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Sunday, 31 May 2020
Recently trending 10 undervalued stocks if you're worried about volatilityBaseline outlook for economic recovery is too optimistic Will our government embrace these three reforms?Welcome to Firstlinks Edition 357Don't invest just for yield: the smarter way to generate income
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Despite signs of optimism, market valuations are stretched and recovery is fuelled by government support. Some companies are doing well but stimulus cannot continue to prop up consumers for too long.
It is always easier to see the challenges and risks while underestimating ingenuity and positive possibilities. It's likely to be the case this time, too, as long as we move quickly to open economies.
Susceptibility is the risk of severe illness or death if an individual contracts COVID-19. It shows how bad an outbreak could be by region and it will inform policy on relaxing restrictions.
We cannot throw our hands up in the air and say 'this time around, it's simply too hard'. Having no macro view is unhelpful, but many of the baseline scenarios are overly optimistic, says the former CEO of Westpac and now Chairman of Chi-X Australia.
The ability of countries to support their economies today turns on fiscal practices set well before this crisis. Increasing levels of debt escalate overall risk, and tie our hands in the future.
The government has announced initiatives to help people use their superannuation in response to the crisis, but for early access and drawdown changes, there are important rules to follow.
Unlike the share prices of some companies which have held up due to their defensive characteristics, Fisher & Paykel is playing an active role in mitigating the worst effects of the crisis.
The varying degrees of market performance are due to the mix of sectors and stocks in each index. The best plan of attack is to find quality companies in essential services at favourable prices.
There are heavy clouds on the horizon in the near and medium term, yet risk markets have separated themselves from the economics. Liquidity will not solve the problems of bankrupt companies.
The deteriorating mood will bring changes that will have profound economic, financial, social and political changes that can be grouped into new, accelerated, busted and possible trends.
Uncertainty was the key theme in recent results, but how did they score on loan provisions, capital resources, margins and most importantly, dividends. There's a lot of guesswork going on in banks.
Downside risks remain and we expect another leg down, but active managers should take advantage of market dislocations. In the current context, humility and risk management are key.
Amid the coronavirus-induced turmoil, many quality names are trading at a discount to fair value, according to Morningstar analysts. A smaller list of companies also screen for earnings certainty.
COVID-19 is an opportunity for a crucial policy reset, but what does that really mean? Business is hoping for three big reforms, but there are massive barriers to be overcome.
There is a remarkable concentration similarity between the Australian and US stock markets that has delivered poor results for Australians and great results for Americans (and global investors). As the share prices of five Australian banks have tanked, the prices of five US technology companies have surged. Each group now represents 20% of their respective indexes, but the journey has been a disaster for many Australians.
Investors often overlook the capital risk in high-yielding stocks. It's better to ensure capital grows and investors can sell a portion each year to make up for the shortfall in income from dividends.
Everyone seems to be watching The Last Dance, a fascinating sports documentary about the pursuit of excellence by one of the greatest athletes of all time. Let's not stretch the business analogy too far.