Update from the PMs – November 2024

– Andrew Macken & Chris Demasi

A popular narrative taking hold of late is that stocks are expensive and it’s difficult to find investment opportunities. Yet we are finding dozens of stocks that are meaningfully undervalued. These opportunities are more than enough to fill Montaka’s highly concentrated portfolio (our top 10 investee companies account for 75% of the portfolio). Indeed, the biggest challenge we are facing today is which attractive opportunities not to include in Montaka’s portfolio.

This month, in Looks can be deceiving: Why equities are more attractive than they appear, Andy addresses potential reasons why some investors and market commentators are misperceiving the opportunities in global equities today.

Montaka’s two largest investee companies, KKR and Blackstone, continue to grow from strength to strength. They find themselves uniquely positioned to take advantage of several large, structural tailwinds, including:

• Structural growth by expanding in the US$40+ trillion credit markets and the US$85 trillion private wealth channel,
• Huge ongoing asset management partnership opportunities with the insurance sector,
• Structurally growing Asian allocations to alternative assets.

Cyclically, KKR and Blackstone are starting to realize more investments, after a period of relative inactivity, which is helping them raise capital and deploy new assets. All of this points to strong fee growth on the horizon – and this is growth that requires little new capital investment or operating expense to capture.

In Artificial Intelligence (AI), we continue to believe extraordinary gains will accrue to the owners of those few ‘one-of-a-kind’ applications that can leverage AI in a cost-effective way to deliver substantial value uplifts to users.

We are witnessing, for example, clear evidence of enormous enhancements to Meta’s core social network and digital advertising business. (The same can be said for Tencent’s in China.) Supported by strong capabilities in custom silicon design and AI infrastructure, Alphabet’s advantages in Google Search are also strengthening thanks to AI. Finally, ServiceNow is uniquely positioned to leverage AI in a cost-effective way to offer its many thousands of enterprise clients highly valuable new features that drive internal productivity gains.

Winning in AI will come down to business advantages, not technology, in our view. In The Potioneer’s Gambit, Andy tests out his creative writing skills to pen a short allegory that shares how we think about winning in AI on behalf of Montaka’s investors.

In this month’s Spotlight Series podcast, Andy and Chris have the pleasure of interviewing top Australian Ironman triathlete, Sam Musgrove, fresh off the back of last month’s Kona Ironman World Championships. We explore the concepts of discipline, perseverance, and grit in the context of multidisciplinary sport. We believe investors need many of the same ingredients to succeed over the long term.

Sincerely,

Andrew Macken & Chris Demasi

Podcast: Join the Montaka Global Investments team on Spotify as we share real-time examples and investing tips that govern our stockpicks. Click below to listen. Alternatively, click on this link: https://podcasters.spotify.com/pod/show/montaka

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