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Sunday, 23 January 2022
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Smaller companies might require more research than large caps but they are often worth it. All large companies were small once and there can be benefits investing in small companies and backing management early.
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.
Most people entering retirement do not see a financial adviser, mainly due to cost. It's a major problem because there are small mistakes a retiree can make which are expensive and avoidable if a few tips were known.
Eligibility for the Commonwealth Seniors Health Card has no asset test and a relatively high income test. It's worth checking eligibility and the benefits of qualifying to save on the cost of medications.
The focus is on Magellan for its investment performance and departure of the CEO, but Douglass says the pandemic, inflation, rising rates and Middle East tensions have not played out. Vindication is always long term.
This is our annual checklist of what retirees need to be aware of in 2022. It is a long list of 25 items and not everything will apply to your situation. Run your eye over the benefits and entitlements.
The Warren Buffett/Charlie Munger partnership is the stuff of legends, but even Charlie admits it is coming to an end ("I'm nearly dead"). He is one of the few people in investing prepared to say what he thinks.
Depending on personal circumstances, it may be time to rethink the bias to paying down housing debt over wealth accumulation in super. Do the sums and ask these four questions to plan for your future.