Mark Draper

Mark Draper

China is certainly on the nose for investors.

The most common reasons for this revolves around China’s position on Russia, Taiwan and the government changing rules under the ‘common prosperity’ program.  

Cameron Robertson who is the co-portfolio manager for Platinum Asia ex-Japan strategy says that people overplay China’s relationship with Russia with respect to the war.  He acknowledges that they did not vote in support of the UN resolution condemning the invasion, but they were one of 35 countries that abstained.  It should be noted that there were 5 countries that voted in support of Russia, China was not among these.

Alasdair McHugh a director at Baillie Gifford adds that China has distanced itself from Russia since the Ukraine invasion.  The foreign minister of China has officially referred to the Russian invasion as a ‘war’, having not done so previously.  McHugh believes that the idea that China is ‘all in’ with Russia is wrong as the threat of secondary sanctions if China continues to do business with Russia is a much higher stakes game than what we’ve seen with Russian sanctions.  Baillie Gifford’s base case is that China is likely to tread carefully, not least because exports to the US and EU are in excess of US $1trn versus just US $68bn to Russia.  McHugh does not think that Beijing will risk losing access to markets in the developed world.

Robertson says that Russia’s invasion seems to have worried people about parallels with China-Taiwan, but thinks people under-estimate how different these two scenarios are.  China is a country with huge foreign trade relationships with the West, and trillions of dollars of USD assets, so even just the threat of sanctions are a much bigger stick.  Meanwhile Russia’s own attempts have really shown the risks of pursuing such a path as there is no one saying “that looks like a success for Russia, we want to follow that path”.  Taiwan has one major political party that is somewhat sympathetic to China, so there is still the glimmer of hope of a peaceful accommodation in China’s eyes – whereas attacking would surely harden resolve against any (even nominal) reunification efforts.

McHugh claims that the current focus on ‘common prosperity’ in much of the Western media portrays this as some sort of attack on capitalism. Helped by the insights we’re gathering from Baillie Gifford’s Shanghai office, he understands common prosperity to instead be about sustainable and inclusive growth. Many companies are well-aligned to such policy directions and he therefore continues to see exciting opportunities ahead.

McHugh believes that China remains a great opportunity for long term growth, and to provide an idea of the scale he says that China has 160 cities with more than 1 million inhabitants versus only 10 in the US.  That is a lot of potential consumers.

Robertson asserts that China is out of favour and cheap, which is commonly a buy indicator.  The discount of the Chinese market can be seen from the chart below which compares the price to earnings (PE) ratios of several countries share markets.

Source:  Minack Advisers

Exposure to China has a role to play in investor’s portfolios, tapping into the dynamism of this country and riding the wave of technological innovation that is taking place as new industries develop there.

Robertson highlights AK Medical is a leading provider of hip and knee orthopaedic replacement joints in China accounting for roughly one fifth of the domestic market, providing high-quality cost effective solutions.  Their products are internationally competitive, seeing acceptance even in developed markets like the UK.  The business expects they will sell around 180 million hip and knee implants this year, up from around 80 million just five years ago.  Currently only one out of every 2,000 people in China has a joint replacement each year, this compares to wealthier countries where we typically see rates of one in every 200-300 people having joint replacement surgery each year. 

McHugh showcases NIO (electric vehicle maker).  NIO’s Chinese name literally means ‘blue sky coming’. It is rapidly scaling production of EVs and thereby supporting China’s climate ambitions. Its trailblazing battery swapping model is inherently more conducive to battery recycling, thereby reducing waste – and it protects the car’s resale value as battery degradation isn’t a factor.

Investing in out of favour sectors is hard, but to ignore one of the world’s largest markets could be a big mistake.

 

This article was published in the Australian Financial Review during May 2022.

Wednesday, 20 April 2022 08:14

Why toll roads are attractive

In uncertain times, toll roads can provide investors with high levels of certainty.

