NEWS
6 May 2022 - Quality, growth, and value: The keys to buying the world's best (mispriced) businesses
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Quality, growth, and value: The keys to buying the world's best (mispriced) businesses Claremont Global March 2022 2022 has seen a marked shift from "growth" to "value." This has seen a resurgence in both bank and oil stocks. The former is expected to see an improvement in profitability, as interest rates rise with tighter monetary policy, whilst the latter are expected to benefit from higher oil prices ― more recently accelerated by the situation in Ukraine. At Claremont Global, we have never owned bank or oil stocks ― nor will we ever. In this article we explain why this is the case, why we think the argument of growth versus value is misplaced ― and why we prefer to think in terms of quality, growth, AND value. Look to own the best businesses On our website, we ask our clients to "Own the world's best businesses." There are two key words in this sentence - own and business. We are not traders or market timers of markets or stocks, looking to profit from short-term price movements. Instead, we look to own some of the world's best businesses for long periods of time, ideally forever and the deferred tax benefits that come with that. This puts us in an effective position to benefit from the growth in their profits over time, and the long-term compounding effect of those profits being re-invested at high rates of return. Why not banks? Our definition of a superior business is one that can grow at a faster rate than nominal gross domestic product (GDP) growth, is blessed with a competitively advantaged product or service and earns higher than average returns on unlevered capital. Banks by their nature are the drivers of economic growth, and as such cannot grow faster than the economy over long periods of time. At best they can expect to grow their deposit bases and profits in-line with nominal GDP growth. Their products are effectively commodities with low switching costs and this is reflected in very low returns on unlevered capital. Over the last five years JP Morgan (widely admired as a best-in-breed bank) has averaged just over 1 per cent return on capital. This has then been levered over 11x to achieve an average 13 per cent return on equity. Source: FactSet At Claremont Global, our businesses consistently earn a high teen return on invested capital, with very low levels of debt ― across the portfolio we are almost net cash. As for growth, we believe our portfolio of great businesses can deliver double-digit profit growth and at a rate that is possibly 2x the growth of the average listed business. Source: Claremont Global In good times, bank profit growth is not much better than the average business, but in bad times their high level of leverage leaves banks very exposed to the vagaries of consumer confidence, liquidity, and regulation. In an extreme situation like the global financial crisis (GFC), banks require large infusions of capital to buttress balance sheets and confidence, whilst regulators limit and/or suspend capital returns to shareholders in the form of buybacks and dividends. If we take the case of Bank of America, the massive equity dilution caused by the GFC, has resulted in the current earnings per share being below the rate it was in 2006! Source: FactSet In summary, banks do not pass three of our investment hurdles: 1) organic growth faster than nominal GDP growth; 2) high returns on unlevered capital; and 3) low financial leverage. The investment case against oil stocks By definition, oil is a commodity with no pricing power and whose consumption over long periods of time is linked to nominal GDP growth. In the main, oil stocks have reasonable returns on capital and generally run strong balance sheets, but their profits are linked to the price of oil - something experience has taught us we have very little expertise in forecasting. Indeed, in 2014 it was a commonly held view amongst "experts" that the oil price would remain above $100 indefinitely ― only to see the price collapse by 70 per cent with the advent of shale oil. Looking at the graph below shows that Exxon is still earning less than it was in 2008. Source: FactSet By contrast, if we look at the earnings progression of our largest holding Visa, the business has consistently grown ahead of nominal GDP growth and its earnings show a steady upward progression, as do returns on capital. Source: FactSet Source: FactSet Whilst we won't argue the possible merit in the short-term trading of bank or oil stocks, these are not businesses we want to