"1. The portfolio is a mix of ASX listed equities on the most part and cash. Are there views on other asset classes when coming up with your overall asset allocation?"
No, I have no skill or experience in valuing other asset classes such as bonds, or precious metals, cryptocurrency or art or vintage cars. I only know how to value businesses (at least I like to think I know how to value them... not to any degree of perfection, mind, but with sufficient absence of imperfection).
And, yes, I look at only companies listed in Australia (where I know the rules, the industries, the competitive landscape, the government forces, the economic structures and institutions, the structural limitations etc.).
There are 2,300 stocks listed on the ASX... if out of that lot I can't find enough to compile a half-decent portfolio, then I'm not trying.
"2. To what extent are the categories defined by the market opportunities vs are there any inevitables that are likely to stay put?" (Or to paraphrase both questions, how much is top-down vs bottom-up allocation?)"
I'm rubbish at macro-economic or thematic investing so the investment process for me is always bottom-up (well, not exactly always... 95% of the time [*]), with little attention given to what interest rates or exchange rates or economic growth or other economic variables are doing at any point in time.
So those categories in the table aren't pre-determined buckets which need to be filled to some or other extent; they just fell that way based on the stocks I currently have in my portfolio.
So the way categories sit at any given point in time is nothing more than an outworking of the stocks I've gathered up because I think they are undervalued. If for some reason all the ASX-listed banks one day traded on P/E multiples of 5 times, and the healthcare stocks traded at 10x P/E, I'd transition as fast as I could to own just banks and healthcare stocks.
[*] Every once in a blue moon, maybe once in 7 or 8 years, some major tectonic discontinuity can be observed within a certain industry or economic sector, with sufficient clarity to justify investing on a top-down macro-thematic view. That has been the case for energyover the past 12 months.
The global oil and coal industries are readily observable, with a finite number of supply and demand blocs, the prospective actions of each bloc being quite predictable, based either on clear articulation or well-established precedents. Predicting the rise in energy prices was not overly difficult (especially given I was not a pioneer in doing so... I unashamedly got onto looking at the idea from another investor who saw it coming way earlier than others).
But, as I say, this sort of macro situation is truly an exception, not a rule.
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