Understanding 4 Big ASX Companies: What Beginners Should Know

In this I speake with Morningstar Australia’s Equity Market Strategist, Lochlan Halloway, to unpack four major ASX‑listed companies: Woolworths (WOW), WiseTech Global (WTC), Ansell (ANN) and Technology One (TNE).

Lochie explains what each business actually does, why their share prices have moved so sharply during reporting season, and how beginners can avoid reacting to short‑term noise, especially around AI. From Woolworths’ scale advantage to WiseTech’s misunderstood layoffs, Ansell’s specialised PPE, and Technology One’s steady compounding, this episode is a clear and simple guide to understanding real companies.

TRANSCRIPT FOLLOWS AFTER THIS BRIEF MESSAGE

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EPISODE TRANSCRIPT

Phil Muscatello: G' day and welcome back to Shares for Beginners. I'm Phil Muscatello. Today we're looking at four well known ASX listed companies. Woolworths, Wisetech, Global, Ancel and TechnologyOne. What do these businesses do? What happened this reporting season just passed and how can beginners cut through the noise, especially around. Around AI? Uh, I know we've been going on a lot about AI lately, but it seems to be getting in everywhere. Today I'm joined by Lochlan Halloway, equity market strategist at Morningstar Australia. Locky analyses the stock market using Morningstar's valuations and before that he worked as an economist at westpac. G', day Lockie.

Lochlan Halloway: Thanks for having me, Phil.

Phil Muscatello: Thanks very much for coming on. Is it okay if I call you Lockie?

Lochlan Halloway: Of course it is. Is that okay if I call you Phil?

Phil Muscatello: Yes, that's right. We're not very formal here at this podcast. So tell us about being an economist and the kind of things that it taught you about how the system works and I guess the effects on markets and companies.

Lochlan Halloway: Yeah, well, it's not miles away from being an equity analyst in some ways, I suppose. It's kind of perhaps the broadest discipline. You know, finance is kind of a subset of economics, I suppose. So economics is the very big picture stuff. When you're a market economist like I, uh, was a lot of your job is thinking about forecasting what interest rates, currency, the labor market, inflation might do. And it's helpful as an investor across all asset classes to know how those bits of the macroeconomic puzzle all fit in together, which is great. The one thing I would say though, with economics, I think there is a lot of short termism, naturally, because a lot of it's trying to forecast what's going to happen next month to the unemployment rate or to inflation or to GDP next quarter. There are a lot of great long term things in economics, don't get me wrong, but I think that's just the nature of the job for many of them. That's not necessarily a very helpful thing as an equity analyst to be too concerned about what's happening next quarter or next month, at least the way we approach it. I'm sure we'll get into that later on in the podcast because it really

Phil Muscatello: is important for investors to understand that market analysts are looking out six months a year, two years down the track, aren't you? That's what you people are doing.

Lochlan Halloway: Yeah, that's right. And that's, I mean, obviously, the closer, uh, the easier it is to forecast. But a lot of the value in shares is not what happens next quarter or next half. It's what happens five, ten years down the track. Shares are perpetual investments. They go on forever and entitles you to an infinite stream of cash flows. So you can't be thinking just about the next little bit. You have to be thinking a bit longer term, I think, to be a great equity investor.

Phil Muscatello: And I think sometimes people do look at the economics as well, and they see something about interest rates or some geopolitical stuff, which I guess is the macroeconomic side of things, and they start making decisions based on how they themselves interpret that. But that's not really a good way of looking at. You really got to look at the numbers behind the companies, don't you?

Lochlan Halloway: I think so. I think the way we approach valuations, the way we approach investing is to look at the microeconomics of a company. How's this business compared? Like, you know, how does it compete? What's its business model, where its competitive advantages? That's kind of where we think our edge is not in what's the RBA or the Federal Reserve going to be doing six months from now and trying to make a big tactical bet on that. That's not really our style. I think you're better off looking at the microeconomics of a business and thinking about how those are likely to evolve over the longer term.

Phil Muscatello: Okay, so the first company we're going to look at is Woolworths. And, you know, we pretty much everyone knows what Woolworths is all about. But for you, what's the most surpr source of revenue in Woolworths? What's something that you found out by digging into what it actually does?

