Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Register

23 July 2025

Home / White Papers 2022

Long-term 'signal' versus short-term 'noise'

The rapid change in long-term bond yields, particularly over the past 12 months, has been the primary cause of the decline in the market value of our portfolios, and has represented the worst macro environment for long-duration assets, in a very long time.

Despite recent declines in our portfolios, the underlying fundamentals have not deteriorated, with our companies' competitive positions and long-term earnings growth profiles remaining strong. Short-term fears about recession, temporary increases in bond yields and inflation are 'noise' and should not be our focus. Instead, focus should be on long-term valuations representing 'signal'.

  • The businesses in Hyperion’s portfolios can take market share because of the relative strength of their value propositions. These companies are leaders in their respective industries and are well-positioned to take advantage of weaker competitors that suffer during an economic downturn. Moreover, these companies tend to have strong pricing power that gives them economic flexibility during economic downturns or periods of high inflation.
  • Our top holdings’ market penetration percentage rates are typically in the single digits indicating that they have significant growth opportunities with the potential to capture meaningful market share.
  • Our key portfolio holdings are dominating niches, in some cases creating new categories, to transform old industries into something more modern. We refer to this concept as “dominate and transform.”
  • During economic downturns, consumers and businesses focus more on the relative strength of the value proposition of the goods and services they buy. As a result, hard times tend to accelerate market share shifts, favouring the stocks Hyperion has in its portfolios. We expect our key portfolio holdings to accrue significant market share gains over the next 10 years.
  • Our portfolio companies have attractive financial metrics relative to their benchmarks such as no net debt or low levels of debt and robust business models that are generally less sensitive to economic conditions than most listed businesses. Furthermore, this year’s weighted average return on equity for the Global fund is estimated to be approximately 33% and 21% for the Australian growth fund, indicating high profitability of our portfolios.

A cyclical recession over the next year is unlikely to impact our portfolios' long-term forecast EPS and valuations due to our high levels of innovation and low penetration rates. In a world where growth will again become scarce, businesses that grow by taking market share will be in a strong position to produce attractive returns over the long term. The current selloff is providing an opportunity for long-term investors to get exposure to some of the best businesses in the world at attractive prices.

Short-term factors are mere 'noise' rather than fundamental long-term 'signals'.

You can find further thought pieces from Hyperion on our website here.

Download the full paper

 


 

Leave a Comment:
Firstlinks is sponsored by:
banner

Most viewed in recent weeks

Raising the GST to 15%

Treasurer Jim Chalmers aims to tackle tax reform but faces challenges. Previous reviews struggled due to political sensitivities, highlighting the need for comprehensive and politically feasible change.

7 examples of how the new super tax will be calculated

You've no doubt heard about Division 296. These case studies show what people at various levels above the $3 million threshold might need to pay the ATO, with examples ranging from under $500 to more than $35,000.

Are franking credits hurting Australia’s economy?

Business investment and per capita GDP have languished over the past decade and the Labor Government is conducting inquiries to find out why. Franking credits should be part of the debate about our stalling economy.

Here's what should replace the $3 million super tax

With Div. 296 looming, is there a smarter way to tax superannuation? This proposes a fairer, income-linked alternative that respects compounding, ensures predictability, and avoids taxing unrealised capital gains. 

The rubbery numbers behind super tax concessions

In selling the super tax, Labor has repeated Treasury claims of there being $50 billion in super tax concessions annually, mostly flowing to high-income earners. This figure is vastly overstated.

9 winning investment strategies

There are many ways to invest in stocks, but some strategies are more effective than others. Here are nine tried and tested investment approaches - choosing one of these can improve your chances of reaching your financial goals.

Latest Updates

Investment strategies

Trump's US dollar assault is fuelling CBA's rise

Australian-based investors have been perplexed by the steep rise in CBA's share price But it's becoming clear that US funds are buying into our largest bank as a hedge against potential QE and further falls in the US dollar.

Investment strategies

With markets near record highs, here's what you should do with your portfolio

Markets have weathered geopolitical turmoil, hitting near record highs. Investors face tough decisions on valuations, asset concentration, and strategic portfolio rebalancing for risk control and future returns.

Property

Soaring house prices may be locking people into marriages

Soaring house prices are deepening Australia's cost of living crisis - and possibly distorting marriage decisions. New research links unexpected price changes to whether couples separate or silently struggle together.

Investment strategies

Google is facing 'the innovator's dilemma'

Artificial intelligence is forcing Google to rethink search - and its future. As usage shifts and rivals close in, will it adapt in time, or become a cautionary tale of disrupted disruptors?

Investment strategies

Study supports what many suspected about passive investing

The surge in passive investing doesn’t just mirror the market—it shapes it, often amplifying the rise of the largest firms and creating new risks and opportunities. For investors, understanding these effects is essential.

Property

Should we dump stamp duties for land taxes?

Economists have long flagged the idea of swapping property taxes for land taxes for fairness and equity reasons. This looks at why what seems fairer may not deliver the outcomes that we expect.

Investing

Being human means being a bad investor

Many of the behaviours that have made humans such a successful species also make it difficult for us to be good, long-term investors. The key to better decision making is to understand what makes us human and adapt.

Sponsors

Alliances

Site Map

About Firstlinks

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.