own. At some point in the future, we will need to make accurate forecasts about interest rates, economic growth, oil supply and demand, as well as an accurate prediction on the politics and policies of a phasing out of oil in favour of a more environmentally friendly solution to our energy needs. We are happy to admit we don't have the specialist capacity or mental bandwidth to do so. We are only looking for 10-15 mispriced businesses Which brings us to our final point and one much loved by large parts of the financial community - quality growth stocks are expensive and it's time to buy "value". Our view is that large parts of the growth universe are indeed expensive. In 2021, we did see a welcome shake out in some of the more speculative areas of the market, including many concept stocks with limited profits having fallen over 50 per cent. But even after this - there are still large parts of our investment universe with elevated valuations. However, at Claremont Global, we are fortunate that we are only looking for 10-15 businesses who we believe can get our clients to our targeted 8-12 per cent per annum return over the next five years with lower-than-average levels of risk. And that return is simply a function of earnings growth, dividends, fees, and movements in the multiples of the businesses we own. In all our valuation work we use through-the-cycle assumptions, and as such, we did not lower our discount rate in recent years to justify higher valuations. In addition, all our multiple assumptions are based on long-term average multiples (5-10 years) as opposed to recent history. As a result, we are now not hurriedly raising our discount rates or bringing down our multiple assumptions. This discipline kept us out of the speculative areas of the market in 2021 - both in terms of unproven business models, as well as great businesses on our universe with very high PE ratios. To conclude, we believe it is futile to think in terms of growth or value. We like to own businesses that will both deliver growth AND value. As usual, Warren Buffett puts it better than we can: Most analysts feel they must choose between two approaches customarily thought to be in opposition: "value" and "growth." Indeed, many investment professionals see any mixing of the two terms as a form of intellectual cross-dressing. We view that as fuzzy thinking (in which, it must be confessed, I myself engaged some years ago). In our opinion, the two approaches are joined at the hip: growth is always a component in the calculation of value. In addition, we think the very term "value investing" is redundant. What is "investing" if it is not the act of seeking value at least sufficient to justify the amount paid? Consciously paying more for a stock than its calculated value - in the hope that it can soon be sold for a still-higher price - should be labelled speculation (which is neither illegal, immoral nor - in our view - financially fattening). In the short-term, we know it is quite possible that not owning bank or oil stocks will lead to temporary under-performance versus an index. However, over a longer time frame we think eschewing these industries ― in favour of owning faster growing and more predictable earnings streams ― is going to give our clients a higher probability of achieving our targeted return of 8-12 per cent per annum. Most importantly, this will be within the confines of a strong balance sheet and commensurate with lower levels of business risk. This lower level of business risk allows us to sleep well at night (even in the very uncertain climate) and most importantly, allows our clients to do the same. Author: Bob Desmond, Head of Claremont Global & Portfolio Manager Funds operated by this manager: |
5 May 2022 - Opportunity and risk in small and mid-cap equities
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Opportunity and risk in small and mid-cap equities abrdn April 2022 The small and mid-cap universe offers the potential to invest in tomorrow's large companies today. In this article, we'll look at ways to navigate this huge global market while balancing the opportunities and risks. Given a backdrop of conflict in Ukraine and a lingering pandemic, investors face a lot of uncertainty at the moment. Due to concerns about inflation, interest rate rises and tightening monetary policy in early 2022, investors in small and mid-cap equities have been favouring "value" stocks with lower price-earnings (P/E) valuations over higher P/E "quality" companies recently. We also saw small and mid-caps underperform large caps in 2021, based on the (not always accurate) perception that big equals safer.
