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Thursday, 28 October 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.
Many investors focus primarily on the big listed companies but the smaller end in tech, mining and healthcare outperforms through innovation. Many Australian companies are world-leaders in their speciality.
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.
Many companies have strengthened their balance sheets but their soundness can be directly correlated to the duration of the pandemic. What lessons has 2020 revealed coming into reporting season?
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.
In some parts of the market, the case for active management over passive is strong. The less-researched small companies space shows a focus on strong capital, proven management and a clear strategy pays off.
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.
Non-banks are claiming market share from banks in many forms of private debt, and it's changing the nature of funding for many small to medium businesses.
The share prices of smaller companies are traditionally more volatile than large, but the market is changing and the roles seem to be reversing. Is it possible to change our bias against small caps?
What factors are a guide to a long term successful investment experience in small caps given the sector has struggled to deliver decent returns?
We tend to forget that house prices often fall. Direct lending controls are more effective than rate rises because macroprudential limits affect the volume of money for housing leaving business rates untouched.
The survey drew a fantastic 2,000 responses with over 1,000 comments and polar opposite views on what is good policy. Do most people believe the home should be in the age pension asset test, and what do they say?
Any policy decision needs to recognise who is affected by a change. It pays to check the data on who pays taxes, who owns assets and who earns the income to ensure an equitable and efficient outcome.
With articles on the pensions assets test read about 40,000 times, 3,500 survey responses and thousands of comments, there was a lot of great reader participation. A few comments added extra insights.
It is hard to think of any area of widespread public concern where the same policies have been pursued for so long, in the face of such incontrovertible evidence that they have failed to achieve their objectives.
There are reasons to believe inflation will stay under control, and although we may see a slowing in the global economy, two companies should benefit from the themes of 'Stable Compounders' and 'Structural Winners'.