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Let's play a game. The game is called the 2025 Financial Time Stock Bicking Contest. Here are the rules. You pick five stocks, long or short, by this Friday at midnight. No mutual funds, no ETFs, individual names only. No trading your portfolio until the end of the year. If you finish first, your reward is perpetual glory.
This is Unhedge, the Markets and Finance podcast from the Financial Times and Pushkin. I am Rob Armstrong, here at Unhedge World Headquarters in beautiful New York City. And today, we're going to pick some stocks.
I am joined by two brilliant colleagues, my trusty lieutenant, Aiden Rider. Good morning. And Alan Livesey, down the telephone from London. Good morning, Alan. How are you? We are well. Alan, we have a question here in New York. What is your job exactly?
I'm a lone wolf. I'm wandering the floor looking for asset management and investment ideas. A lone wolf stocking Brackenhouse. Wait for the full moon and then I appear. Okay, so I want to talk about what we think are the right stocks to own, but I have a few things to say and to ask first. The thing I have to say to our listeners, and I want you to listen very closely, this is not investing advice.
My results in the last two years of the stock picking contest are proof that it is not investing advice. The second thing I want to ask of Aiden and Allen is what kind of year are we expecting? When you are picking stocks, what kind of year were you thinking about Allen? What's 2025 going to be like for financial markets?
Donald Trump has already begun to throw wrenches into the greater machinery of the world's markets and economies. And I'm counting on it, keeping that up. But where he's going to throw the most wrenches, I suspect, and he's already started.
is at the Federal Reserve. I think he is going to keep coming. If Mr. Powell doesn't deliver lots of rate cuts. He put out a really nasty tweet, or what do we call the things one does on Truth Social? Truths? Truths, I think. So we wrote a little bit about the truth. You wrote a little bit about the truth yesterday.
When he was at Davos, he said to the various globalists there that he wants all interest rates in the world to drop. Yesterday, after the Fed did not drop the rate, he said he's going to do it himself, gosh darn it, whether that be through his various MAGA policies or something else, he will make the US economy stronger. So he's a Jerome Powell hater. What does that imply Alan?
I think he's going to attack the Federal Reserve on a regular basis and make markets, investors question the dollar, and that will draw people to alternatives, but particularly gold. Back when we worked together on Lex, Rob, we wrote horrible things about the gold market and the gold investor, but no longer
They're laughing at us recently. They made a lot of money. They're not laughing at me because, in my final years, I became more of a not a Lex gold bug, but just, let's say, much more favorable. OK, so he's one of your picks gold stock. Now we're getting to picks. Two of my picks.
I wanted to do junior gold miners. It's kind of hard. What does that mean, junior gold miner? A junior miner tends to have no cash flow. They'll have an asset. They may well just have begun production, but they'll be very small as the name implies, but they'll be higher beta, higher beta kind of more leverage to the price of the metal.
I would expect that. So I went down the smaller end of the scale and I went through the recommendations I could find and a couple stood out and I suspect I'll get some hate mail on this, maybe not, maybe yes. But I picked Dundee Precious Metals and another one called Oceana Gold. The Oceana Gold actually has an asset in the United States, I believe it's in Nevada. I think that's an interesting play because there is going to be more mining in the United States.
Yeah, and you see the Trump is already causing some ruckions in the gold market recently with extra stockpiling of gold at the Fed and the COMEX. I'm bullish on gold. I think gold's going to have another good run. It used to be people would say, oh, after gold gets above $2,100.
there's a demand destruction. The Asian buyer stops buying in a certain, and now we're at like 2,600. So this thing's running, it's like at a new level. So that's a momentum play you have right there. Part of it is also Chinese investors eventually are just going to keep coming. But the Asian investor doesn't, an Indian investor particularly doesn't like paying up for gold, but I still see more gold.
But central banks are still buying, and if Trump sets the Fox in the hen house or whatever the phrase is, you can predict central banks are gonna want more of the stuff. So that's an interesting- Yeah, I think there's a non-crypto buyer, you know, the silent majority I'm going to say that- The silent majority. Aiden, do you have a pick for us, sir?
I do, and that's a controversial one. Let's remind listeners that this is not real money. And we're locking in right now for returns for the end of 2025. Yeah, so it's an 11 month contest, the 31st of January to the 31st of December, basically. So this is certainly not investment advice. Yeah, yeah. So you're going with the volatility approach. I am. Long shots. Throwing stuff out there, seeing what sticks. Yeah. I'm going to short Google.