Lochlan Halloway: Yeah, that's an interesting question. I mean, look, I could say, you know, that it owns Big W, and maybe not everybody knows that they own Big W or pet stock, their pet care and pet product business, or even the New Zealand business. But look, to be honest with you, Australian food retailing, like the supermarkets, that is the main game. It's basically the only game. It's like three quarters of revenue across Woolworths group is Australian food retailing and basically all of earnings. I think analysts get a little bit caught up maybe on, okay, what's Big W doing this quarter and that quarter and getting them on your show there. If you want to know Woolworths you just have to worry about. Supermarkets don't have to worry about the rest. It's all marginal.

Phil Muscatello: So what's the story behind the large moves that we've seen in the Woolworths share price over the last year?

Lochlan Halloway: Yeah, it's been a bit of a rollercoaster for Woolworths and for its investors. Last August Woolworths had I think its worst single day since 1994. Stock falling I think 13 odd percent, 15% after its result because it had a bunch of short term issues. It had. Its distribution center was disrupted, it had some problems in New Zealand. It was losing a little bit of market share to Coles. Coles was out executing on it. And then six months later it

00:05:00

Lochlan Halloway: reports it's half year and the stock has its best day ever. It completely reverses all of that and the story is now flip. Woolworths seems to be winning again. It's executing well again. It's taking back market share from Coles. Look, what's that all down to? I think the big moves were down to the market fixating on the short term. And who was winning these short term battles between Woolworths and Coles who was having sales grow slightly faster than whom. But these are very long term established businesses. We don't see a lot of outperformance for very long periods. This gap closed pretty quickly and the market rewarded Woolworths. But I think it goes to show the danger of getting too fixated on the short term. If you missed out, if you sold were six months ago and had to buy it back now, it wouldn't be very pretty. So thinking longer term I think again to that original point is uh, good sense.

Phil Muscatello: Yeah. So it's not really a good idea to react to headlines too much. I mean it's a bit hard to do, you know when you see the share price go down it's very emotional reaction that you have. But really for companies like these you do have to be a bit more long term with them, don't you?

Lochlan Halloway: I think so. And look it is. It's psychologically difficult not to react when you see an investment you own drop by 10% or 20% or 30% and look, sometimes that's warranted, sometimes you get an update and the business really does change. Something came out of left field and the thesis is different but that's not always true. I think often it's not. And I think especially when you're talking about established blue chip businesses, these enormous swings we're starting to see More and more of in the last few years. I think there's a lot of noise and often not as much signal in what the market's doing with those types of businesses.

Phil Muscatello: What are a couple of the numbers that you've seen in the financials that you particularly like?

Lochlan Halloway: Well, with Woolworths specifically, it is the best business of the two supermarket behemoths in Australia. The oligopoly of Coles and Woolworths, it has something like 36% of Australian food retail. In Coles is something about 28%. So it has a significantly larger sales base, 30% more sales than Coles does. And that gives it scale advantages, economies of scale over Coles. So that translates into higher margins generally. It also means it gets better bargaining terms with its suppliers, which means that it gets higher gross margins. So it's the better business from a scale perspective, which is why we give it a moat M rating. That's also allowed it to, because it has more capacity to cut prices, to win back trust. Because margins are higher. It was able to do that, win back customers, win back market share, and that's why the market liked it so much in August. So the scale advantage it has, I think, is a really nice attribute for that business versus Coles and versus many other businesses on the ASX which don't have the scale that Woolworths does.

Phil Muscatello: So what is the size of the scale difference between Woolworths and Coles?

Lochlan Halloway: Yeah, so again, that sort of, if we're thinking about total Australian food retailing,

Phil Muscatello: you said, I think it was said, 36% and 28% of the market. Is that the basic figures of it?

Lochlan Halloway: Yeah. Ah, they're the basic figures, exactly. That's the scale difference. And I mean, with 30% more Woolworths, about $50 billion of Australian food retailing sales a year. So Coles has 30% less than that. That's a scale difference which is quite meaningful, you know, when you think about what that actually means in dollar terms and bargaining power. And again, that's why it boasts higher operating margins than Coles does.