All this means there is now an opportunity to invest in quality small and mid-cap companies with the potential to weather economic cycles. These companies are available at compelling valuations. But in today's unpredictable environment, is it possible for investors to buy tomorrow's potential large caps without taking high risks? Narrowing the search The global small and mid-cap equity investable universe is vast. Two thirds of the world's listed corporates are small or mid-cap companies. That's 7850 stocks.1 Very few analysts cover the sector, which means experienced investors can exploit market inefficiencies. With such a huge opportunity set, where do investors begin to look? At abrdn our starting point since the late 90s has been our stock screening matrix. Our information feeds measure the quality, growth, momentum and valuation factors that our continuous backtesting has found to be predictive of share price performance. The above illustration shows the select companies we look for; those with strong quality, growth and momentum characteristics. Our screening matrix highlights a shortlist of companies which look attractive from a quantitative perspective. Small and mid-cap specialists carry out rigorous fundamental research on these top-scoring companies, including meeting with senior management, financial analysis, an assessment of ESG risks and opportunities, as well as a peer review process. The result is a 'best ideas list' which comprises of regional analysts' highest conviction names. Each list typically contains 15-20 stocks. Our portfolios have high weights to these strongest conviction companies, while ensuring a sufficient level of diversification as well as clear, deliberate and persistent style tilts to quality, growth and momentum. Factors in focus We've talked about the factors that we believe are important when selecting companies with the potential to enlarge their market capitalisation over the long term. But what are the key indicators of these three characteristics? Growth In our view, it's important to look for companies with profitable, sustainable, growth. Small and mid-cap businesses with supportive end markets, as well as the ability to gain market share and expand profit margins, have the greatest potential to become tomorrow's large caps. Momentum We also look for signs that companies are exhibiting momentum, such as seeing upward earnings revisions and a history of consistently beating earnings forecasts. Growth and momentum characteristics have the potential to be sustained for many years, which partly explains why small caps have outperformed large caps over the long term.2 Quality The graphic below shows what we believe are the key indicators of company quality: Measures such as balance sheet strength, management pedigree and sustainable competitive advantage allow companies to successfully navigate changing economic cycles. Of course, investing in quality is also about avoiding loss-making, blue sky or highly leveraged businesses, as well as those with extremely cyclical earnings or a history of dividend cuts. Because of this, we believe, 'quality' companies have the potential to deliver higher returns over the long term with less volatility. This results in a more favourable risk-return profile. ESG - a key indicator of quality One indicator shown above is ESG (environmental, social and governance). For us, ESG factors are financially material and can affect any company's performance both positively and negatively. A strong record on ESG issues is a key sign of company quality and can potentially help to reduce risk. Therefore, in our view, understanding ESG risks and opportunities should be an intrinsic part of any small and mid-cap research process, alongside other financial metrics. We also think informed and constructive engagement with company leaders can help investment managers to encourage and share positive ESG practices - potentially protecting and enhancing the value of investments for years to come. Well-resourced investment managers have the confidence to rely on their own ESG research, investing in companies which meet their own criteria, even when not covered by external ratings agencies. You can read more about The Importance of ESG in Small Cap Investing in our recent article. Risk and opportunity Looking forward, the outlook for higher interest rates, potentially sustained high inflation, and a lower growth environment suggest uncertain times are ahead. Companies selected using a quality, growth and momentum process combined with ESG analysis are potentially well-placed to weather economic downturns. Far from being dependent on externally-driven cycles, these companies are likely to expand in a predictable, sustainable way. They are also more likely to be market leaders able to pass on inflationary costs in the form of higher prices, as well as having strong margins and robust balance sheets. Furthermore, portfolios constructed in this way are more likely to be diversified across products, markets and geographies. We also believe that in a changing world, smaller, nimble, well managed companies that can pivot their businesses more quickly than mega caps are well placed to take advantage of evolving opportunities. Final thoughts Many high quality small and mid-cap companies with the potential to expand and grow are currently available at attractive valuations. In today's uncertain world, we believe a robust, repeatable investment process focusing on quality, growth and momentum can help investors select the large cap leaders of the future with favourable risk-return profiles. Author: Alexandra Popa, Macro ESG Research, Abrdn Research Institute |
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Funds operated by this manager: Aberdeen Standard Actively Hedged International Equities Fund, Aberdeen Standard Asian Opportunities Fund, Aberdeen Standard Australian Small Companies Fund, Aberdeen Standard Emerging Opportunities Fund, Aberdeen Standard Ex-20 Australian Equities Fund (Class A), Aberdeen Standard Focused Sustainable Australian Equity Fund, Aberdeen Standard Fully Hedged International Equities Fund, Aberdeen Standard Global Absolute Return Strategies Fund, Aberdeen Standard Global Corporate Bond Fund, Aberdeen Standard International Equity Fund , Aberdeen Standard Life Absolute Return Global Bond Strategies Fund, Aberdeen Standard Multi Asset Real Return Fund, Aberdeen Standard Multi-Asset Income Fund
1 Source MSCI 28 February 2022 2 Source: Morningstar, Total Return, GBP, 01 January 2000 to 31 March 2022 |
4 May 2022 - Update on Q1 2022 Webinar Recording
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Update on Q1 2022 Webinar Recording Laureola Advisors April 2022 On Wednesday, April 27, Laureola Advisors shared an update on Q1 2022. Request for the recording now! ABOUT LAUREOLA ADVISORS The best feature of the asset class is the genuine non-correlation with stocks, bonds, real estate, or hedge funds. Life Settlement investors will make money when others can't. Like many asset classes, Life Settlements provides experienced and competent boutique managers like Laureola with significant advantages over larger institutional players. In Life Settlements, the boutique manager can identify and close more opportunities in a cost effective manner, can move quickly when necessary, and can instantly adapt when opportunities dry up in one segment but appear in another. Larger investors are restricted not only by their size and natural inertia, but by self-imposed rules and criteria, which are typically designed by committees. The Laureola Advisors team has transacted over $1 billion (US dollars) in face value of life insurance policies. Funds operated by this manager: |