A toll road by definition from the Cambridge dictionary is ‘a road that you have to pay to use.  Your journey will be quicker but more expensive if you take the toll road’.

Generally there are three types of toll roads – ‘greenfields’, which are under construction, newly opened toll roads in ‘ramp up’, and mature roads.  Hugh Dive who is the Chief Investment Officer at Atlas Funds Management is of the view that mature roads are preferable as investors can more accurately assess the traffic numbers and the earnings.

Dan Moore, Portfolio Manager from Investors Mutual says that history shows traffic forecasters tend to be overly optimistic and forecasting errors in the past saw the original owners of greenfield toll roads, Cross City Tunnel and Lane Cove Tunnel go into receivership.

It is important to understand that toll road investors don’t own the physical land or the road they build, they merely own the right to collect tolls for a specific period which is known as the concession period.  After this period, the road reverts to the government and the debt repaid.  Dive says that the finite life of a toll road concession is sometimes used as a reason not to invest in the sector but believes that this approach is too simplistic and doesn’t account for the actions that toll road operators can take to extend the life of the concession.  In 2015, Transurban added extra lanes on the M2 motorway in Sydney and in exchange, saw an 11.5 year increase in the concession period for the Lane Cove Tunnel and an increase in truck tolls of 33%.

A toll road contract usually allows for tolls to increase, commonly in line with inflation, which makes their operational earnings resilient during periods of higher inflation.  

Toll roads are attractive according to Moore due to their high level of recurring revenue, with built in price escalators, particularly if they are located in an area with a growing population.

Dive says that toll roads are long dated monopoly assets as no rival is going to build a competitor road next door to an existing road.  Once construction is complete, ongoing costs for a toll road are low which results in high margins, which can be up around 80%.

Dive also likes the Government support for the sector and uses the example in NSW where Revenue NSW collects unpaid tolls on behalf of Transurban, suspending a drivers licence if they don’t pay.  Trucks are required to use the recently completed North Connex and will receive a $194 fine if they attempt to use the ‘free’ roads above the tunnel.

While high fuel prices present some risk to toll road investors Moore believes that this is not a major concern for investors as most traffic is non-discretionary.  He says that recessions accompanied by high unemployment is a bigger concern.  The chart below supports Moore’s view as it shows continued traffic growth on the Sydney Harbor bridge during the oil crisis during 1973 – 1974.

 

 

Political risk, commonly referred to as sovereign risk is another factor when investing in infrastructure.  Dive highlights the two key risks are:

  1. Expropriation, which is the concession taken away from the toll road operator and
  2. Regulation, where the government defaults on the toll road’s contractual obligations, ie not allowing tolls to increase in line with the formula stated in the contract

Political risk are quite low in the western world according to Dive and highlights these risks have largely been confined to developing countries such as South Africa and Malaysia.

Other considerations for investors is the capital structure of the company according to Moore.  Excessive debt levels, makes any company more susceptible to short term risks and can lead to untimely dilutive equity raisings which impact investor returns.

Investors can gain access to this asset class through the two ASX listed toll roads in Transurban (largely Australian roads) and Atlas Arteria (European roads).  Exposure to toll roads can also be achieved by investing in infrastructure funds offered by several funds management groups.

In a low interest rate environment, toll roads can help drive investors dollars further.

 

This article was published in the Australian Financial Review (AFR) on Wednesday 20th April 2022.  Mark Draper (GEM Capital) writes monthly for the AFR about investment topics that impact investors.

If the world is to achieve the targets from the 2015 Paris agreement, the level of spending required is estimated to be over US $40 trillion.  Decarbonisation of the planet is the biggest investment opportunity for a generation. 

Decarbonisation put simply is the transition towards a world powered by renewable energy.  

When many investors think of decarbonisation they are immediately drawn toward owning renewable energy businesses producing solar, wind and hydrogen and manufacturers of electric vehicles.  But decarbonisation of the world has many more layers than that.