Phil Muscatello: I think one of the great things that's benefited Woolworths over the last few years, like you said, is in terms of supply chains and logistics, the large distribution centres that they've been building. Do you see this as being a driver behind their competitiveness?

Lochlan Halloway: Yeah, absolutely. And they have to do this. When we think about big distribution centres, we're really talking about online fulfill fulfillment of sales. Right. That is the next frontier of groceries supermarket retailing in Australia. And both Woolworths and Coles are uh, laser focused on this part of their business because that's where all the growth is is there. It's taking a lot of share, a lot of shares moving from physical bricks and mortar retailing onto online. And they're building out big distribution centers and they're only going to get decent returns if they get a lot of volume to those distribution centers. So it's absolutely part of the strategy. It's early days yet and as I said, it's now really we're still in the sort of investment phase rather than the big returning phase. But expect online and how efficient the online digital selling businesses of Coles and Woolworths are to be a dominating narrative for the foreseeable future.

Phil Muscatello: Okay, and just with a caveat about all that, we're talking about, we're talking about long term investor investing with a lot of these companies, aren't we? This is something for the long term and ignore those short term headlines. And like we said before.

Lochlan Halloway: That's right, that's how we view it. Each investor is totally entitled to focus on what they want to do. We are a long term investment research house. We care more about where's this business going to be in five or 10 years time. How's the competition going to evolve in five or 10 years time? Not is it likely to have a good half or a good year. That's how we look at it.

Phil Muscatello: Okay, well let's move on to another company that's slightly more controversial. Wise Tech Global. What does wisetech Global, apart from having a very colorful CEO and

00:10:00

Phil Muscatello: founder?

Lochlan Halloway: Yeah, sure. So wisetech, I mean start with, you know, who its customers are. Uh, if you are trying to ship, if you're a manufacturer in China and you're trying to ship shoes to Australia, that is a very complex process. You gotta get it from your factory to the port, it's gotta clear through customs, it's gotta get on a container on a freighter, it's gotta get to Australia, it's gotta go through customs here. It's gotta plan any duties that are applicable. So you got to get from the port on wherever it has to wind up. That's a very, very complex process with many, many touch points. And the manufacturers don't do that themselves. They outsource that to freight forwarders, freight forwarding businesses, who manage all that on behalf of the manufacturer and the ultimate customer. What uh, wisetech does is it provides the software that sits at the core of these freight forwarding businesses, that manages for these businesses all the little Logistical things they have to do to make sure that product A gets through that entire global freight network to its destination. It used to be a very manual process and in many parts of the industry it still is. Like, you know, manual spreadsheets, calling people up, calling up freighters to get, you know, to get onto a ship. Wisetech's automated a lot of that.

Phil Muscatello: Printing labels, printing all that.

Lochlan Halloway: This is all changing and wisetech is a big part of that. It's got a lot of market share. It can still take, but it's, and it's in the early innings of this. But that's what's really been the reason why WiseTech has been such an investment success story over the last decade notwithstanding. Obviously, uh, a few questions investors have in the last, uh, six months or so.

Phil Muscatello: Yeah, a couple of governance issues, but we won't cover that today. We've covered that quite a bit on the podcast. So what's the competitive landscape like for wisetech? Does it have competitors? I mean this is obviously a global market that it's addressing. How successful is it in achieving those ends?

Lochlan Halloway: Well, it's basically dominated the digital side of freight forwarding software. So for those freight forwarding companies that do use software, like CargoWise is Wisetech's flagship freight forwarding software, most of them are on the Wyzech product, cargo Wise. So it has a lot of market share in the subset of freight forwarders who use software. A lot of them still don't though. And I guess that's where the opportunity for Wise Tech lies is. Can we bring more and more of the freight forwarders onto the automated software stuff? It's expensive, yes, to use wisetech software, but it makes you a lot more efficient as a business and it takes a lot of cost out and it's a very, very competitive industry. Freight forwarding, fairly low margins. So being slightly better than your competitor is potentially do or die. So it is, it wins in the sector that it has, but it has a lot of market share yet to convert, I suppose.

Phil Muscatello: And how sticky would the existing customer base be?