4 May 2022 - Are the winners today also the winners of tomorrow?
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Are the winners today also the winners of tomorrow? Insync Fund Managers April 2022 March witnessed the third month of the fear-based swing to stocks perceived as short-term winners from the Ukraine invasion and Covid related supply chain issues. Think: materials and economically sensitive stocks. These same events also precipitated a knee-jerk move away from stocks viewed as 'growth' related at the same time. The ensuing impact on inflation from both of the above events added to fear-based motivations. Consider this: Most stocks receiving current price lifts (commodities, energy & banking) tend to possess various combinations of low PEs, a history of business underperformance, low returns on invested capital, high Credit Default Swap prices, low sales growth, and lesser margin control. Few successful fund managers have enriched investors built around these factors. In the last few months these stocks outperformed by a large margin those that are; highly profitable, with strong margins and price control, long run earnings growth, lower debt, and not as reliant on macro factors (like inflation). It's interesting to note that many leading "value-managers', have also posted negative returns. Banking, industrial cyclicals, and housing related stocks generally trade on low P/E ratios, yet they too had their prices weaken recently. This is principally due to the 'supply side' commodity price shock at a time when macro-economic growth is weakening. This is not the environment for a rising tide to lifting all value stocks. In our minds, this swing represents the same but opposing side of the unjustifiable prices that many tech/disruption stocks enjoyed until recently. Neither group are worthy of serious, risk aware and longer-term investment. It's why we invest in companies that can sustainably deliver strong above average Earnings Growth. Their stock prices tend to always follow (Barr the odd event-based, short-lived exception like the one we are experiencing now). Are the businesses enjoying stock price rises today also the winners of tomorrow? Lately we are all experiencing one tectonic event after the next. Foundations of the political and economic framework that have dominated much of the world since the 1980s are now being challenged; the impacts on globalisation, the questioning of the USD central role, and previously deeply embedded structural relationships in the energy markets to name a few. Regular readers of our newsletter know that our approach is far less dependent than our peers are on these issues, including inflation and interest rates. The jury is still out on whether inflation will be a temporary or a longer-term phenomenon. Covid and the tragic invasion of Ukraine have created significant commodity, energy, and labour mobility pressures. Companies that:
These are the required factors for a business to continue delivering healthy returns in real terms and are thus the same attributes Insync seeks. Most companies are not able to do this. Those companies possessing the most levers to pull going into an inflationary period are also the most likely to protect and even thrive for their investors. There will likely be tougher times ahead, quality growth investors should find themselves better positioned than most to weather the storm and come out substantially ahead. Why earnings power is crucial A shy, humble investor living on a suburban street in a small mid-western US city is often cited for his quips.
Over shorter periods sentiment in markets can shift wildly depending on the narrative of the day. This is driven by perceptions of investors trying to gauge where we are in the economic cycle, the path of inflation and interest rates, the impact of a geopolitical crisis, and what style of investing will be best equipped for the future. These are impossible to predict with any degree of certainty or to do so consistently. The one thing that is more certain over time is that in the long-term, share prices follow the consistent growth in the earnings of a business. We know that the most profitable companies remain profitable even ten years later fuelled by the enduring, large megatrends. Megatrends are so predictable you can set your watch by them. This is whether it is the rising importance of the Gen Z'ers, the acceleration in the number of people aged 70+, GDP+ growth in spending on skin and beauty, or the insatiable desire to spend on experiences. A portfolio of the most profitable companies tied to megatrends provides consistency in earnings leading to strong stock price returns. They are also mostly impervious to interest rate settings, the state of the economy or current commodity prices. 3 portfolio examples of why Earnings Growth is good for investors The evidence shows it all. Here are 3 companies in our portfolio. The coloured line in each graph is the path of earnings over the past 10 years. The white line is the share price performance. Observe the strong correlation between the earnings growth and share price performance. From time to time the two lines deviate based on an 'event', as is the case now. Obviously, present prices present an outstanding opportunity to invest.
