Its exposure to the cyclical materials sector has risen, which means that your exposure to materials is quite high.” Compared even to the tech bubble, the surge leading up to the crash of 1987 or the late-1960s conviction that an industrialisng Japan would grow perpetually, the last bull market was “abnormal”, Kightley says. Headlined by the skyrocketing price of BHP Billiton, the resources boom was driven by the price of commodities. But the resources companies also produced earnings, making them more difficult to identify as the drivers of an unsustainable bull run than many tech stocks were in 1999. “Resources companies looked to be value, but they were cyclical and at peak earnings. They were more difficult to analyse than tech stocks because those companies had no value, no earnings,” Kightley says.
The differences in valuations between good and poor companies was more dramatic in the tech bubble, van Munster says. “People were paying up to 35 times for growth companies, and eight times for so-called dinosaur stocks.” During the dotcom era, visitors to the Maple-Brown Abbott office at 20 Bond Street made jokes about the colonial aesthetic of the firm’s boardroom, with its stately boardroom table and book cabinets built from varnished wood, and prints of native flora on the wall. “We just didn’t get it, they said. We were ‘dinosaurs’,” Kightley says.
“This time around, it’s been people saying, ‘What if China keeps on growing?’ There are some investors who subscribed to a stronger-forever, more than a commodity super-cycle idea. Meanwhile we’re generally buying the least popular part of the market,” Kightley says.