Lochlan Halloway: Very, very sticky. That's been a hallmark of wisetech is that there is very, very, very little churn in Wise Tech's customers. Really the only customers that churn is in are the ones that go out of business. Which says basically for all the businesses, the freight forwarders who don't fail on wisetech, they basically don't churn out of the product. It's got industry leading retention rates which if you're a software company, is one of the sort of flagship metrics you'd be looking at to tell is this a high quality software business? So it gets a check on that front.

Phil Muscatello: Track your investments like a pro. Sharesight is Investopedia's number one portfolio tracker for DIY investors. Simplifying your finances. Get four months free on an annual premium plan at sharesite.com sharesforbeginners. So WiseTech recently announced big job cuts and saying that AI was the reason. What's really going on there?

Lochlan Halloway: AI is, I'm sure, part of the story, not just in wisetech's business, but the broader conversations that investors are having about AI and how it might or might not disrupt traditional software businesses. Which Wise Tech is. This one though, uh, this particular round of job cuts that they announced at their half year looked a little bit more like their standard playbook than maybe something that was purely AI based. So they acquired a business called e2open not that long ago and that I think almost doubled their headcount. WiseTech's headcount. And so they've cut about 2,000 people out of their 8,000 odd workforce, many of whom came across with that acquisition. They've done this in the past. They made out 50 acquisitions over the life of the business. And usually the model is bring that business in, incorporate its software into the core product and then trim, I suppose, a superfluous headcount. And so they've done that this time M and they dressed it up as an AI related headcount reduction. I think we see it probably more as BAU than maybe something new and revolutionary to get too scared about. Not to dismiss AI as a potential disruptor for all white cholera knowledge worker businesses. But this one particularly probably looks a little bit more like standard Wise Tech stuff than something particularly new and revolutionary.

Phil Muscatello: So tell

00:15:00

Phil Muscatello: us about the half yearly report. What were the highlights in it for you?

Lochlan Halloway: Yeah, look, I think overall things are going pretty well. One thing that we've been, I suppose, looking for closely is how are those metrics like customer retention holding up? Because that is very important. And as I said, wisetech boasts pretty phenomenal customer retention rates. So that's still going along pretty well. They've also changed their pricing model somewhat controversially because it is going to make it more expensive for some of their customers to use. But previously they used a sort of seat based model. Uh, so every person in a business who used wisetech paid for a seat. That's potentially a problem for wisetech if you make your customers a whole lot more efficient and they start taking headcount of their business because they don't have as many people to buy seat licenses from you. So they've changed to a volume based pricing measure which says, all right, we're going to charge you based on throughput that comes through our system, how many containers you're filling in, shipping and so on. That seems to have gone so well so far and it does insulate them to a degree from actually making their customers more efficient and leaner. That's at uh, the start of the journey though, for that. So we'll keep an eye on how that goes down the road and whether there is any competition from an AI challenger startup, given that the cost of programming now is falling quite significantly.

Phil Muscatello: And Richard White, is he still a problem for the company? He's still there, isn't he?

Lochlan Halloway: Yeah. Uh, look, I mean our analyst, and I'm not the analyst for Wise Tech, but our tech analyst at Morningstar sees which Richard White is an important part of, of the history of the business. He obviously has, you know, there are personal issues going on there with him, but he has been, I mean he founded the company and built the company into what it is today, uh, a highly, very, very successful software business, I would imagine. And we do see him as an important part of the future of the business. So I would think as a general, we don't see Richard White as so much of a problem, but an important part of the talent pool at wisetech.

Phil Muscatello: Okay, so moving on to Ansel. Apart from rubber gloves, what does Ansel make and who uses their products?

Lochlan Halloway: Well, it is mostly gloves really. They do some other bits and pieces here and there. I think they do full body protective suits, but they are a PPE business, Personal Protective Equipment. I think we all know that acronym after Covid. But it is mostly gloves. And their customers are, uh, predominantly healthcare customers, hospitals. It's about half of their business. The other half is industrial. So factory floor heavy industry. It's pretty much 50, 50 split between those two broad groups of customers.

Phil Muscatello: So it's a really basic business, isn't it? And you know, it's amazing when you hear about some businesses how they can be just cash generating machines for almost generations just by doing one thing very well. Is that the way you see Ansel?