These highly profitable businesses benefitting from Insync's identified megatrends have become even more attractive due to recent price falls. This is because their ongoing and established earnings power remains intact. Such excellent buying opportunities do not often present themselves. The 'coiled Spring' phenomenon continues to gain energy. Funds operated by this manager: Insync Global Capital Aware Fund, Insync Global Quality Equity Fund Disclaimer |
3 May 2022 - Performance Report: Laureola Australia Feeder Fund
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| Fund Overview | Life Settlements are resold life insurance policies and can be thought of as a form of finance extended to an individual backed by the person's life insurance policy. This financing is repaid upon maturity by collecting the death benefit from the insurance company. Risk mitigation measures implemented by Laureola include science-driven due diligence of policies, active monitoring of insured through a vertically integrated operation, and investor aligned fund design. |
| Manager Comments | The Laureola Master Fund has a track record of 8 years and 11 months and has outperformed the Bloomberg AusBond Composite 0+ Yr Index since inception in May 2013, providing investors with an annualised return of 14.48% compared with the index's return of 2.9% over the same period. On a calendar year basis, the fund hasn't experienced any negative annual returns in the 8 years and 11 months since its inception. Over the past 12 months, the fund's largest drawdown was -2.39% vs the index's -8.66%, and since inception in May 2013 the fund's largest drawdown was -4.9% vs the index's maximum drawdown over the same period of -8.94%. The fund's maximum drawdown began in December 2018 and lasted 10 months, reaching its lowest point during December 2018. The fund had completely recovered its losses by October 2019. During this period, the index's maximum drawdown was -0.98%. The Manager has delivered these returns with 1.87% more volatility than the index, contributing to a Sharpe ratio which has consistently remained above 1 over the past five years and which currently sits at 2.3 since inception. The fund has provided positive monthly returns 97% of the time in rising markets and 94% of the time during periods of market decline, contributing to an up-capture ratio since inception of 160% and a down-capture ratio of -204%. |
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3 May 2022 - Twitter bids, social media monetisation and control in volatile markets
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Twitter bids, social media monetisation and control in volatile markets Forager Funds Management 02 May 2021
In this episode, CIO Steve Johnson is joined by whisky-naysayer (and Senior Analyst) Chloe Stokes to discuss the bid for Twitter, social media monetisation, and control in volatile markets. Chloe also shares her experience as a younger investor and reveals the stocks (and burgers) currently on her watchlist. "As shareholders, we can't help but be disappointed. We bought [Twitter] because we thought the platform had a lot of potential," Chloe tells Steve. "It's obvious that we think it's worth more than the bid, because we held it through periods where it was trading much higher and still thought it was worth more than those higher prices. So, we are definitely not happy from a price perspective, but on the other hand, we can't stop talking about it." Timestamps 02.30 Start |
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Funds operated by this manager: Forager Australian Shares Fund (ASX: FOR), Forager International Shares Fund |
3 May 2022 - ESG Insights: Being a good NABER
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ESG Insights: Being a good NABER Tyndall Asset Management March 2022 Whenever stranded assets are mentioned we are likely to conjure the image of a dilapidated oil terminal that no longer has any value attached to it due to alternate fuels or costly environmental regulations. Commercial real estate rarely enters our consciousness and as a result the REIT sector has never had the intense ESG spotlight shone on it by the public or the wider investor base. How is ESG impacting investing? ESG focused investing has really ramped up in recent history and has gradually shifted from just the direct operations of a company to now analyzing the impact of all its organs. As a result, firms will have to reflect and act on every part of their operations - whether that includes a manufacturer assessing the carbon intensity of its HQ, a pharmaceutical trying to lessen water usage at its distribution centre or a tech company maximizing the air quality on its campuses. Thus, the real estate occupied by those firms will become increasingly scrutinized and assets that cannot be adapted to the tenant's growing requirements risk becoming obsolete and costly for its owners to hold.
