NEWS
30 Sep 2022 - Times like these - investing in sustainable growth companies makes sense
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Times like these - investing in sustainable growth companies makes sense Insync Fund Managers August 2022 For the best part of 10 years, we've enjoyed the tranquil waters of low and stable inflation and even lower interest rates. That's all changing.
Many companies will struggle in this new world, however there is a small group who will thrive. And they have one thing in common: sustainable compounding earnings growth. It's never been more important for investors. We anticipate markets are already shifting focus after a recent wild swing backwards impacting all, deserved or not, to the prospect of Goldilocks economic conditions (not too hot nor too cold). The evolving economic backdrop is accelerating the business performances of the type of stocks that we hold at Insync; specific companies backed by our megatrends. Whether it's demographic shifts, digitisation or even pet humanisation; its megatrends like these providing the tailwinds for their growth, irrespective of the economy. And, it's why we remain fully invested despite market swings and the often touted fears by commentators. Investing in the highest quality stocks benefitting from megatrends delivers strong earnings growth over a full economic cycle. This is because of the duration of the megatrends being far longer than mere themes. Recent portfolio examples include Home Depot (see below) and Walt Disney (whom recently increased ticket prices by 7% with zero impact on demand). Our holdings possess high gross margins and strong pricing power, providing strength in both high and more normalised inflation environments. Our portfolio is well positioned as a result for continued delivery of the 5 year aim of both funds, as stock prices over the longer term follow consistent earnings growth.
Home Depot (a supersized bunnings) benefits from the 'Household Formation' Megatrend, fuelled by the all-important 'Demographics' Super Driver. Understanding changing demographics across all ages and segments globally is very important in identifying the winning companies of the future. One example is the escalation in the 47 year old age cohort in the United States over the next 8 years (see graph below).
The acceleration in the age 47 cohort coincides with the median average age of all home buyers, pushing up construction demand. Additionally a housing supply deficit in the US as high as 3.8m homes exists. On the renovation front, seniors are increasingly reluctant to move into aged care centres, and the increased 'working from home' trend further fuels demand. These are long duration strong tailwinds. Short term interest rate rises, and other macro factors are unlikely to alter this powerful megatrend. Home Depot is a big winner of all this. Think of it as a massive Bunnings network with almost 2,000 stores! They serve both trade and DIY markets, dominating the US building supply industry and run by a highly competent management team. Despite rising interest rates their recent strong results are testament to both the strength of the company and the power of the megatrend. Home Depot delivers very high returns on invested capital with an expected 10-15% p.a. compound annual earnings growth in the years ahead. Funds operated by this manager: Insync Global Capital Aware Fund, Insync Global Quality Equity Fund Disclaimer |
29 Sep 2022 - Sector Spotlight: SGH
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Sector Spotlight: SGH Airlie Funds Management July 2022 |
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Hear from Joe Wright as he provides a backdrop on Seven Group; a diversified investment business operating mining and industrials companies including WesTrac, Coates and Boral. Speaker: Joe Wright, Equities Analyst Funds operated by this manager: Important Information: Units in the fund(s) referred to herein are issued by Magellan Asset Management Limited (ABN 31 120 593 946, AFS Licence No. 304 301) trading as Airlie Funds Management ('Airlie') and has been prepared for general information purposes only and must not be construed as investment advice or as an investment recommendation. This material does not take into account your investment objectives, financial situation or particular needs. This material does not constitute an offer or inducement to engage in an investment activity nor does it form part of any offer documentation, offer or invitation to purchase, sell or subscribe for interests in any type of investment product or service. You should obtain and consider the relevant Product Disclosure Statement ('PDS') and Target Market Determination ('TMD') and consider obtaining professional investment advice tailored to your specific circumstances before making a decision to acquire, or continue to hold, the relevant financial product. A copy of the relevant PDS and TMD relating to an Airlie financial product or service may be obtained by calling +61 2 9235 4760 or by visiting www.airliefundsmanagement.com.au. Past performance is not necessarily indicative of future results and no person guarantees the future performance of any financial product or service, the amount or timing of any return from it, that asset allocations will be met, that it will be able to implement its investment strategy or that its investment objectives will be achieved. This material may contain 'forward-looking statements'. Actual events or results or the actual performance of an Airlie financial product or service may differ materially from those reflected or contemplated in such forward-looking statements. This material may include data, research and other information from third party sources. Airlie makes no guarantee that such information is accurate, complete or timely and does not provide any