Glenn Freeman: During the session, you were talking about, obviously it was focused on Australian equities, and where should investors be looking now given that commodities and materials and resources are under pressure and the banks as well. What sort of sectors should people be looking at?

Neale Goldston-Morris: What we are seeing is a major transformation in our market a lot of the largest companies are now very mature in the 20 Leaders, the retailers, the banks, insurance companies, things like that. What we are seeing is new companies coming through quickly and always because of some sort of major drivers, not just management by itself, but it might be an ageing demographic, demand for hospitals: Ramsay Healthcare. Or just the medicines themselves like CSL. Or it's simply changing technology and the companies like Aristocrat or Domino's et cetera.

And this is exactly the sort of process that’s been occurring in America. You've seen all the new companies coming through, whether it'd be Amazon or Google or Facebook or whatever and the old companies, or some of the old companies, slowly sliding away. That’s not to invalidate some of the older ones but nevertheless when you get big it gets harder to grow, and we are seeing this transformation at the moment.

Freeman: And also, you made the point in there about. You mentioned two rules of finance, there was around the cycle always prevails, and the golden rule of compounding. Can you just expand on this, a bit for us?

Goldston-Morris: So the cycle lives on in finance and life in every way. Markets get oversupplied, market gets undersupplied, prices go up, prices go down. The importance with companies is you want to be in companies that are not dependent on the cycle so much, because that is very dangerous. If you are in a company which is purely dependent on the cycle you will get the timing wrong, you know, you buy high you sell low. You want companies that can grow through the cycle because they offer the customer something different. It might be a new technology, might be a brand name. It might be some appeal to new market segment. You don’t want to be just a prisoner of a mature market and just the cycle.

And the second is the magic of compounding. As you all know, you compound anything at 20 per cent, you'll have a serious amount in a relatively short period of time. You compound at 2 per cent, and you won't. The secret to all companies is this: if a company can make a return in excess of its cost of capital it will grow over time. If it can't, it won't. And if you are achieving a high return that will compound and compound very substantially on any reasonable investment time period. Whereas the cycle could whip you up, and whip you down, and whip you up again.

Freeman: You referred to the historical trends. And it kind of occurs to me that you were talking there about the importance for investors in understanding the historical trends that have been before in the market, and how important that is in identifying new areas of opportunity.

Goldston-Morris: Yes, I mean history tends to repeat itself. We tend to think our era is unique. Well it's not, it never is. Yes some of the ingredients might be a little bit different, but I'll give you two very quick examples. In 1830 if you were invested in the biggest stocks in the market, the canal operators, and you dismissed the new steam engine, the new-fangled thing, within 10 years all those canal operators were either bust or very small, and steam engines took off. Now that’s an extreme.

The same in 1900. If you were a business that operated horses and wagons, you were out of business within 20 years as cars came in.

Well it’s the same today. And the fascinating thing in history is very few companies make the transition from the old technology to the new. Because they remain in denial, 'oh, no it's not going to affect me very much ,I can make the transition when its proven. I have to tell you by the time its proven, the companies that are committed to that new way of doing things are leagues ahead, and the old company never catches up.