Alasdair McHugh, a director of Baillie Gifford says that no market segment will be immune to the effects of climate change as companies will all be impacted to a greater or lesser extent.  This is especially true when (not if) we see a proper price put on carbon emissions.  This seems inevitable if countries are to achieve the goals of the Paris agreement.  A carbon tax north of US $100 per tonne looks likely in his view and one recent study estimated that a US $50 carbon tax on scope I-III emissions would see 8% of US companies lose their entire profits.  A carbon tax of $150 results in 21% of US companies losing their profits.  McHugh stresses that being invested within the profitable 79% of companies will be critical.

Jodie Bannan, a senior analyst from Platinum Asset Management thinks it is important to look beyond the obvious beneficiaries of decarbonisation.  If contemplating investing in the wind farm sector she believes it is important to also consider that every wind turbine requires several tons of copper and towers made from steel.  While resource extraction and processing generally contributes to carbon emissions, the use of the product may result in the overall reduction of emissions.  Bannan believes that copper has a long term demand profile for this reason as well as its importance in the electrification of the economy.

Bannan follows with another example of electric cars.  She believes that not only should vehicle manufacturers be considered, but also the companies providing electric motors, charging equipment and those involved in the battery supply chain.  

Other areas that will contribute to decarbonisation, to name just a few according to Bannan, include electronic systems for the control and moderation of power delivery and use, robotics, automation to make industry more efficient, recycling companies and sustainable material industries.  

McHugh adds that a lesser known fact is around 15% of global greenhouse gas emissions come from the agriculture sector, primarily through the methane excreted by cattle being raised for beef production.  A likely step is for humans to consume less meat which explains the rapid growth in the alternative protein market.  Beyond Meat is a portfolio holding of Baillie Gifford due to its ambition to reach parity with animal meat across the key areas of taste, health and cost.  Beyond Meat is targeting meat eaters and uses 95% less land than traditional meat, and it emits 90% fewer greenhouse gases and uses half the energy.

Bannan says paper and pulp are an unlikely source of decarbonisation.  While paper has been in decline for well over a decade, pulp raw material is a sustainable (carbon neutral) and degradable resource which is increasingly being used to replace plastic packaging.

Australian investors have limited opportunity to invest in the decarbonisation theme via the ASX, but can gain exposure through owning recycling companies such as Cleanaway, copper and other materials through the resource sector as well as a number of listed lithium mining companies. 

Alternatively Australian investors can seek exposure to decarbonisation through global managed funds and listed investment companies.  Platinum is looking to launch a dedicated Carbon Transition Fund later this year, subject to regulatory approvals.

McHugh says the main risk of investing in decarbonisation is that the world’s leaders continue to talk a good game but fail to put their plans into action.  Bannan highlights the risk that returns from new technologies required for energy transition can be long dated as the market demand will take time to develop.  Many of these companies will remain loss making for 3-4 years and there will also be many that do not survive.

Decarbonisation is one of the greatest opportunities of our time, investors need to ensure their portfolio’s are prepared.

 

 

Each month, Mark Draper (GEM Captial) writes for the Australian Financial Review.  This article featured in the 23rd March 2022 edition of the Financial Review.

Wednesday, 23 February 2022 07:20

Investments to Avoid in 2022

The current investment environment feels a lot like 1999 just before the dotcom bubble burst, with a hint of 1994.

Investors would probably need to be over 40 to remember the fallen angels of 1999 when the dotcom bubble popped.  Back then the new paradigm was that price to earnings ratio’s were irrelevant and it was price to revenue that mattered.  Sound familiar?

One of the most high profile busts in 1999 was One Tel.  At it’s peak, One Tel had a market capitalisation of $5.3bn in November 1999 making it one of Australia’s largest companies at the time.  It reported a record operating loss in August 2000 of $291m, before entering receivership in May 2001.  