warranties regarding results obtained from its use. This information is subject to change at any time and no person has any responsibility to update any of the information provided in this material. Statements contained in this material that are not historical facts are based on current expectations, estimates, projections, opinions and beliefs of Airlie. Such statements involve known and unknown risks, uncertainties and other factors, and undue reliance should not be placed thereon. Any third party trademarks contained herein are the property of their respective owners and Airlie claims no ownership in, nor any affiliation with, such trademarks. Any third party trademarks that appear in this material are used for information purposes and only to identify the company names or brands of their respective owners. No affiliation, sponsorship or endorsement should be inferred from the use of these trademarks.. This material and the information contained within it may not be reproduced, or disclosed, in whole or in part, without the prior written consent of Airlie. |
29 Sep 2022 - Are we there yet? (Whitepaper)
28 Sep 2022 - 10k Words
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10k Words Equitable Investors September 2022 Earnings season on the ASX has come to a close with a historically low number of downgrades on the FY22 numbers, as tracked by Wilsons, but more downgrades than upgrades to EPS and dividend guidance for FY23, based on Evans & Partners' numbers. The one year return on Bloomberg's benchmark for the bond market is down 19% over the past 12 months. While the Australian yield curve is sloping upwards, the US yield curve is currently inverted. An inverted yield curve has historically led to some type of "break" in the system, @Marlin_Capital warns. But the inflation data is potentially turning - Yardeni highlights plunging US gasoline prices. Given the European situation, nuclear power and uranium are seeing a revival of sorts, at least with Japan revisiting its stance. Uranium equities have been advancing and the Washington Post ran a Blooomberg piece highlighting the unsavoury sources of current uranium supply. Taking a look at equities, Bespoke's optimistic take on the June half-year's poor showing is that such a poor first six months is typically followed by 12 months of 20%+ returns for the S&P 500. We thought it was interesting how closely the Grayscale Ethereum Trust has traded in comparison with the ARK Innovation ETF - a speculative cryptocurrency vehicle alongside a high growth tech investment vehicle. And potentially adding some colour to that is Visual Capitalist's charting of the demise of long-term investing. Aggregate ASX earnings downgrades announced over course of 12 month reporrting cycle
Source: Wilsons Net guidance upgrades for FY23f for the S&P/ASX 200
Source: Evans & Partners Bloomberg Global-Aggregate Total Return Index Value Unhedged USD
Source: RBA Australian and US yield curves
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Source: worldgovernmentbonds.com An inverted yield curve has historically led to some type of "break" in the system Source: @Marlin_Capital, Federal Reserve of St Louis US gasoline priced have plummeted as consumption is reduced relative to a year earlier Source: Yardeni Research North American uranium ETFs on the rise (URA, URNM, U.U)
Source: TIKR, Equitable Investors Authoritarian nations dominate the world's uranium production
S&P 500 has been up at least 22% in the year following prior 20%+ two-quarter drops
Source: Bespoke Grayscale Ethereum Trust (orange) and ARK Innovation (green) moving together
Source: TIKR, Equitable Investors The average holding period of shares on the NYSE has fallen to new lows
Source: Visual Capitalist September 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 |
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27 Sep 2022 - Webinar Replay: Catalyst Fund
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L1 Capital Webinar Replay: Catalyst Fund L1 Capital September 2022 WEBINAR REPLAY | L1 Capital Catalyst Fund | September 15, 2022
Speaker: James Hawkins, Partner & Head of L1 Capital's Catalyst Fund Time Stamps: • 0.44 Fund overview • 2.50 Reflections from the first year • 4.49 Activist market observations • 13.17 Questions from investors |
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Funds operated by this manager: L1 Capital Long Short Fund (Monthly Class), L1 Capital International Fund, L1 Capital Long Short Fund (Daily Class), L1 Long Short Fund Limited (ASX: LSF), L1 Capital Catalyst Fund, L1 Capital Global Opportunities Fund |
27 Sep 2022 - Investment Perspectives: Why rising interest rates aren't working (yet)
26 Sep 2022 - Look beyond market noise to unlock China's growth
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Look beyond market noise to unlock China's growth abrdn August 2022 Market sentiment on China has become especially fragile of late amid fears over near-term growth. However, we see reasons to be positive and urge investors to think longer term and ignore market noise. Hot topics among our investment teams include zero-Covid policy, US-China tensions, monetary and fiscal easing, the weak economic backdrop, a beleaguered property sector and regulatory oversight. China's economy contracted 2.6% in the second quarter this year on the back of Covid-19 lockdowns and a real estate sector under severe liquidity stress due to continued government deleveraging. Of course, these headwinds will likely trigger further monetary and fiscal policy easing, which will support China's economy. Chiefly we expect infrastructure spending and modest interest rate cuts. In the absence of strong stimuli, we're anticipating a gradual turnaround. Our Research Institute is forecasting year-on-year GDP growth of about 3% in 2022 - below market consensus of close to 4%. We