Lochlan Halloway: Yeah, I mean it uh, it has, it has a long corporate history, various permutations and what it has and hasn't done for more than 100 years. But right now it is fairly simple in what it produces. It's interesting though, I mean it is the strength of Ansel is Not the commoditized single use gloves you might picture when you buy, you know, buy off the bottom shelf at Woolies. That's not what its core is. That's not what the best part of Ansel is. It's the specialized protective gloves that are used, say by surgeons where, you know, fit and preference is really important, or by industry where safety is absolutely key. And having a glove that doesn't work quite right can be, well, potentially catastrophic. Right. If you're not used to fit, if it doesn't protect you well enough, that's a big problem. So it has a brand as a high quality glove maker, highly protective, its customers like it. You know, when you think about what Ansell is selling gloves, that's usually a very small part of the cost base of most of its customers. Right? So to quibble over a small sliver of your cost base if your employees prefer, if you get, you know, additional safety benefits from it keeps you pretty well insulated from the competition. So it excels more in that higher value upmarket protective equipment rather than the really basic single use, commoditized stuff where there are plenty of competitors who can do it cheaper than Ansell can.

Phil Muscatello: So presumably they do have a kind of a sticky customer base. But they do face competition, don't they?

Lochlan Halloway: They do. And I mean, when we think about, they're usually either the leader, uh, or second in the market in most of the higher quality spaces in which they operate, which suggests they do have a brand. Right. They win in most of the markets where they target. The other nice thing about particularly the health side of the business is not really very economically cyclical. That's nice in a business when you don't. We're not really exposed to broader economic fluctuations. Hospitals need gloves kind of regardless of what's going on. And that's nice. It insulates you from some of the volatility. You might see more in the industrial business selling gloves in industry or broader stocks that are exposed to the economic cycle. It is competitive. And certainly when, you know, when the tariffs became a big thing in a big way, people were concerned about, okay,

00:20:00

Lochlan Halloway: well, Ansel is making it manufactures most of its products in Southeast Asia, which were hit with pretty tremendous tariff rates in that first burst and liberation day. People were worried, okay, will there be lower cost suppliers who can undercut Antsell, who's facing these whopping tariffs? Most suppliers are, uh, located in the same area, so they also face the same hit. And so it didn't really affect them too much in that sense. And the Fact that they have pricing power and the fact that they were taking a lot of cost out of their supply chain turned out to result in some solid financial results in the last half, given a, you know, pretty challenging backdrop for a business like this.

Phil Muscatello: It's interesting you use the term pricing power because that's a very important thing for to set some companies apart from others. Talk to us a little bit more about Ansel's pricing power.

Lochlan Halloway: Yeah, well, it comes back to that brand value, that intangible brand value we spoke about at the start. If company has a brand, it can charge more for its product. I mean that's kind of what a brand is basically if, you know, you pay more for something because it has a label on it versus a generic brand, uh, or non brand. Ansell has that. So it means it is more able to pass through cost inflation like the big hit from the tariffs, which is obviously highly unusual and would be highly disruptive if you couldn't pass on. If you get hit with a. The average tariff rate in Ansell's manufacturing jurisdictions is like 19% or something. If your cost base, uh, essentially goes up by 19%, that could be disastrous if you can't pass any of that on. Ansell could and did we look at the last half, I think revenue grew by 2% but its earnings grew by like almost 20%. Right. So it was able to pass. It was able to offset a lot of the cost pressure and take some costs out of the business and that was very solid. So to come back to the original point, if you have a brand that often affords you pricing power and that can be very, very helpful when you have a backdrop like we do today, where you've got highly uncertain tariff rates and geopolitics.

Phil Muscatello: So for you, it's one of the stars of the latest reporting season, is it?

Lochlan Halloway: Well, I think it did very well. There are 200 odd narratives in reporting season. I would say that that was very commendable given the backdrop. It is more exposed than most businesses to tariffs because it manufactures in Asia and ships about half of its goods to the US when we look across the asx, that was in the high exposure bucket to tariffs and it did pretty well against that backdrop.

Phil Muscatello: Okay, technology one. So tell us a bit about technology one. I keep on finding a lot of people don't know about this company, but it's a company that they really should put on their radar.

