Here’s what you need to know today

• Elon Musk has had a mixed couple of days. On the positive side, SpaceX completed its fifth test flight of its giant Starship rocket. The spacecraft took off, detached from its booster rocket and landed in the Indian Ocean. Most impressive, the booster then returned to the launch pad where it was ‘caught’ by giant mechanical arms. Another step towards fully re-usable rockets. (ABC)
  
  

• On the negative side, reactions to the Tesla Cybercab launch continue. The electric vehicle company shares are down 9% while investors in Uber and Lyft, the largest competitors to the Cybercab, breathed a sigh of relief with shares in both ride-sharing companies rising 10%. (Quartz)
  
  

• Virgin Australia’s latest numbers show the airline is on the road to recovery after its collapse amidst the COVID shutdowns. Revenue was up 7% to $5.4 billion and earnings before interest and tax (EBIT) was up 18% to $519 million. For comparison, Qantas’ domestic aviation business made $1.1 billion in EBIT last year. (AFR)
  
  

• China’s economic slowdown continues. The consumer price index only rose by an annual rate of 0.4% to September, lower than expectations. And the producer-price index was actually down 2.8% year-on-year. China’s finance minister Lan Foan has confirmed the country will “significantly increase” debt issuance to try and stimulate the economy. (Capital Brief)
  
  

• A Barclays analyst has warned of an “EV winter” as customers are becoming increasingly reluctant to buy electric vehicles. Despite that, European car makers are planning to launch more than 100 new electric vehicle models this year and another 70 in 2025. (FT)
  
  

• Ahead of his visit to Australia next week, King Charles has confirmed it is up to the Australian people to decide whether Australia remains a constitutional monarchy or becomes a republic. It is expected that the Australian Republic Movement will use the attention of the King’s trip to push their case for changing Australia’s system of government. (BBC)

What the…?

Here’s a novel way for the FBI to catch crypto scammers. The agency created their own cryptocurrency, called NexFundAI Token, and used it to target fraudulent token developers, promoters and market makers.

While the token was being traded, the price shot up over 1,558% before being shut down by the FBI. As a result the FBI have charged several companies, 18 individuals and seized more than $25 million. (Quartz)

Investing is a lifelong journey

Here’s what you can learn today.

This is an excerpt from our podcast with Roger Montgomery, episode titled Expert: Roger Montgomery - 5 Stocks He’s Buying Today (Apple | Spotify | YouTube)

How do you see the role of inflation and interest rates impacting investment decisions in the coming years?

In the coming years, I foresee disinflation persisting, particularly due to the impact of AI and automation on the workforce, which will likely put downward pressure on wages and, consequently, inflation. While short-term interest rate movements might cause market volatility, the long-term trend is what matters more for investors. If interest rates stabilise or decline gradually, it creates a favourable environment for growth stocks, especially those with pricing power and innovative capabilities.

The key is to maintain a long-term perspective and focus on businesses that can thrive irrespective of short-term macroeconomic fluctuations. Companies with robust growth prospects, high margins, and little or manageable debt are well-positioned to do well even if the economic environment changes. Hence, understanding the broader macro trends—such as technological advancements and evolving consumer behaviours—will be more beneficial than trying to predict each move in interest rates.

You've highlighted a few small-cap stocks like Macquarie Technology Group and Megaport. What qualities make these companies stand out?

Macquarie Technology Group and Megaport stand out due to their positions in rapidly growing sectors and their strong financials:

• Macquarie Technology Group: This company operates data centers with high margins (around 75%) and serves blue-chip clients, including government departments and Fortune 500 companies. The ongoing demand for cloud computing, propelled by the enterprise migration to the cloud, ensures robust and growing revenue streams. Additionally, the rise of AI will further increase the demand for cloud services, enhancing Macquarie's long-term growth prospects. With current valuations appearing attractive compared to their intrinsic value, Macquarie Technology Group offers significant upside potential.

• Megaport: Known for simplifying the connectivity between enterprises and their cloud service providers, Megaport facilitates seamless communication across different data centers. Its innovative approach to cloud interconnection services positions it as a leader in a space with burgeoning demand due to the global cloud migration. Megaport's technological edge and anticipated growth in client adoption make it a compelling investment, even at its current valuation.

These companies' exposure to strong secular growth trends, such as cloud computing and AI, combined with their high margins and robust financial performance, creates a favourable outlook for future growth and shareholder value.

Today’s sponsor is Franklin Templeton

For global equity investors, “value” has been out of favour for a long time. At Brandywine Global, a Franklin Templeton company, we believe value will have its day. Particularly given the backdrop in the US – expensive valuations, uncertain election outcomes and sustaining tech industry hype. We take a consistent yet adaptive value approach, as value opportunities take many forms.

Now is a great time to have the flexibility to look across the globe with a strategy that is designed to outpace the broad market, while maintaining consistent exposure to value opportunities.

The Brandywine Global Opportunistic Equity strategy has an investment process that seeks “multiple ways to win” through macro, market assessment and stock selection, which has generated highly differentiated outcomes relative to peers.

Want more Equity Mates?