While there are similar NABERS ratings on water, indoor air and waste, energy has grown to be the most prolific due to legislative requirements. Under the current system all commercial offices over 1000sqm that wish to advertise for leasing or selling purposes must disclose their NABERS energy rating. Furthermore, in order to attract the government as a tenant the base building requires a minimum 4.5 star NABERS rating. As a result, NABERS has become the leading benchmark for assessing the 'green-ness' of a property. What can businesses expect to see? The current landscape in the Australian market is that of institutional investors leading the pack and commandeering more of the higher star rating assets. Morgan Stanley research found that the three biggest listed office landlords had a significantly high performing portfolio with Mirvac (MGR), Dexus (DXS), and GPT achieving a portfolio average rating of 5.5, 5, and 5 respectively for their office assets. This has largely been the result of an active development pipeline helping refresh the age of the portfolio as well as conscious decisions to refurbish older assets to meet modern environmental standards. Employees are also increasingly expecting their employers to be environmentally conscious - a survey by HR resource company ELMO found that 71% of Generation Z workers would refuse to work for a company that was not seriously dealing with climate change. Furthermore, ambience and aesthetics are also rising in importance with a future workplace wellness study found that 31% of employees lose the equivalent of 60 minutes of productivity if the environmental wellness of their environment such as air quality and other factors were not satisfactory. Increasingly the mental health of employees is being brought to the fore thanks to the pandemic and companies who wish to be seen as socially responsible will need to accommodate this. Employers are taking note - JLL reported that 73% of their APAC based tenants surveyed saying they will be retrofitting assets by 2025 to meet these requirements such as achieving net zero and ensuring the office is a pleasant location to be. The COVID pandemic has shaken up the office sector in various ways. Vacancies in CBDs have ballooned, with Sydney climbing from 4% pre-pandemic to 13% currently. Companies are re-assessing their space requirements which will certainly be influenced on how successfully they are able to persuade staff to return to the office. With widespread reports of labour shortages, it looks that the balance of power has shifted towards the employees. Employers in a post-COVID world will face the dual challenges of keeping their staff by aligning their actions with the staff's ESG values as well as also providing enticements to lure them back into the offices - no doubt challenges landlords will have a stake in. It has become clear that for employers to retain talent and encourage employees back to their offices for physical collaboration, they will need to ensure their assets and workspaces are up to scratch. Feedback from asset owners and leasing agents are that expectations from tenants are shifting to asset owners providing the amenities required by their employees such as coffee shops or breakout areas whereas previously the landlord was only responsible for the capital to ensure the base building was environmentally friendly. The costs of these amenities historically would be recouped through higher rents or lower incentives however the supply/demand dynamics in this market means tenants have effectively externalized a portion of their costs to meet environmental and social expectations to landlords. Where are we seeing vacancies? If history is any guide, the current over-supply situation (highlighted by elevated vacancies) will result in lower rental price growth and higher incentives (in the form of fit out contributions or rent-free periods) which negatively impact the cashflow of the landlords. While this trend was observed in 2020-2021, our channel checks have found that the performance of assets have become increasingly bifurcated. Prime grade assets (Premium & A grade) continue to hold onto higher rents and lower vacancy while the declines in rents has mostly been felt in B grade assets and below. One asset owner has even stated that they are seeing further bifurcation with A grade starting to lose some of its lustre leading to a 'Premium vs everything else' situation. This trend has been accelerated post-COVID with a common theme in the Feb-2022 reporting season being an acute sense of 'flight to quality'. For example Mirvac called out 80% of their vacancies were located in their lower tier assets. This is not surprising given higher-grade assets predominately have 5-6 star ratings further enhanced with numerous amenities to