Lochlan Halloway: Yeah, look, it's a very high quality Australian software business. It's probably not the sexiest software business in the World. I mean that's why a lot of people don't hear about it.

Phil Muscatello: But that's always a good thing really, isn't it? You know, it can be a good software business. Yeah.

Lochlan Halloway: Especially when the entire market is looking to sell software businesses and find out how they could be attacked by AI. Uh, the SaaS. Pocalypse being a boring one with high quality customers, which we can talk about in a second, is a very nice attribute right now. Maybe it wasn't as sexy as the growth story for Promedicus or Wisetech even, but it has nice attributes in the software space when things are quite uncertain, which I do right now. So what does it do? Well, it is an erp, uh, enterprise resource planning software provider primarily to councils and governments and to hospitals and universities. So it's kind of government or semi government customers. So IT software manages things like, you know, payroll, hr, procurement, some accounting functions. It kind of is like the core planning software for these businesses. You know, like Workday, uh, for example would be a bigger example than it and it has specific tailored products for the type of customers that it serves. And because it is mainly serving government, semi government customers, the failure rates of these businesses are essentially zero. They don't go over. And that's very nice if your customer base firstly doesn't churn because of attrition because business go bankrupt. But secondly in the case of tech one, it doesn't really churn at all. It's got 99% customer retention which is like kind of the best in class almost anywhere, which is phenomenal. So that's a nice attribute to have. It's a high quality software business serving high quality customers. I wouldn't say there's necessarily a lot of it's not got the sexiest growth story because it really dominates a lot of the markets that it already operates in and has a lot of the customers already. I guess the thing for them now is just trying to sell more products to those customers. That's where the growth might come from rather than, you know, white space. New customer acquisition.

Phil Muscatello: Super. Is one of the most important investments you'll ever make. But how do you know if you're in the best fund for your situation? Head to lifesherpa.com to find out more. Lifesherpa,

00:25:00

Phil Muscatello: uh, Australia's most affordable online financial advice.

Phil Muscatello: And where are the markets geographically located that it operates in?

Lochlan Halloway: Mostly an Australian and New Zealand business that's kind of overwhelmingly where they are. Uh, as I said, and it's mostly councils, local governments, some federal government though I Don't think they've had a lot of success there off the top of my head. And yeah, hospitals, universities, just interestingly, I

Phil Muscatello: mean, I've got a guest coming on in a couple of months time, the author of this book called the Coffee Can Investor where he's I think 10 companies in a coffee can, so to speak, for his daughters to leave for years. And he's a New York fund manager, hedge fund manager. And one of the companies he's got in that coffee can is Technology one. Uh, first of all, I don't know how it came up on his radar, but secondly, it's obviously got something. Yeah, he's got something going on.

Lochlan Halloway: I mean, as I said, maybe if you just screen by global software companies customer retention rate, I think you might stumble across Tech one pretty early in the list. It's not to say that it may not face, you know, challenges right from AI, from disruption. It's not totally impervious to that. It's better placed than most software businesses because it's so like mission critical and deeply integrated. I mean you really, if you're accountant, you can't, you can't have something fall over and not be able to pay your employees or have an accounting system screw up or an HR system screw up. And you've got very risk averse customers when you've got government customers too, who probably don't have a lot of incentive to try and shift away from you if you're doing a good job. So that helps protect them better than most, we think, from this new threat of AI disruption which has really come to the fore in the last couple of months.

Phil Muscatello: Well, I'll be sure to be asking him how he screened and how it came up on the radar. Uh, yeah, I think, I think it was actually looking at for companies that what were the characteristics of 100 baggers? So it was something really basic like that. And of course we're not looking for 100 bagger here necessarily. And this is no recommendation to buy. Okay. We're just no talking about how we're looking for value in different companies, aren't we, Lachie?

Lochlan Halloway: Yeah, that's right, that's right, yeah.

Phil Muscatello: Okay, so reporting season, what are a couple of the key takeaways overall? What do you think are the major forces that have been acting on Australian companies in this latest reporting season?

