Knowing when to sell: How growth investor Michael Frazis manages risk

**Michael Frazis** (0:00)
The hyperscalers are now going into debt as a group, and borrowing huge amounts of money and raising equity in the markets to fund the CAPEX. If they grow as planned next year, they're going to have to do even more of that. And that's completely changed the market because these, they were the big stabilizers. Now, you've got the opposite.
So no matter what, it's going to be a much less stable environment going forward. So we'll probably see more of these crazy moments. It's going to be a much more volatile market.

**Alec Renehan** (0:29)
Welcome to another episode of Equity Mates, a podcast where we explore what is possible in the world of investing. If you've just joined our community for the very first time, a huge welcome to our show.

**Bryce Leske** (0:38)
My name is Bryce and I'm Ren. And today we are talking all things high growth with a returning guest, Michael Frazis.

**Alec Renehan** (0:45)
Yes, Michael Frazis is the Chief Investment Officer at Frazis Capital Partners. And we've got him on because they've recently brought to the market an active ETF.
It's the Lion Active ETF. The TIKR is raw, R-O-A-R. And it really brings together Michael's love of high growth companies that we've spoken to him about many times over the years with a momentum quant tilt.

**Bryce Leske** (1:11)
Yeah, I think for people who have followed Michael's journey and have heard him on the show before and seen him in the media, his story is a fascinating one in Australian funds management. He was the best at writing the 2021 growth wave.

**Michael Frazis** (1:25)
Smashed it.

**Bryce Leske** (1:25)
Fair to say.

**Michael Frazis** (1:26)
Yeah.

**Bryce Leske** (1:26)
That really like shot him to prominence, had some big years there and then got absolutely whacked in the inflation and interest rate sell off of 2022 and 2023 And so he went away and thought a lot about risk management. And we spoke to him maybe a year or two ago and he was speaking about how he was trying to build some risk models.
And this conversation was an evolution of that. And he's thinking a lot more about when to take profits and when to get out of stocks as they turn or before they really start to crash. So this is a really interesting conversation to think about his evolution, but also for our personal investing, how we can think about taking profits when we've had a big win on an investment.

**Alec Renehan** (2:13)
So a massive thank you goes to Frazis Capital Partners for supporting today's episode and helping us keep all of our content here at Equity Mates free.

**Bryce Leske** (2:21)
All right. With that said, let's get to our conversation with Michael Frazis.

**Alec Renehan** (2:27)
Mike, welcome back to Equity Mates.

**Michael Frazis** (2:28)
Thanks so much for having me back on.

**Alec Renehan** (2:30)
It's been a massive month in markets. AI story has been unfolding. We've had a run. We've just come off a bumper earning season.
Starting at the top, how do you make sense of markets today?

**Michael Frazis** (2:40)
Yeah, it seems like they're, I mean, you say this every time we chat, but they're just moving faster than ever, aren't they? There's like multiple cycles and mini cycles and rotations within every year at the moment. So the moment, it seems like AI is under a bit of pressure. The data centers, chips, Nvidia, all these kinds of companies, the small companies are down 30-40 percent of the highs. Meanwhile, it seems like there's been a bit of recovery in software, and some of those growth related names that drop 60-70 percent. So basically, over the last 12 months, there's been this huge rotation where every builder is massively overweight software, underweight semiconductors.
It was early 2025, so I guess a year and six months now. It's hard to believe there was a very bearish view amongst professional managers on the AI cycle. It seemed like the models were slowing down, investment would slow down, and so exposure was extremely low, and everybody was still really bullish on software, and that just completely reversed over the last year or so.
Then maybe in the last couple of months, it seems to be rotating back, and just as everybody goes to max-long semiconductors, they've peaked and come off, and then just as everybody's written off software completely, nobody wants to admit to owning Atlassian, for example. That stock just doubles in a few weeks. So it seems to be one of those moments where things are just rotating and moving. It's pretty hard to navigate. Yeah, it is.

**Bryce Leske** (4:01)