In this episode, I'm speaking with James Richards, Co-portfolio Manager of Fidelity International's Transition Materials Strategy. James runs a strategy that invests in stocks of companies that are exposed to materials that will play a crucial role in the energy transition. And it's not all about copper or lithium. James keeps his investment universe wide and includes commodities, such as animal fats and wood chips. We discussed the spike in rare earth materials earlier this year. We also look at why this is a super-cycle, but unlike the previous, China-led one. And finally, we explore whether this strategy correlates with the Australian economy and its emphasis on materials and style factors, including value. Enjoy the show.

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Overview of podcast with James Richards, Fidelity

 

01:00 What are transition materials?

04:00 This was an analyst-driven idea, based on common themes emerging in different materials, rather than a product team idea

06:00 This is a different supercycle from the China-driven supercycle

07:00 There is a school of thought that says iron ore is benefiting from the transition. I don't really believe that

9:00 The energy transition will have an element of decommoditisation to it. There will be pockets of price premiums

11:00 Rare earth prices spiked earlier this year as generalist investors came into this market

14:00 In the first six months of this year, China has installed as much wind and solar as 90 per cent of all wind and solar ever built in the US.

17:00 Are we experiencing a uranium/nuclear renaissance?

21:00 This is not a commodity strategy; you invest in equities. Why?

24:00 We are looking to expand the universe rather than contract it, because we think the opportunity set is wider than even we envisaged. Chemicals is an interesting area.

25:30 Correlations with the commodity-heavy Australian industry.

29:00 You can see the way the world is heading, but when we get there is often unclear. You can lose a lot of money investing in a great demand stories that are just uninvestable at this time

31:00 Is this a value play?

 

Disclaimer:

The content in this podcast is for institutional and wholesale investors and is not for distribution to retail investors.  This podcast has been prepared without taking into account any person's objectives, financial situation or needs. It is provided for general information purposes only and is not intended to constitute advice of any kind. References to specific stocks is for illustrative purposes and is not a recommendation to buy, sell or hold those stocks. You should consider the relevant PDS and TMD for any Fidelity Australia product mentioned before making any investment decisions, available at www.fidelity.com.au.

Full Episode Transcript

Wouter Klijn  01:16

James, welcome to the show. 

 

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