1994 saw the Australian 10 year bond rate rise from around 6.3% in January 1994 to over 10% by the end of 1994.  Long term interest rates are important as valuations of shares and property are anchored to them and generally speaking as rates rise, property and share valuations fall.

Fast forward to 2022 and investors could be forgiven for thinking they have been cryogenically frozen from the periods of 1994 and 1999.  Long term interest rates have doubled in the last 6 months, and share markets are laden with many companies trading at lofty valuations, making little or no profit today.

While history doesn’t exactly repeat itself, the lessons from these two time periods can help investors today avoid repeating the mistakes of the past.

Hugh Dive, the Chief Investment Officer at Atlas Funds Management believes that investors should look to avoid tech stocks and growth stocks on high price earnings multiples as rising interest rates will be unkind to them.  The companies Dive refers to have minimal to no earnings today but the promise of large profits in the distant future.  Asset valuation models are sensitive to interest rates, and higher rates result in lower valuations.

Dive says that rising interest rates make the “boring” profits and dividends of companies such as Amcor, Ampol and Transurban look more attractive than a tech company promising large “blue sky” cash flow in 20 years time.  This occurs as the present value of profits delivered today are worth more when rates rise than profits that may or may not be generated in 10 to 20 years time.

Matt Williams, portfolio manager at Airlie Funds Management is wary of loss making tech companies but acknowledges that there will be some winners amongst them and nominates Spotify and AirBnB as looking interesting.  Williams says crypto and NFT’s are obviously impossible to value making them speculative.

Williams adds that investors should be careful of some of the reopening beneficiaries which are now priced for perfection.  Qantas and Flight Centre for example now have enterprise values higher than what they were pre-COVID which means that investors are already factoring in a strong travel recovery.  Ultimately we will revert back to pre-COVID travel levels at some point but it’s taking longer than what was previously envisaged.

Another high profile casualty of rising interest rates is Government Bonds.  Dive is of the view that investors should stay away from bonds.  He says that bonds have enjoyed a 40 year bull market as 10 year rates have fallen from 16% in 1982 to 2% today.  The capital value of bonds increase as rates fall, but as long term rates rise, the capital value of bonds fall.  As a rule of thumb, for every 1% rise in long term rates, investors can expect the capital value of a 10 year bond to fall by around 9%.  Superannuation investors in Balanced, Conservative or Fixed Interest funds are likely to have a large allocation to Government Bonds and would be wise to review these funds.

Williams sums up the current environment by saying that the market dynamics will change as central banks slowly but surely wind back monetary settings from “ridiculously easy” to just “easy”.  Volatility will create headlines and headlines build psychological pressure in investors minds to “do something”.  That “something” should be to think 5 – 10 years ahead and look to buy great companies that are being sold cheaply by the market.

 

Mark Draper writes monthly for the Australian Financial Review - this article was published in February 2022

 Mark Draper and Shannon Corcoran (GEM Capital) speak with Clay Smolinski (Co Chief Investment Officer from Platinum Asset Management) about the latest developments in the Chinese property markets and their property developers.

Clay provides important background to allow investors to understand what has previously taken place in order to get where we are today.  He discusses the problems and solutions with respect to Chinese developer Evergrande and he outlines why he does not believe that these issues are likely to turn into the next financial crisis.

 

Music by Joel Laundy

 

 

Wednesday, 01 December 2021 08:11

The case against crypto as an investment

The mania surrounding crypto assets makes the dotcom boom of just over 20 years ago look totally credible, many professional investors say.

It is clear that blockchain, the distributed ledger technology behind crypto, is real and will serve many benefits to society in years to come similar to the development of the internet.  The concern for many professional investors revolves around the specific crypto currencies themselves.