maintain tenants and their increasingly demanding staff. The Australian listed market and other large institutional owners have been acutely aware of this and have largely been successful in ensuring their portfolios are at the higher end of the NABERS spectrum. Conversely, B-grade assets and below are mostly held by private owners. Typically such owners have less access to capital and as such may struggle to make the necessary investment to upgrade the asset ratings. Refurbishments required to drive an increase in the NABERS ratings require significant capital and often involve asset downtime (from 1 - 2 years). Activities such as replacing the cladding of a building has shown to potentially cost >10% of the asset value itself. As such, we expect more and more assets becoming more obsolete as the capital costs to upgrade older assets are prohibitive especially for non-institutional investors. Additionally, debt markets are also starting to differentially price ESG factors. In 2021 GPT issued their inaugural Green Bond of $250m and we expect this to be the first of many. Whilst this has not translated to lower cost of debt for green assets yet, expectations are that liquidity pools will become more discerning around ESG which over time should translate to higher cost of debt for ESG-poor assets. Ultimately while we are concerned about the current oversupply in the market and the uncertainty in the sector's vacancy outlook due to COVID and increased working from home, we are somewhat comforted by the fact that the Australian listed players have positioned themselves relatively well in regards to the sustainability of their asset portfolios. This should partially offset future structural uncertainties as we believe not all the competing supply in the market is fit for purpose and given ESG requirements on buildings are only getting more stringent, we expect the pool of 'ESG-ready' assets to shrink further. Funds operated by this manager: Tyndall Australian Share Concentrated Fund, Tyndall Australian Share Income Fund, Tyndall Australian Share Wholesale Fund Important information: This material was prepared and is issued by Yarra Capital Management Limited (formerly Nikko AM Limited) ABN 99 003 376 252 AFSL No: 237563 (YCML). The information contained in this material is of a general nature only and does not constitute personal advice, nor does it constitute an offer of any financial product. It does not take into account the objectives, financial situation or needs of any individual. For this reason, you should, before acting on this material, consider the appropriateness of the material, having regard to your objectives, financial situation, and needs. The information in this material has been prepared from what is considered to be reliable information, but the accuracy and integrity of the information is not guaranteed. Figures, charts, opinions and other data, including statistics, in this material are current as at the date of publication, unless stated otherwise. The graphs and figures contained in this material include either past or backdated data, and make no promise of future investment returns. Past performance is not an indicator of future performance. Any economic or market forecasts are not guaranteed. Any references to particular securities or sectors are for illustrative purposes only and are as at the date of publication of this material. This is not a recommendation in relation to any named securities or sectors and no warranty or guarantee is provided. |
2 May 2022 - 10k Words
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10k Words Equitable Investors April 2022 Apparently, Confucius did not say "One Picture is Worth Ten Thousand Words" after all. It was an advertisement in a 1920s trade journal for the use of images in advertisements on the sides of streetcars. Even without the credibility of Confucius behind it, we think this saying has merit. Each month we share a few charts or images we consider noteworthy. Online sales volumes have retreated in absolute numbers and as a share of total sales as the charts from the Australian Bureau of Statistics and the US Census Bureau show. US government bonds are on track to deliver their worst annual loss, Compound Capital Advisors highlights. Bank of America links the preceeding surge in central bank liquidity with the value of "Big Tech" stocks. A correlation between inflation worries and the relative valuation of small caps is charted by BCA Research. Quantitative Value co-author Tobias Carlisle shows that "unexcellent" stocks have outperformed "excellent" stocks over time. We return to BofA to look at how hedge funds and fund managers have become reluctant to take on risk. And, finally, "The Plateau of Latent Potential" is a chart from the book Atomic Habits that spoke to us.