Lochlan Halloway: Well, I think we have to briefly talk about not so much the fundamentals of the company, but just the share price reactions we've seen. It would be remiss of me not to Mention that volatility of share prices on results days is rising and rising and rising and it's been doing that for about a decade now. Maybe that's down to more short term capital in the market. You know, hedge funds, trading pods, momentum investors, ETFs, uh, ETFs, possibly passive multiplying reactions on the day. Yeah, all of these factors might be a part of it that doesn't necessarily have anything to do with the health of the businesses underlying these stock prices. And I think oftentimes it doesn't. Woolworths at the top of the show was, I think a great example of that. We need to understand that that is probably a new reality now for investors. And I think when you're looking at reporting season and you see a company that you own drop by 20, 30, 40% sometimes we saw that a couple of times this uh, reporting season. That's sometimes signal. A lot of it is noise though. You need to find out what are the few bits and pieces that actually matter for the thesis. Are they tracking in the right direction? If they are, you, uh, can potentially just tune out whatever the share price did in the day. I think that is, that's probably the overarching takeaway. It's not specifically about businesses, but about the way the market's evolving. And I think it's a bit of a potential pitfall if you really get caught up in that. I don't think as, you know, as individual investors we should be trying to hunt for opportunities in on the day share price moves in reporting season. I don't think that's happy hunting grounds for us, but maybe using some of the massive sell offs that we're seeing or some of the big share price rises we're seeing as opportunities for mispricings that might be where you can do better.

Phil Muscatello: So you would be amongst friends at barbecues sometimes and known as the financial guru and get all those questions. What is it when someone says to you, oh, you know, I've bought these Woolworths shares and they're down, you know, uh, 20%. What are the sort of things that you would tell them?

Lochlan Halloway: Yeah, look, it's obviously it matters stock by stock, but I suppose generally, you know, why did you buy it in the first? What was your investment thesis? What was the investment case there? What were the numbers you were looking for to try and confirm or refute your hypothesis? And has any of that changed? And if none of that's changed, if the investment case is still there, the business is humming along, there's no Reason to think that the long term view of this stock has much changed at all, then there's no need to do anything. I think that's kind of it. And usually there's only a couple of numbers that really matter. You get dumped with on an earnings day, a results announcement, a report, multi

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Lochlan Halloway: hundreds of pages of reports, glossy investor presentations. But generally you don't need all that to find out a couple of data points that matter. Check in on those and if they're moving along nicely, then there's not necessarily a need to do anything.

Phil Muscatello: I can't let you get away with that telling us what those data points are, what those numbers are.

Lochlan Halloway: Well, I mean it depends on the stock. Of course, when I say this, I mean the narrative is going to be different. For every stock that you own, there isn't one single number you can go to on PageX every financial report and say that's the one. It's going to depend on your investment case, your investment thesis and the stock. I mean for Woolworths, for example, a big part of it was this reporting season. And more generally, can they start to win back trust of their customers and see sales growth approaching if not exceeding that of Coles? That was kind of the thesis. If they can start to grow again and at least keep pace with Coleslaw, then that's kind of it. They have to cut prices to that in the short term, fine, which they did. The customers came back, their performance started to improve and then that's, that's kind of the end of the story. Don't worry about what big W is doing or what New Zealand's doing, or this little moving part here or there. That was kind of the main story for that stock. And that wasn't too hard to tell. It's not to say that, you know, I mean there are, there are many, many, many narratives. But it's just knowing why you own it and does that still stand?

Phil Muscatello: And I just wanted to come back to a thing you said a few minutes ago. And that's about why do you own um, the company? And um, that's so important, isn't it? You've got to have a reason for owning the company. Hold onto that reason and see if the thesis changes for whatever reason.

Lochlan Halloway: Yeah. And try and approach it in the most objective way that you can. You don't have to anchor yourself to the first. If something changes, if the facts change, you can change your mind. That's okay too. But try and be objective. Don't worry about, you know, ideally, don't even look at the share price, look at the result first. You know, try and pass through it, figure out what actually matters and if you must, go and look at the share price after that. But don't be led by the share price into making a decision.

Phil Muscatello: Lachlan Helloay. Thank you so much for joining me today.

Lochlan Halloway: Thanks for having me.

Phil Muscatello: Phil thanks for listening to Shares for Beginners. You can find more@sharesforbeginners.com if you enjoy listening, please take a moment to rate or review in your podcast player or tell a friend who might want to learn more about investing for their future.

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