The RBA recently published a paper outlining three types of digital assets:

  1. Cryptocurrencies – these have their own currency unit and are not denominated in the currency of or backed by any sovereign issuer.  Bitcoin is the most prominent with a market cap of US $1.1 trillion.  Another example is Dogecoin which was started as a joke in 2013 now has a market cap of around US $30bn
  2. Stablecoins – are designed to have a relatively stable price, typically  through being pegged to a commodity or currency.
  3. Central bank digital currency (CBDC) – is a potential new form of digital money that would be a liability of the central bank.  It could be like a digital version of cash possibly accessible via wallets on phones.

Good investors consider not only the positive aspects of an investment case, but where they could be wrong.  Many crypto investors seem almost evangelical in their approach and scoff at alternate views to their beliefs.  There are indeed many similarities to 1999/2000 in the unwavering belief that new tech companies back then (coins today) would take over the world and never face anything but sunny futures without competition or regulatory change.

Michael Collins an investment specialist at Magellan Financial Group says that one of the flaws of crypto currency is that the system is based on mutual trust which is unstable because trust is fragile and sub-networks can emerge if members disagree on procedures.  Bitcoin in 2018 splintered after members adopted new protocols incompatible with prevailing ones.  

Another problem is that distributed ledgers appear just as vulnerable to cyberfraud as any other technology, which could suddenly ruin their value, even if bitcoins blockchain has proved secure so far.

Then there is the regulatory risk according to an anonymous institutional investor who said the most common transactional use is money laundering.  Investors can not pay tax with crypto, which implies it is difficult to argue it as a true currency.

Collins says that the other regulatory risk relates to financial stability.  If enough bitcoin circulated in an economy, monetary policy would lose its potence as a macro tool to control inflation and economic activity because it would have no influence over ‘parallel’ cryptos.  There are problems too with calls for central banks to issue their own digital money (CBDC) to the public to gain total control of the money supply and improve the payments system.  The biggest risk is that it would eradicate the four-centuries-old fractional reserve banking system because banks would no longer receive the same level of deposits on which they base their lending.   If bank deposits fell enough, the question then would be which institutions would conduct the lending that is the lifeblood of capitalism.

John Addis founder of Intelligent Investor believes crypto is a digital ‘wild west’.  He nominates another big problem with crypto is that it is ‘non-custodial’, which means investors maintain control of their own keys and assets.  If the keys are lost, the value is gone and if the system is hacked, or there is a scam, there is no recourse.  The Canadian crypto exchange, Quadriga, which collapsed in 2019, owed US$190m to 115,000 customers.

While ASIC recently approved a crypto based ETF, product approval by a regulator is in no way an endorsement or guarantee of investment success.  ASIC chairman recently urged investors to be careful investing in crypto, and highlighted the regulator is virtually powerless to intervene which means consumers are ‘on their own’.

Bill Gates sums crypto up beautifully with the words “my general thought would be that if you have less money than Elon Musk, you should probably watch out”.

When it comes to its true worth, bitcoins ultimate vulnerability is that it has no intrinsic value.  Gold has other purposes and besides is a means of payment.  Government backed currencies can be used to pay taxes and for services.  Bitcoin is  worth what the next person will pay for it which may become only a fraction of today’s price.

 

 

This article appeared in the Australian Financial Review on 1st December 2021

Wednesday, 01 December 2021 08:11

The case against crypto as an investment

The mania surrounding crypto assets makes the dotcom boom of just over 20 years ago look totally credible, many professional investors say.

It is clear that blockchain, the distributed ledger technology behind crypto, is real and will serve many benefits to society in years to come similar to the development of the internet.  The concern for many professional investors revolves around the specific crypto currencies themselves.

The RBA recently published a paper outlining three types of digital assets:

  1. Cryptocurrencies – these have their own currency unit and are not denominated in the currency of or backed by any sovereign issuer.  Bitcoin is the most prominent with a market cap of US $1.1 trillion.  Another example is Dogecoin which was started as a joke in 2013 now has a market cap of around US $30bn
  2. Stablecoins – are designed to have a relatively stable price, typically  through being pegged to a commodity or currency.
  3. Central bank digital currency (CBDC) – is a potential new form of digital money that would be a liability of the central bank.  It could be like a digital version of cash possibly accessible via wallets on phones.

