Sep 18, 2026 · 42 min
Volatility widens Australia’s value-investing gap
Hofflin: Big moves are creating great value on the ASX
Philipp Hofflin argues that unusually wide valuation differences and sharp market reactions are creating opportunities, while macroeconomic and AI risks complicate the case for value.
- 1Reduced liquidity and shifting expectations are driving unusually large share-price moves across major Australian companies.
- 2Hofflin sees opportunities among fallen angels and less fashionable sectors, including healthcare, nickel and wine.
- 3He selects IDP Education as a five-year holding despite severe recent earnings pressure and political risks.
Don't miss
Philipp Hofflin selects IDP Education as the company he would own if markets closed for five years.
The brief
Lazard portfolio manager Philipp Hofflin defines value investing as buying businesses priced for low expectations, then tests that discipline against inflation, geopolitics, debt and AI spending.
Large Australian companies including CSL and Cochlear are making unusually large moves around results, a sign that reduced liquidity has made markets less tolerant of disappointment.
Hofflin argues that the unusually wide gap between expensive and cheap stocks supports a portfolio approach built on repeated purchases, disciplined selling and empirical results.
His opportunity set includes fallen angels and less fashionable sectors, with Sonic Healthcare, Nickel Industries and Treasury Wine Estates among the areas he discusses.
Asked what he would own if markets closed for five years, Hofflin chooses IDP Education, citing its quality, balance sheet, market-share gains and buybacks despite recent pressure.
What was said on this episode
33 statements · 15 positive · 17 negative · 1 mixed
Buying low-expectation, low-multiple companies outperforms betting on future transformations over the long run.
“if you buy low expectations, low multiples, high cash flow yields and so forth, in the long run, you do better than if you... hope for some great transformation in the future.”
Listen at 1:21
Inflation is currently the biggest market problem.
“inflation. And that is, I think, the biggest problem out there at the moment.”
Listen at 2:29
The United States fiscal deficit is unsustainable despite economic growth and low unemployment.
“They're running a 6% deficit. in a boom with low unemployment. It is completely and utterly unsustainable.”
Listen at 5:10
The United States will eventually stop 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 policy and high asset prices create a dangerous market combination.
“high inflation and tight monetary policy and aggressive central banks and high asset prices just don't mix.”
Listen at 8:55
AI will eventually become deflationary, but its boom will continue for the next couple of years.
“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
Military spending contributes to inflation.
“military spending also is an inflationary force in that sense.”
Listen at 10:13
Current inflationary dynamics are unlikely to change soon.
“It's very hard to see the dynamics at the moment changing.”
Listen at 10:44
Interest-rate uncertainty warrants caution among investors.
“We don't think we can forecast interest rates any better than anybody else. I think it makes you cautious.”
Listen at 10:57
CSL shares rose 38% in one month after its reporting result.
“the stock just, you know, it was up 38% in a month.”
Listen at 14:14
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 shares fell 32% on its warning day and 45% over that week.
“cochlear fell 32% on that day of the warning in April, and it was down 45% in the week.”
Listen at 17:01
Less efficient markets create opportunities for value investors.
“it gives us opportunities.”
Listen at 17:33
AI-enabled coding may cause companies to replace SaaS subscriptions with internal development.
“That companies are going to turn around to their service provider and say, look, I'm paying you $2 million for this license. I can get my own people to do my own stuff.”
Listen at 18:30
AI may replace white-collar workforces and their software simultaneously within ten years.
“The real risk is that sometime over the next five or ten 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, right?”
Listen at 19:43
AI may become capable enough to dominate mathematical research discussion within a year.
“I think it's pretty clear that in a year or so... the entire mathematical community will probably just be commentating on what AI does.”
Listen at 20:35
SaaS stocks remain expensive at approximately 50-times earnings.
“these stocks have gone from trading on 120 times to trading on 50 times. 50 times isn't exactly cheap.”
Listen at 21:00
BHP and Woodside should benefit from materials demand during an AI-driven economic boom.
“I know what BHP is going to be doing, or Woodside. Because if all this works out well, and we get an enormous economic boom, we're going to need to build things”
Listen at 21:16
Wide valuation dispersion continues to offer a strong value-investing opportunity.
“So in that sense, yes, it's a very good opportunity still.”
Listen at 23:18
Sonic Healthcare is a current healthcare investment opportunity under consideration.
“We are looking very carefully at Sonic Healthcare. which is a more recent opportunity.”
Listen at 24:17
Nickel Industries remains an attractive investment.
“One stock we still like is Nickel Industries.”
Listen at 27:04
Treasury Wine Estates remains attractive as a long-term investment.
“So still like that one.”
Listen at 27:54
Australian banks remain too expensive for value investors.
“The banks are still far too expensive for us”
Listen at 28:02
The US value portfolio outperformed the growth portfolio twentyfold over 75 years.
“over the 75 years, the value portfolio has beaten the growth portfolio 20-fold.”
Listen at 30:40
Value investing has outperformed growth across major global markets.
“This is a universal phenomenon.”
Listen at 34:06
Whitehaven Coal rose thirteenfold from its COVID-era low within two years.
“the stock pushed $11 two years later. It went up 13-fold from the bottom.”
Listen at 36:15
The US stock market is currently extremely expensive.
“the US, I think, is horrendously expensive.”
Listen at 36:54
The US stock market could halve or more because its earnings are overstated.
“It's a market that can halve or more than halve and it doesn't bounce because the earnings are just completely overstated.”
Listen at 37:30
CSL was recently considered very cheap by Hofflin.
“In principle, two or three months ago I would have said, easy, CSL, right? This is so cheap.”
Listen at 38:17
IDP Education continues gaining market share and signing new university clients.
“They still gain market share. They sign up new universities.”
Listen at 39:12
IDP Education has an asset-light model, strong returns, sound balance sheet and substantial buybacks.
“Asset light, good returns, good balance sheet. They're buying back 10% of their register at these prices.”
Listen at 39:20
Investors should own some IDP Education shares because the outlook is asymmetric.
“So I think it is worth owning some. That's why we own some.”
Listen at 40:51
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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