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Tuesday, 21 September 2021
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Some high-quality companies have emerged even stronger since the onset of COVID and are well placed for outperformance. We call these the ‘COVID Opportunists’ as they are now dominating their specific sectors.
Social media, app and trading platforms that drive retail participation also open doors for greater volatility. Ironically, easy money is contributing to market risks, with shorting hit by spiking to the upside.
A high level of spending capacity is left in consumers which will support consumer-related stocks for a longer period than is factored into current share prices. Savers have lots of money sitting in the bank.
Over the last 20 years, smaller Australian listed companies have outperformed larger companies but with greater volatility. Following a strong run in the last six months, the smaller end is looking expensive.
Global equity markets have experienced huge volatility during 2020. Investors are now looking at stretched large cap valuations but there are good opportunities in less well-known, smaller companies.
Financial software companies have favourable attributes and industry tailwinds that may see investors rewarded, especially with super funds driving for greater efficiencies and better member experiences.
Despite the rhetoric from some investors, backing smaller, riskier stocks in the Australian share market will not necessarily give better returns than larger, less volatile stocks.
Australian investors have a domestic bias, but around the world, a swag of small to medium cap companies offer better value than the mega-cap names that have driven markets in recent years.
As heads turn to the hottest tech or niche stock, some companies in traditional business sectors get left behind because they are boring. But overlooked means not overcooked.
Assessing the barriers to entry, formal and informal, is always relevant in investing, but particularly for small cap stocks, where forecast growth can only occur if such barriers persist and grow.
Microcap managers have the potential to outperform their indexes by picking undiscovered stocks which do exceptionally well, but it can work the other way. Variability of manager performance is a sector feature.
S&P's SPIVA (index versus active) data now spans 15 years of data on the performance of Australian managed funds. This study illuminates returns from sectors and styles, and investment lessons learned from it.
Who knew? With some surprise results, the Government is on unexpected firm ground in asking people to draw on all their assets in retirement, although the comments show what feisty and informed readers we have.
The RBA Governor says rising house prices are due to "the design of our taxation and social security systems". The OECD says "the prolonged boom in house prices has inflated the wealth of many pensioners without impacting their pension eligibility." What's your view?
It's a remarkable statistic. In any year since 1875, if you had invested in the Australian stock index, turned away and come back eight years later, your average return would be 120% with no negative periods.
Never stand between Australian households and an uncapped government programme with $3 billion in ‘free money’ to build or renovate their homes. But excess supply is coming with an absence of net migration.
Picking macro trends is difficult. What may seem logical and compelling one minute may completely change a few months later. There are better rewards from focussing on identifying the best companies at good prices.