Good investors consider not only the positive aspects of an investment case, but where they could be wrong.  Many crypto investors seem almost evangelical in their approach and scoff at alternate views to their beliefs.  There are indeed many similarities to 1999/2000 in the unwavering belief that new tech companies back then (coins today) would take over the world and never face anything but sunny futures without competition or regulatory change.

Michael Collins an investment specialist at Magellan Financial Group says that one of the flaws of crypto currency is that the system is based on mutual trust which is unstable because trust is fragile and sub-networks can emerge if members disagree on procedures.  Bitcoin in 2018 splintered after members adopted new protocols incompatible with prevailing ones.  

Another problem is that distributed ledgers appear just as vulnerable to cyberfraud as any other technology, which could suddenly ruin their value, even if bitcoins blockchain has proved secure so far.

Then there is the regulatory risk according to an anonymous institutional investor who said the most common transactional use is money laundering.  Investors can not pay tax with crypto, which implies it is difficult to argue it as a true currency.

Collins says that the other regulatory risk relates to financial stability.  If enough bitcoin circulated in an economy, monetary policy would lose its potence as a macro tool to control inflation and economic activity because it would have no influence over ‘parallel’ cryptos.  There are problems too with calls for central banks to issue their own digital money (CBDC) to the public to gain total control of the money supply and improve the payments system.  The biggest risk is that it would eradicate the four-centuries-old fractional reserve banking system because banks would no longer receive the same level of deposits on which they base their lending.   If bank deposits fell enough, the question then would be which institutions would conduct the lending that is the lifeblood of capitalism.

John Addis founder of Intelligent Investor believes crypto is a digital ‘wild west’.  He nominates another big problem with crypto is that it is ‘non-custodial’, which means investors maintain control of their own keys and assets.  If the keys are lost, the value is gone and if the system is hacked, or there is a scam, there is no recourse.  The Canadian crypto exchange, Quadriga, which collapsed in 2019, owed US$190m to 115,000 customers.

While ASIC recently approved a crypto based ETF, product approval by a regulator is in no way an endorsement or guarantee of investment success.  ASIC chairman recently urged investors to be careful investing in crypto, and highlighted the regulator is virtually powerless to intervene which means consumers are ‘on their own’.

Bill Gates sums crypto up beautifully with the words “my general thought would be that if you have less money than Elon Musk, you should probably watch out”.

When it comes to its true worth, bitcoins ultimate vulnerability is that it has no intrinsic value.  Gold has other purposes and besides is a means of payment.  Government backed currencies can be used to pay taxes and for services.  Bitcoin is  worth what the next person will pay for it which may become only a fraction of today’s price.

 

 

This article appeared in the Australian Financial Review on 1st December 2021

Friday, 05 November 2021 08:20

Before you invest in Hydrogen

With the Glasgow climate summit around the corner the market is buzzing with excitement surrounding hydrogen.

Investors should ask themselves whether this is the next ‘big thing’.  But before rushing into the new Hydrogen ETF, or buying Fortescue Metals on the basis of their interest in hydrogen, investors should pause for thought.

Hydrogen is seen as being crucial to achieving net zero carbon emissions given that when burned, hydrogen emits mainly water.

Jodie Bannan an Investment Analyst with Platinum Asset Management says that the first thing to consider is hydrogen is not a primary energy source that exists by itself in nature. It requires primary sources of energy (coal, natural gas or renewable electricity) to split it from oxygen in water or carbon in hydrocarbons. This means there is energy lost with each conversion and transport to end use and this needs to be considered when thinking about suitable applications. 