Wow! Have you considered just setting your money on fire instead? Thankfully, it's not real money. And that's why I'm doing it. OK, give us this short case on Google. That is a controversial call right there. So we've gotten some interesting news on AI in the past three days. We've learned these models could be made more efficient. We've learned that some of the big players like Amazon, Meta, they actually might be able to get better deals on those models because they don't necessarily have to invest as much in creating them.
Google, according to some people I spoke with in the chip ecosystem, is one that isn't necessarily a big winner from this week of DeepSeek of the big tech companies. They have invested a lot in their own chips, which might not be up to snuff and might not have the same rationale that NVIDIA had when they were making their own chips.
And then there's a question on whether or not they can properly integrate AI into their system and to their services. They also have a big antitrust issue this year. So they were found liable of monopolistic behavior when it came to their payments to Apple and when it came to their ownership of Chrome and Android. Now this is a big bet because we don't know what the judge will do in this case. And it's possible that Google has to shed
one or part of its business, whether that's components of the ad ecosystem, whether that is Chrome itself, right, their online browser, or it even could be Android. So we don't know what's going to happen next. I'm going to take the bets, the long shot bet, that whatever it is, it will not be good for Google. I find that so incredibly unconvincing that my first pick is long Google. Well, we'll see who wins. Yeah.
That's interesting. So you have to change the name of this podcast who hedged. I think Google not, you know, I just think it's an innovative company. I think it's the cheapest of the Mag 7s. Their core business is actually safe from all these legal rearrangements. They'll thrive whatever happens. So I'll go along that one.
It's probably right, but you know, got to have fun. I want to talk about my, all my, and I think that's kind of a conservative pick. We'll see. That's a good debate though, but in general, my, my picks are quite conservative. My first idea, and I'm interested in your thoughts on this Alan and Aidan, is that it's going to be a great year to own a huge money center bank.
And I'll tell you why. Volatile markets, which are gonna be delivered by the president and everything else, are very good for the big banks trading desks. They like volatility. They make more money. It's slated to be a good year for IPOs. We've had a bit of a slow IPO market. A lot of private equity companies wanna get some liquidity. We're gonna have a good IPO market. The shape of the yield curve is good for the lending businesses.
Strong US economy means the credit card businesses are not going to face big defaults. Most boring possible pick, but it's been on a great run. I think it'll stand a great run. What's wrong with owning JP Morgan Chase in a crazy year where things will probably, it'll probably be a strong US economy and things probably will be fine. You get some upside because JP Morgan Chase is leveraged to US economy.
And if all goes badly, JP Morgan's the strongest bank in the world and probably won't do as badly as other banks. So that's boring, but I'm going with it. What do you think, Alan? Am I going to make money on that? I like that, but I went high data and I went with Evercore, the boutique investment bank as we discussed. So it's like the same idea except more concentrated.
in a certain way. I think it's got to be a good time for deals. We both know this from talking to many CEOs and board members, they need to feel confident before going into a deal situation. They may have plenty of targets, but they need confidence. I think that confidence is there.
Well, at least we'll be there for the next few months. It disassembles the economy. There's no question that there is a lot of strong animal spirits in the economy and in markets. That should be good for the M&A market. And maybe I'll steal your idea for my portfolio. Maybe I'm being too cautious. You've slightly convinced me.
Costures did not work last year. Yeah, I know. But I just feel like my general thinking about this market is this. The US is going to work. So you want exposure to the US. You want companies that are leveraged to the US economy. Growth is going to keep working. So you want companies that have kind of above average earnings growth. If you're going for volatility fine, I'm actually trying to build a good portfolio here.
You know, if you think it's going to be a volatile year, you want companies with a certain amount of sturdiness to them. That's, so I'm taking a different approach than Aiden, who's going for the long shots.
Anybody have another idea? I do. I have some short ideas. I love a good short. The one is an investment house that has fallen upon hard, hard times. It's the Swiss investment house GAM, G-A-M. It's listed. It has been just a disastrous run. When you say investment house, what does that mean exactly? I'm ashamed to say I've never heard of this company.
Oh, he must have, because Gam was one of the early sort of investors in hedge funds. They are Swiss. It is a Swiss house, although there's a lot of people here in the London office. I was a hedge fund guy. They invested in my fund for a time. And that was a long time ago, 20 years ago. So it had a very good reputation for being a sort of niche player. And I think the father of the philosopher, Ellen De Botone, started it.
Anyway, it's fallen hard times. French billionaires stepped in, Mr. Neil. Xavier Neil. Telecom's billionaire. Whatever he's done hasn't worked because the shares just keep going down to the point that the y-axis of price has moved to a log scale. I noticed on my back set.
