world. The company is working to develop West Africa’s next gold mine through their Kobada project in Mali.

In this Uncovered deep dive, we take a look at the gold mining industry in Mali, Toubani’s ambition with their Kobada project, share a primer on investing in mining explorers and developers and ask what next for Toubani Resources.