The only ASX stock with a return on equity of over 50%

Value investing is all about buying stocks that are trading below their intrinsic value.  In practical terms, that often involves investing in companies and sectors that have been shunned by the market due to particular macro headwinds.  "It should be no surprise as to where the pockets of opportunity are," says Tim Carleton, Auscap Asset Management CIO and today's guest on the Rules of Investing.  "They're in the more cyclical sectors that people are most concerned about from an earnings perspective." In today's interview with Livewire's David Thornton, Tim runs through two retail stocks in the Auscap Long Short Australian Equities Fund that fit this profile. I won't give them away, but one is the only stock on the ASX with a return on equity above 50%, while the other is a long-term compounder poised to take market share.  He also discusses why he's avoided the tech and energy sectors, what he expects from earnings season, why he doesn't put much weight in earnings beats and misses, and why lithium is a crowded trade (yet remains invested in it).  Note: This episode was recorded on July 26, 2023.  Timestamps 0:00 - START 1:30 - Have we avoided a hard landing? 3:30 - Australian base case 4:30 - Reporting season 10:00 - Stock prices follow earnings 12:30 - A checklist for finding value 14:20 - Consumer discretionary in 2023 17:55 - Two COVID beneficiaries primed for growth 20:50 - Avoiding tech and energy 23:00 - Lithium is crowded, but does that matter? 29:20 - Look past the market's time horizon 44:00 - Bottom drawer retail stock