And if that isn't evidence of a seriously falling damn price, nothing is. I think you need to start an algorithmic hedge fund that just tracks that. Anytime you have a falling stock and the chart goes to log scale, you immediately initiate a short. And you can have a long short. You can have the other one. If the thing's going up so much, the chart has to go to log scale, then you go long. So it's a momentum fund with an automatic trigger. You're going to be a rich man.
Or not, because there's a bit of death or glory here, like Katie was, whatever it's time. If Nail decides to just say buy it out, I'm doomed. But it's at nine whatever, some teams or whatever, I can't remember if it's, I think it's in Swiss Francs. Whatever the scent is, and it could go to zero. If it goes to zero, I make 100%. So that's one of my shorts.
Okay, what's next, Aidan? What do you got for us? I'm not sure exactly which company I will short, but there's a universe of companies that I think are worthy of a short. Right now, Donald Trump has talked a lot about tariffs. Last time he did tariffs in 2018 when they were a little more haphazard, it was metal companies that took a big beating.
Interesting. Metal company. Yeah, rare earth metals from China are a big deal. So anybody who is trading in commodities from China to the US or to the developed world. Now this is going to be global. So some of the big players, whether that be Glencore or Rio Tinto, might face some pressure.
So Encore is interesting. They're like more of a trading house. They're more of a trading house, and they are purely just trading. And if there's tariff barriers erected everywhere. That's very interesting. So it would seem to make the heads that they would be assured. That being said, some of them have US exposure. So if you have mines in the US, that might offset some of this. Yes. I do have a short idea, but it's a bit of a hedge. My portfolio is going to be mostly cyclical US-driven companies. And so I want a cyclical stock
that is like a structurally weak business. So if cyclically the economy does go in the trash, I'll have one hedge out there despite the name of this podcast. And I'm wondering, paper companies have gone up wildly and the paper industry is the worst industry in the world.
low barriers to entry, low returns on capital, capital intensive, very, very sensitive to economic change. And I wonder if maybe the way to hedge my portfolio is to go short one of the big US paper companies, either International Paper, Packaging Corporation of America, Smurf it. So that would be my idea is like I have all these cyclical companies
and then I have a cyclical short on the other side. So that's the one I'm thinking about there. But here's a kind of company that I love that many of our readers, listeners I should say won't know about is
the aggregates business. Rock guys. So what you do in the aggregates business is make big rocks into little rocks. You have a quarry, you get some rocks, you mash them up, and then the rocks go in to make house asphalt or concrete or other building materials.
Gravel, you think, who would want to be invested in the gravel business? But let me tell you this. Over its history, Vulcan materials, which is kind of the leading US aggregates company, is one of the best performing stocks there is over the long term. Because these businesses are all local monopolies. You can't carry rocks around very far.
And why that is interesting is like once you have the quarry in a given neighborhood, given like a 50 mile radius, you're it. So you have great pricing power. And so Vulcan, which is a national company, is basically an interlock series of local monopolies and has great returns. If you think Donald Trump is going to supercharge the American economy, there will be construction, there will be road building, et cetera, et cetera. This is a levered play on that. I just think it's a really safe company. And you know what? You can't import rocks.
This is like the least tariff affected company you can possibly imagine. But doesn't that rely on rates coming down and mortgages coming down? Okay, it's true. The weakest part of their business is going to be residential construction, but their biggest business is like roads. You know what I mean? And so that part of demand is built in, the local budgets look good. So if rates come down, you get some upside.
uh... it's already absorbed pretty high rates if rates come up it's not going to be a great pick yeah i don't know the part of the funded part of transportation doesn't seem to yes there but again i've asked all these questions of people who follow the company they're not that exposed to the federal government and it is more to state and local governments that they are exposed
the highway departments and so forth. And for this year, all the federal spending is already approved on its way, et cetera, et cetera. So I like Vulcan materials. That's one of those stocks you can buy and then go to sleep for 20 years and wake up and be happy. So I like those kind of stocks. I think my last one is, quote unquote, no brainer if you're trying to do moon shots this year is crypto.
Trump has promised to unleash crypto regulation and give them all they want and all the securities regulation they want, which would theoretically usher them into the mainstream. If you believe that will happen, and if you believe that will happen this year, crypto stocks to the extent this is not already priced in should see a big upside. So it's, of course, crypto is a different asset. You can't do it in this game, but you can buy Coinbase or other companies that are tied to crypto.
Yeah, I love it. I think if you want to death or glory pick, you just go one direction or the other all in on crypto for sure. Alan, you've given us your long two gold companies and a bank, and you're short a Swiss investment company. Round out your portfolio with a fifth pick for us.
