What does a good market hide? Quite a lot. When capital is easy to access and asset prices keep rising, weak businesses can look far stronger than they really are. But when conditions tighten, those illusions tend not to last.
Leverage is the killer
That was one of the clearest takeaways from the latest “Stocks Neat” podcast, where Forager’s CIO, Steve Johnson, sat down for a chat with Julian Biggins: in the end, businesses are rarely killed by a lack of ambition. More often, they are killed by fragility. In his words, “leverage is the killer.” Reflecting on distressed property situations after the Global Financial Crisis (GFC), Biggins noted that the underlying assets were often not worthless at all. The real problem was that the owners had too much debt, could not hold on, and were forced to sell at the worst possible time.
That idea extends beyond property. Across markets, the difference between a good investment and a bad one is often not the asset itself, but the structure around it. A decent asset with too much leverage can become disastrous. An average asset, owned conservatively and managed well, can survive long enough to become a good investment.
Looking past the label
A second lesson from the discussion was that investors should care less about labels and more about what actually sits underneath them. Julian and Steve made the point that “private credit” is not one thing, just as “equities” is not one thing. Within any asset class, there is a wide range of risk. One example Biggins used was mezzanine lending in residential development. It may offer higher returns on paper, but it sits in a far more vulnerable position in the capital stack. If something goes wrong, that layer can be wiped out very quickly, even while the senior lender remains protected.
This is a useful reminder at a time when products are often sold on headline yield or broad category labels. A return number for that broad category on its own says very little. What matters is the assumptions behind it, where you sit in the structure, and how much has to go wrong before your capital is at risk. As Julian put it, detail matters.
Cash flow is king
The same scepticism applies in property. The distinction between an asset that looks attractive on surface metrics and one that actually produces durable cash flow is important. Julian’s point was blunt: “cash flow is king.” Cap rates, accounting yields, and headline rents can all flatter an asset if you do not properly account for incentives, maintenance capex, leasing costs, and the operational effort required to keep income flowing.
His examples reinforced the point . A long-leased Bunnings warehouse can behave almost like a bond, with some inflation protection. A shopping centre, by contrast, is a deeply operational asset where small details - traffic flow, catchment access, tenant mix and layout - can materially change outcomes.
That leads to another theme: the best investors are usually not the ones chasing everything. They are the ones who know exactly where they have an edge. Julian returned several times to the idea that “you just can’t hunt everything.” In competitive markets, breadth is often overrated. Deep capability, local knowledge, and operational control matter more.
Why Tailwinds Matter
There was also a useful strategic lesson in the conversation about tailwinds. Julian noted that even a bright idea can struggle if it is fighting the tide. In investing, it is rarely enough to be directionally right about a business or an asset; it helps enormously if the broader environment is working with you rather than against you. He pointed, for example, to the way tighter bank capital rules and a more cautious approach to commercial real estate lending have opened the door for private credit providers to step into parts of the market banks once dominated.
But even here, the deeper lesson was not “find a tailwind and buy anything.” It was that good businesses build resilience so that no single product, person, or funding source can sink them. Julian described the importance of diversification - not in abstract portfolio terms, but more simply: making sure “no one thing can kill you.” That is as true for portfolios as it is for companies.
In the end, the conversation kept coming back to the same principle: endurance matters more than excitement. You need to invest where you have expertise, avoid being overextended, and stay in the game long enough for the cycle to turn in your favour.
MA Financial is an interesting example of that endurance mindset in practice. Its growth and success have been shaped by the idea that resilience matters more than flash. As Julian puts it, “You don’t need to win in everything. You just need to pick a few that you’re very good at and go through the cycle.” That thinking is reflected in MA’s shift away from the volatility of traditional investment banking and toward more recurring, defensive earnings streams such as asset management, private credit, and lending.
If there is a lesson here, it is not to chase whatever looks strongest in easy times. It is to ask a harder question: what is built to last when conditions turn? That may be a less exciting way to think about investing, but it is often the wiser one. In the end, endurance is not separate from success. It is what makes it possible.
To hear the full discussion with Julian, tune in to the full Stocks Neat podcast episode.
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