see authorities have levers to stabilise the property sector, and growing policy support reaffirms Beijing's commitment. Reportedly they're considering a rescue fund to deliver unfinished residential projects. While it may be insufficient to shore up buyers' confidence, it's a step in the right direction. Further, we expect policymakers to dilute or discard their zero-Covid strategy over time, most likely after the Party's 20th National Congress this year. So we see lockdown effects on growth dissipating. Similarly we see regulatory pressures easing. At a recent Politburo meeting we noted support for expanding China's universe of digital platforms and standardising supervision. Stable regulation will help to improve investor confidence and could drive multiple re-ratings for e-commerce companies. Clearly, geopolitical risk is hard to predict and we expect heightened US-China tensions to last for some time. But we view such tensions as periodic and part of an evolving geopolitical landscape. Our base case is that Beijing will not engage in direct military conflict with Taiwan in the near term. We think cooler heads will prevail in recognition of the heavy cost to economies and global stability. We believe imposing sanctions on Taiwan would be contrary to Beijing's own economic interests, while more military drills around the Taiwan Strait risk disrupting global supply chains and logistics. So what might investors expect? Here we outline our investment teams' China views. Equity teamIt's early for China's economy to show strong signs of recovery on the back of easing measures. So we expect equity markets to remain rangebound in the near term. But we're constructive on the outlook as stimulus measures start to work their way through the system in the second half of 2022. "We're constructive on the outlook as stimulus measures start to work their way through the system in the second half." Companies have started reporting their first-half results, with investors now more focused on analysing fundamentals to understand their underlying strengths and weaknesses. Given our focus on high-quality stocks, we're optimistic about the earnings resilience of our holdings. Valuations also look attractive. The MSCI China A Onshore Index's 12-month forward price-earnings ratio is 11.6x - comfortably below 15.4x for MSCI World and against a five-year average of 12.6x.1 China aims to reduce real estate's contribution to GDP growth due to the sector's high leverage. We have positioned our equity portfolios around the following five themes that we think will enjoy state support and are deemed critical to give China a competitive edge in its economic rivalry with the US: Aspiration: rising affluence leading to fast growth in premium consumption; Fixed income teamWith inflation not an issue, we expect stronger fiscal policy-easing this year and further rate cuts over the next 12 months. However, we suspect growth in infrastructure investment might disappoint after a strong first half. Momentum in the property sector is too weak for it to recover this year. Property sales have fallen sharply and will likely stay low amid impaired consumer confidence. However, we think state-owned enterprises (SOEs) in the sector with continued access to funding are well-placed to outperform. Additionally, with the rollout of more co-ordinated government support, we see potential for stabilisation among large, well-established privately owned enterprise (POE) developers. More generally, Chinese SOEs have enjoyed healthy demand in recent months and we expect them to retain strong government support, although we remain cautious about valuations. We think onshore SOE spreads will remain tight in coming months. We have been trimming core SOE positions over rich valuations relative to Asian and global peers. For the same reason we underweight Chinese financials in the offshore market, especially big banks. We also see supportive liquidity conditions for Local Government Financing Vehicles (LGFVs) in the near term, albeit amid growing concerns about the ability of local governments to support them. Offshore China portfolio positioning:
Onshore China bond positioning:
 Multi-Asset teamThe world is a highly unusual place today, with this economic cycle different for three reasons: policymakers are seeking to avoid stimulating the economy via the property sector; strict Covid containment measures continue to dampen consumption; and major central banks are tightening policy aggressively to fight inflation, leading to slower global growth. Whereas in China, where inflation is not an issue, economic growth is in the early stages of recovery after authorities started easing policy this year. Government bond yields are near historic lows, so not outright cheap. But equity risk premia and offshore credit spreads remain attractive. As a result, although Chinese growth is likely to see sequential improvement in the second half of this year, the strength of the recovery will be weaker than in previous cycles. Monetary policy is likely to remain loose, with credit growth driven more by government than the property sector. As policymakers seek to balance short-term growth with long-term structural reform goals, we remain long China onshore equity and China duration; cautious on China credit; and we recommend hedging currency risk when investing in China. In a normal cycle, an early recovery phase is the time to invest in Chinese equity. However, in this cycle we think the recovery will be highly uneven and asset allocators need to pay close attention to potential tail-risk from Covid lockdowns and the property sector. Active stock selection is key. In a normal cycle, as growth recovery takes hold, the bulk of government bond outperformance should be behind us. However, in this cycle the weak recovery suggests China's central bank is likely to keep liquidity conditions loose, meaning bond yields will remain lower for longer. In a normal cycle, credit should rally with equities. However, in this cycle we are not confident that policymakers will backstop troubled property developers, which means high-yield credit will remain distressed. Of course, that does not preclude interesting opportunities in investment grade credit. For currencies, we think CNY can stay resilient on a trade-weighted basis, but weakening external demand and a hawkish US Federal Reserve will put downward pressure on CNY against USD. For global investors, hedging CNY risk is not a bad idea as hedging costs are at their lowest for five years.  Author: Nicholas Yeo, Head Of China Equities; |