So it's a short on the luxury company, Caring, which is a bit of a joke because Caring doesn't seem to care about its shareholders and hasn't for some time. The business of the billionaire is at Francois Henri Pino. I hope I didn't miss this.
He has run this for a while. It's been a sort of family thing. I just don't think he's focused enough on this business. And I think finally the shareholders began to notice a couple of years ago. I wrote about it on Lex. It continues to go down because Gucci is the big problem.
And I know Rishmont had some good results recently, and that was fine, and it shot up. LVMH had bad figures the other day, or not so good. And if the best company in the space is doing poorly, the worst company in the space or the weaker company in the space is going to have a real problem. I think it just keeps going down.
Okay, you know why this is a brilliant pick, Alan, is because you have just, by being short-caring, you have just hedged career risk. Because as we all know, the FT is very dependent on luxury advertising. So if the luxury business has a terrible 2025, we all might get fired.
but I'll be right. You will be right and your short position on caring will carry you through. I love that pick. Aidan, round out your portfolio for us. Your short Google, you are long something Bitcoin, not Bitcoin itself.
what a short Glencore or other. A short Glencore or another big commodities house. Yeah, I like it. I am long. I haven't decided again which specific equity, but some private credit player, right? Owl or someone else. Everybody has been saying forever that private credit is super dangerous. It's going to implode the entire financial system. I don't think that's happening in 2025. Yes. Instead, I actually think they're going to have an easier time and a better economy to work with. Yes.
So yeah, long private credit. And you're getting in front of good momentum there. I mean, this asset class is so beloved right now. You know, these guys are just holding out their hands and people are throwing money out. It's barely a moonshot. But I could short them on the whole chance that I think that private credit is going to implode. But I think I'm going to be chill on that one. All right. I think we're almost there. My final pick, again, on the theme of boredom,
The first company I ever covered is an analyst. Many decades ago was a drug distributor called McKesson, a very well-run company. They basically roll the trucks that bring the pills to the drugstores. They supply hospitals and all that. Very well-run business.
In general, healthcare was unpopular with investors last year. I think it's going to be more popular this year. I think this is defensive. They're not exposed to all the worries that are covering other bits of healthcare. I just think like this company is a good way to get exposure to healthcare, which I think is a sector that's going to do well this year. So I'm buying it. So what do we have? We have two interesting portfolios from Aiden and Allen and one
agonizingly boring one from Rob Armstrong, but perhaps this year will be the year that boredom wins. We will be right back with long and short
Bonds are back. And so is all the credit. PGIM fixed income's monthly podcast series. From the latest trends to long-term perspectives, you'll get timely fixed income insights from leading economists, research analysts, and investment professionals. Whether you're new to bonds or a seasoned investor, tune in to all the credit wherever you get your podcasts. This podcast is intended solely for professional investor use. Past performance is not a guarantee of future results.
Listeners, welcome back. This is long and short, the portion of the show where we go long things we like and short things we don't like, but we're not doing stocks today because we just went long and short a bunch of stocks. Aiden.
Do you like something or dislike something today? Yeah, I'm long little spritz bottles, you know, like little water spritzing bottles. You know, I have plants now that I have to spritz every morning and I just find a lot of pleasure just spritzing them every morning. It's the simple things. I love taking care of plants too. I am long.
Long johns been a cold winter in New York. And I think people underrate what a huge difference to your warmth, a pair of long johns make. People layer on all these coats. If your legs are warm, your whole body is warm. That is my, that's going on my gravestone. That's my motto. Too much material. No, I'm telling you, this is you got to try it. You got to go for it. Okay. Alan Libsy, special guest star. What are you learning short?
I'm very long of a internet radio site known as Radio Paradise. Because I'm always looking for new sources of music very into my music. And this was tipped off to me by a friend and believe it or not, I have an album club. And one of my friends in it got this tip. I think they broadcast out of Eureka, California. It is so good. Radio Paradise is cool. Radio Paradise. And he just mixes it all up and he's going to bring in more
types of music. I think he's going to start a jazz one. It's great. Listeners, we will be back in your feed next Tuesday with more finance paradise. In the meantime, please do join the FT stock picking contest, which you can do at FT.com slash stock pick 2025. Stay sharp out there.
Unhedged is produced by Jake Harper and edited by Bryant Erstat, our executive producer as Jacob Goldstein. We had additional help from Toe for Four has Cheryl Bromley. It's the FT's global head of audio. Special thanks to Laura Clark, Alistair Mackey, Greta Cohn, and Natalie Sadler. FT Premium subscribers can get the Unhedged newsletter for free. A 30-day free trial is available to everyone else. Just go to FT.com slash Unhedged Offer.
I'm Rob Armstrong, thanks for listening.