Steve Johnson: What the market is missing about the AI boom
Summary
Steve Johnson, CIO of Forager Funds, candidly explains why his funds underperform during the AI trade, arguing that current valuations are disconnected from sustainable returns. He discusses his contrarian strategy, highlighting opportunities in undervalued Australian small caps like Catapult and Motorcycle Holdings, while analyzing the structural challenges and volatility in the local market. Johnson also reflects on past investment mistakes and offers a long-term perspective on Australian equities versus global alternatives.
Topics discussed
Sponsorships: Zen Nicotine Pouches and Waymo
Introduction to Steve Johnson and Forager Funds
Candid CIO Letter: AI Trade and Underperformance
AI as a Transformational Technology: Utility vs. Limitations
Economic Costs of AI: Tokens, Capex, and Business Models
The AI Bubble: Valuation Disconnects and IPOs
Fundamentals: Return on Capital and Bubble Dynamics
Client Trust, Transparency, and Performance Expectations
Portfolio Management: Turnarounds and Avoiding Doubling Down
Value Opportunities: Low-Cost, Sticky Software (MyOB)
SaaS Apocalypse Narrative and US vs. International Funds
Australian Small Caps: Pessimism and Structural Challenges
Market Volatility: Algorithmic Trading and Expectations
Deep Dive: Catapult (Sports Tech) Investment Thesis
Other Opportunities: Moto Holdings and Dividend Yield
Australia vs. US: Macro Comparison and Portfolio Allocation
Sponsorships: Zen and Waymo (Repeat)
Buy vs. Rent: Property Returns and Mortgage Discipline
Housing Market: Interest Rates, Psychology, and Renovation Costs
Final Advice: Sticking to a Long-Term Investment Strategy
Outro and Sponsorships: Peloton
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