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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 Bloomberg, 26 August 2022 |
23 Sep 2022 - Europe Trip Insights
23 Sep 2022 - Outlook Snapshot
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Outlook Snapshot Cyan Investment Management September 2022 |
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After the strong rally in July which extended into the middle of August, markets became significantly more bearish on renewed inflation concerns and rate rises which saw the broader markets shed almost 5% in the last two weeks of the month. Much of this bearishness was as a result of rate rise fears being validated in early September with the RBA's fifth rate rise in as many months taking rates from 0.35% to 2.25%. By and large the August reporting season did not produce the dire results many participants feared, although, in the case of many companies, outlook statements from management were noncommittal due to the economic and geopolitical uncertainty ahead. Another key theme was a focus on cost management, and there remain a number of high-growth emerging technology businesses that failed in that regard and continue to burn through extreme amounts of cash. Anecdotally we have seen an increase in market activity, a number of new IPO's have been marketed along with a good increase in corporate flow along with the previously discussed takeover activity. Whilst this has not yet resulted in substantially increased trading volumes, we absolutely feel that the market is heading back towards more 'normal' levels of activity.
As we mentioned in our introduction there are certainly some 'green shoots' in the domestic market with takeover bids, new IPOs and generally increased levels of confidence and market activity. In the past two weeks we have had more than a dozen face-to-face meetings with management (along with a similar number of zoom calls) so it's very much beginning to feel like business conditions are improving. After more than 12 months of bearish stock market trading we feel there are presently a number of emerging market trends that could result in markedly improved short to medium term performance. Â Certainly, we feel that our investee companies have been, on the whole, trading well and we're firmly of the view that from present levels, upside price appreciation far exceeds downside. What we wrote previously remains very much relevant: "We still see a gap between price and value in many of our holdings. However, with sentiment feeling more positive ... we hope that some of that inherent value will be released in the short to medium term as the market re-focuses on quality, growing companies and fundamental research."Â |
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Funds operated by this manager: Cyan C3G Fund |
21 Sep 2022 - Reporting season better than many feared
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Reporting season better than many feared Glenmore Asset Management September 2022 In August, equity markets were weaker, driven by expectations around the number of future interest rate rises needed to reduce inflation. In the key US indices, the S&P 500 was down -4.2%, the Nasdaq fell -4.6%, whilst in the UK the FTSE 100 performed better, declining -1.9%. Australia outperformed, where the All Ordinaries Accumulation Index rose +1.3%, driven by its heavy weighting to resources and oil and gas stocks, which outperformed strongly. Property, consumer staples and utilities sectors lagged. The key driver of declines in global indices were comments made by Jerome Powell (chair of US Federal Reserve) in late August which indicated the US Federal Reserve monetary policy will be aimed very strongly at bringing down inflation closer to its long range target of ~2%, which in turn indicates the interest rate hiking phase will be larger and go for longer than some equity investors had hoped for. On this issue, our base expectation is that central banks will need to raise rates aggressively for another 6-12 months in order to reduce inflation to more acceptable levels. Whilst this will lead to a challenging and volatile period for equity markets, the positive is that this volatility is likely to provide excellent buying opportunities in stocks across a range of sectors on the ASX. In fixed interest markets, the US 10 year bond yield rose sharply, climbing 42 basis points to close at 3.13%, whilst the yield on the Australian 10 year bond also rose sharply, by 54bp to close at 3.55%. The A$/US$ fell -2.0% to close at US$68.5. Commodities were broadly lower in August, iron ore fell - 16.0%, crude oil -12.3%, copper fell -2.1%, whilst thermal coal continued to outperform, rising +4.2%. Overall, the August reporting season was better than many investors had feared, with most results coming in close to consensus expectations. With that said, we are still quite early of the interest rate hiking cycle, with company results for the December 2022 half likely to be more impacted by rising interest rates, higher cost of living, and general caution on household spending. Funds operated by this manager: |
