Sep 18, 2026 · 42 min
Value investors find opportunity in Australia’s fallen angels
Riding the rebound in CSL, Cochlear and finding the next opportunity
The discussion tests whether depressed expectations and market volatility are creating durable opportunities—or simply disguising structural risks.
- 1Higher volatility and thinner liquidity are amplifying price moves, creating openings when investor expectations fall too far.
- 2CSL, Cochlear and IDP Education illustrate how fallen angels can combine sharp declines with credible recovery paths.
- 3Hofflin favors disciplined, empirical value investing while warning that expensive US markets rely on demanding earnings and spending assumptions.
Don't miss
Hofflin names IDP Education as the company he would own for five years if markets closed, despite its earnings decline and political challenges.
The brief
Philipp Hofflin frames value investing as buying low expectations, low multiples and strong cash-flow yields—an approach gaining relevance as volatility rises and liquidity falls.
Inflation, energy prices, wars, government debt and the AI investment boom complicate the market outlook, while Australia’s leveraged housing market adds a domestic fault line.
CSL, Cochlear, IDP Education, Domino’s and Woolworths show how fallen angels can suffer sharp repricing yet retain recovery potential when expectations become unduly pessimistic.
Hofflin highlights Nickel Industries and Treasury Wine Estates as current Australian opportunities, then contrasts disciplined value portfolios with growth narratives and expensive US markets.
His five-year pick is IDP Education, where an asset-light model, university relationships, market-share gains and cost flexibility could support recovery despite political and earnings pressure.
What was said on this episode
29 statements · 14 positive · 14 negative · 1 mixed
Buying low-expectation stocks outperforms betting on future transformations over the long run.
“If you buy low expectations, uh, you know, low multiples, high cash flow yields and so forth, in the long run you do better than if you, uh, hope for some great transformation in the future.”
Listen at 1:21
Underlying inflation in Australia and the United States is currently too high.
“Underlying inflation is running at 3 to 4%. So it's already too high, right?”
Listen at 2:39
Falling global energy inventories increase the risk of an energy-price spike.
“The risk that something breaks and they really spike increases.”
Listen at 3:30
The United States fiscal deficit is unsustainable and reckless.
“It is completely and utterly unsustainable. Reckless, it seems to me.”
Listen at 5:16
The United States must reduce its deficit or face a market crisis.
“So either they stop or the market will stop them. There's a crisis.”
Listen at 5:43
High inflation, tight monetary policy, and high asset prices create a major market risk.
“high inflation and tight monetary policy and aggressive central banks and high asset prices just don't mix.”
Listen at 8:56
AI will eventually become deflationary, but its investment boom will continue for several years.
“I think AI will eventually turn deflationary, but at the moment, yes, it is absolutely— for the next couple of years, it looks like, you know, that boom is just going to roll on.”
Listen at 9:44
Increased military spending is inflationary because it represents consumption rather than production.
“military spending also puts— is an inflationary force in that sense.”
Listen at 10:13
Interest-rate uncertainty should make investors cautious.
“we don't think we can forecast interest rates any better than anybody else. I think it makes you cautious.”
Listen at 10:58
CSL was sufficiently underpriced to justify maximum portfolio exposure and subsequently rallied sharply.
“We were maximum CSL across all our funds. And since then, it's had this astonishing rally.”
Listen at 14:00
Reduced market liquidity increases share-price volatility.
“Therefore, any volatility becomes greater because there's less depth in the market.”
Listen at 16:07
Cochlear became attractive after its sharp decline and subsequently rallied 50%.
“We bought it. It's already rallied 50%.”
Listen at 17:19
AI could replace white-collar workforces and their SaaS software within 5–10 years.
“The real risk is that sometime over the next 5 or 10 years, the company replaces the workforce and the software in one hit.”
Listen at 19:04
AI-driven workforce replacement poses an existential risk to SaaS providers.
“And that's an existential risk.”
Listen at 19:43
Australian valuation dispersion still offers a strong opportunity for value investors.
“So in that sense, yes, it's a very good opportunity still.”
Listen at 23:18
Chinese competitors selling similar devices at half price threaten ResMed.
“The main issue for us is that The devices they make, well, there's some Chinese competitors that make very similar looking devices that seem to do pretty much the same and they sell them for half the price. So I'm very worried about Chinese manufacturing competition”
Listen at 24:49
Nickel Industries remains an attractive investment.
“One stock we still like is Nickel Industries.”
Listen at 27:04
The Chinese currency is substantially undervalued over the long term.
“And if there's one strong investment view I have, And a long-term one is that the Chinese currency is far too low.”
Listen at 27:29
The Chinese currency will appreciate over the long run.
“So the Chinese currency in the long run is going to rise.”
Listen at 27:42
Australian banks remain too expensive for Hofflin to buy.
“The banks are still far too expensive for us.”
Listen at 28:02
US value portfolios outperformed growth portfolios by roughly 4% annually over 75 years.
“over the 75 years, the value portfolio has beaten the growth portfolio 20-fold. That's over 4% per annum on average.”
Listen at 30:40
Value investing works as a portfolio process rather than through permanently holding individual stocks.
“value is a process”
Listen at 32:05
Whitehaven Coal rose thirteenfold from its COVID-era low within two years.
“the stock pushed $11 2 years later. It went up 13-fold from the bottom.”
Listen at 36:15
The US equity market is currently extremely expensive and speculative.
“the US, I think, is horrendously expensive. It is very highly priced, very frothy.”
Listen at 36:54
The US equity market could lose half or more of its value.
“US, I think, is in that position. It's a market that can halve or more than halve”
Listen at 37:28
IDP Education continues gaining market share and signing new university partners.
“They still gain market share. They sign up new universities.”
Listen at 39:12
IDP Education remains fundamentally a good business despite recent declines.
“it's a good business”
Listen at 39:25
IDP Education currently trades below seven times earnings.
“It is now at this low point on less than 7 times.”
Listen at 39:58
IDP Education offers attractive upside-downside asymmetry and is worth owning.
“the asymmetry in the outlook here is great. So I think it is worth owning some.”
Listen at 40:49
Statements are attributed to the speaker as said on the episode and reflect their view at the time, not PodLume's. They are not advice.
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