Source: ABS
Source: US Census Bureau
Source: Bank of America
Source: Bank of America
Source: @JamesClear, Atomic Habits via @SvnCapital April Edition Funds operated by this manager: Equitable Investors Dragonfly Fund Disclaimer Nothing in this blog constitutes investment advice - or advice in any other field. Neither the information, commentary or any opinion contained in this blog constitutes a solicitation or offer by Equitable Investors Pty Ltd (Equitable Investors) or its affiliates to buy or sell any securities or other financial instruments. Nor shall any such security be offered or sold to any person in any jurisdiction in which such offer, solicitation, purchase, or sale would be unlawful under the securities laws of such jurisdiction. The content of this blog should not be relied upon in making investment decisions.Any decisions based on information contained on this blog are the sole responsibility of the visitor. In exchange for using this blog, the visitor agree to indemnify Equitable Investors and hold Equitable Investors, its officers, directors, employees, affiliates, agents, licensors and suppliers harmless against any and all claims, losses, liability, costs and expenses (including but not limited to legal fees) arising from your use of this blog, from your violation of these Terms or from any decisions that the visitor makes based on such information. This blog is for information purposes only and is not intended to be relied upon as a forecast, research or investment advice. The information on this blog does not constitute a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Although this material is based upon information that Equitable Investors considers reliable and endeavours to keep current, Equitable Investors does not assure that this material is accurate, current or complete, and it should not be relied upon as such. Any opinions expressed on this blog may change as subsequent conditions vary. Equitable Investors does not warrant, either expressly or implied, the accuracy or completeness of the information, text, graphics, links or other items contained on this blog and does not warrant that the functions contained in this blog will be uninterrupted or error-free, that defects will be corrected, or that the blog will be free of viruses or other harmful components.Equitable Investors expressly disclaims all liability for errors and omissions in the materials on this blog and for the use or interpretation by others of information contained on the blog |
Source: BCA, @Scutty
29 Apr 2022 - Hedge Clippings |29 April 2022
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Hedge Clippings | Friday, 29 April 2022
Half way there - only three weeks to go... Only Anthony Albanese's staunchest supporters would describe him as an exciting, inspiring or charismatic politician. So whilst he's been locked away with COVID how come this election campaign has seemed even more boring than usual? To be fair, the requirements of, or for, a good PM don't have to include charisma, or to be inspirational, but even a touch of either would liven things up a bit. Given (according to the polls) it looks a better than even chance he'll be running the country in a few weeks' time one can only hope that whilst in isolation he has at least been able to brush up on his long forgotten, but recently recalled, economics degree. Hedge Clippings doesn't want to put any of our hard earned on the outcome, but our current call is for a minority government, with a group of independents (hopefully excluding Clive and his UAP) calling the shots. If that outcome comes to pass, that's democracy in action, but who knows where it will lead over the following three years? In the meantime there were two major confirmations over the past week: Firstly, that China is much smarter strategically and politically than Australia, the USA and New Zealand put together. Any thoughts that China WON'T militarise the Solomon Islands seem implausible, otherwise why would they have bothered in the first place, and why won't they release the terms of the deal? One can assume that no amount of pressure or persuasion will result in them retreating back to the Chinese mainland, the Spratly Islands - or even in due course, to Taiwan. Secondly, confirmation this week that inflation, and therefore interest rates, will soon be rising. A couple of months ago we thought this would not occur before June to avoid the impending election, but the RBA now has to justify why NOT to move in May at next Tuesday's board meeting. Whilst it will make all the headlines, the questions that really need to be asked are how many more, and how much higher will they go? Much of the latest annual 5.1% increase in inflation was sourced externally (oil, energy, COVID, supply chain, etc) or seasonal food prices, leaving the increase in the "trimmed rate" a slightly less alarming 3.7%. However, given inflation has averaged around 2.5% for the last 30 odd years, that's enough to worry the RBA, and the property market. Rates will certainly rise, but from such a low level that the effect on the economy, and the negative effects on consumer spending, will be magnified. How the government - whichever party or parties prevail - manages and the wage claims that follow will be critical. Given the uncertainty currenlty prevailing - both locally, and globally - the outcome of the election is going to be crucial, and we suspect the following three years will be painful. Much like the past two years, albeit for different reasons! News & Insights Hedging against inflation - gold or real estate? | Quay Global Investors The Experience Megatrend | Insync Fund Managers 10k Words | Equitable Investors |
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March 2022 Performance News |
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29 Apr 2022 - Fund Review: Insync Global Capital Aware Fund March 2022
INSYNC GLOBAL CAPITAL AWARE FUND
Attached is our most recently updated Fund Review on the Insync Global Capital Aware Fund.
We would like to highlight the following:
- The Global Capital Aware Fund invests in a concentrated portfolio of 15-30 stocks, targeting exceptional, large cap global companies with a strong focus on dividend growth and downside protection.
- Portfolio selection is driven by a core strategy of investing in companies with sustainable growth in dividends, high returns on capital, positive free cash flows and strong balance sheets.
- Emphasis on limiting downside risk is through extensive company research, the ability to hold cash and long protective index put options.
For further details on the Fund, please do not hesitate to contact us.
AFM Fund Review - March 2022 (pdf format)