Natasha Thomas a Portfolio Manager at Ausbil Global Infrastructure highlights that there are two main ways to make hydrogen – via electrolysis of water which uses a great deal of electricity to split water into hydrogen and oxygen, or reforming natural gas into hydrogen and CO2.

Hydrogen made from electrolysis of water using renewable electricity is labelled ‘green’ hydrogen and according to Thomas is more expensive.  Market cost estimates range between US $5.00 - $8.00 per kgH2, with the price estimated to fall to US $1.25 - $2.70 per kgH2 by 2030.  This is attributed to the falling costs of renewable electricity generation and scaling up electrolyser manufacturing.

Thomas compares this with market cost estimates for ‘grey’ hydrogen (from steam methane reform) at US $1.00 - $1.75 and blue hydrogen (steam methane reform followed by capturing and storing the CO2 by-product underground) which costs US $1.40 - $2.45 per kgH2.

Bannan believes that a hydrogen price of around US $1.50 per kgH2 is needed to put it on parity with fossil fuel depending on the use.

 

 

In 2020 the International Energy Agency (IEA) reported that demand for hydrogen was 90 million tons.  Bannan said that about 48% was produced using natural gas based steam methane reform, 30% is a by product from oil refining, 18% using coal and 4% from water electrolysis.

In terms of the uses for hydrogen today, currently over half is mixed with nitrogen to make fertiliser or used in oil refining and methanol production.  

In looking to the future Bannan believes that new opportunities for hydrogen applications come from the growing need to eliminate CO2 emissions from process industries that are hard to electrify such as steel, cement and gas fired power plants.

Thomas adds that other future uses are likely to include transportation either as hydrogen-based fuels for shipping and aviation or as hydrogen fuel cells for electric vehicles.  As global transportation currently generates 24% of direct CO2 emissions from gasoline and diesel combustion, the use of green hydrogen would significantly reduce emissions.

Despite the momentum in hydrogen around the world, its place in the global energy mix still has many unknowns.  The IEA forecasts by 2050 hydrogen could make up 10% of the global energy mix and Bloomberg NEF forecasts that green hydrogen by 2050 could be cheaper than natural gas in some regions.

This brings investors to the opportunities in the hydrogen sector.  Bannan says there are traditional companies such as industrial gas companies that transition to hydrogen production over time.  Then there are technology pure plays such as fuel cell makers, electrolysers and carbon capture companies.  New technology is required to lower the cost of hydrogen production and the technology companies are often building capacity ahead of demand which is a key risk to consider.  Most of the technology companies are estimated to be loss making for the next five years.  These companies may not have the balance sheet to fund themselves or are reliant on government funding or tax incentives which may be unreliable. 

If investors believe that green hydrogen will be successful, Thomas believes the biggest opportunities are in the renewable energy sector which provide electricity to hydrogen production.

Energy infrastructure companies such as natural gas pipeline networks and equipment storage providers that may already be supplying the gas sector already, also stand to benefit from hydrogen and may be a lower risk of gaining hydrogen exposure.

The developments in hydrogen have some way to go. Any delays in rolling out green hydrogen could be met with scepticism, but investors would be brave to bet against its progress.

 

 

Every month, Mark Draper (GEM Captial) writes a column for the Australian Financial Review.  This column was published in the first week of November 2021.

Mark Draper (GEM Capital) and Shannon Corcoran (GEM Capital) recently spoke with Hugh Dive (Chief Investment Officer Atlas Funds Management) about the key themes he saw from the most recent company reporting season.

Running time around 30 mins.

Music clip by Joel Laundy.

Mark Draper (GEM Capital) and Shannon Corcoran (GEM Capital) talk with Nathan Bell (Head of Research at Intelligent Investor) about the investment cases for Sonic Healthcare, Telstra and Magellan Financial Group.

 

 To listen to the podcast, click on the link below.  Podcast time 41 mins.

 

Music clip by Joel Laundy

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