reports
- Shane Lee
Aussie Equities Month in Review - February 2020
Global equities fell by 0.6% after a strong start of the month was scuttled by the emergence of the Coronavirus. Healthcare (12%), IT (11%), Communication Services (9%) and Consumer Staples (8%) saw strong returns. The biggest hurdle for investors in Australia remains valuation. Analysts seem relatively comfortable with full-year EPS estimates after the downgrade cycle, with earnings certainty is back to around normal levels for the ASX200 universe. The Q4 19 inflation data was broadly in ...
- Shane Lee
Aussie Equities Month in Review (Dec 2019)
Global equities rallied by 3.0% after the US and China announced they were close to formalising a trade deal. Emerging markets rallied strongly, with the global EM index up by 7.5% supported by strong gains in Argentina (21%), China B (8.4%), Russia (7.7%), Brazil (6.8%) and China A (6.2%). Consumer Staples (-8.1%), Communication Services (-7.8%), Property (-4.8%) led the declines, while Materials (1.5%) and Utilities (0.8%) were the only sectors to gain ground. The biggest hurdle for invest...
- Shane Lee
2020 Asset Allocation and ASX Outlook
We expect the Australian equity market to deliver low-mid single digit returns next year. Our Dynamic Asset Allocation preference is a mild overweight to Growth assets, given the relative attractiveness of equities to both bonds and credit. In Fixed Income we prefer Global markets over Australia even though the RBA has probably more work to do. In the ASX, the Risk: Reward skew is tilted more positive for Resources than Banks, particularly in H1 as the global economy shows signs of recover...
- Shane Lee
Aussie Equities Month in Review (Nov 2019)
The ASX 200 gained 3.3% and outperformed global markets again. IT (11.0%), Communication Services (9.6%), Healthcare (8.9%) and Consumer Staples (8.2%) were the best-performing sectors. The biggest hurdle for investors in Australia is valuation. The combination of falling downgrades and upgrades more in line with long-term averages means that earnings certainty is back to around normal levels for the ASX200 universe. The RBA laid out its plans for providing additional monetary support sho...
- Shane Lee
Aussie Equities Month in Review (October 2019)
The ASX 200 fell by 0.4% and underperformed global markets after several strong months of outperformance and earnings downgrades. In net terms the market was upgraded, although this was mainly because there were less downgrades than normal and not because analysts were becoming more positive on the earnings outlook. IT (-3.9%), Financials (-2.8%), Consumer Staples (-2.2%) and Materials all underperformed. Australia remains expensive with the earnings bar now lowered to a level more achieva...
- Shane Lee
Model Portfolio update - October 2019 - Sticking to the Knitting
Our model portfolio has added 200bp of Alpha since our last update and our stock selection remains broadly unchanged. We continue our strategy that we put in place early this year and again lift the bar on defensive positioning. The Banks are struggling on several fronts and we move underweight ANZ and CBA. We maintain our overweight in NAB and our underweight in WBC. The global economic cycle is long-in-the-tooth and recession seems inevitable, with prospects of a large global equity draw...
- Shane Lee
Aussie Equities Month in Review (September 2019)
The ASX 200 shrugged off a poor reporting season and another barrage of downgrades in September to gain 1.8% during the month. Australia (22.6%) and New Zealand (24%) are amongst the strongest performing developed equity markets year-to-date underpinned by their relatively high dividend yield. Financials (4.1%) benefitted from global curve steepening and Consumer Discretionary (3.0%) benefited from lower domestic interest rates, while Energy caught a bid from the escalation of tensions bet...
- Shane Lee
Aussie Equities Month in Review (August 2019)
The ASX 200 shrugged off a poor reporting season and fell in line with global markets. Global stock markets fell by 2.0% due to concerns about global trade. Healthcare (3.6%), Property (2.3%) and IT (5.0%) were the best performing sectors, while Materials declined on the backs of a large fall in the price of iron ore and a weak FY19 result from BLD. The strong relative performance of Australia during the past 3 months combined with the large number of downgrades in June and a downgrade ...
- Shane Lee
ASX Reporting Season Update: Misses and Downgrades Amongst Bright Spo...
Reporting season has been relatively disappointing with only 45% of stocks able to either meet or beat FY19 expectations. Trade tensions between the US and China have provided a relatively somber backdrop, with the ASX 200 4% below its peak just before reporting season kicked off. Capital management has been a key area of focus. Some management teams (SUL, JBH, MGR, DHG, REA and CAR) in industries with headwinds such as housing and consumer spending are clearly taking up the challenge. ...
- Shane Lee
Tracking a Slowdown Path for Aussie Equities
The Fed has massaged market expectations of lower official interest rates and with other central banks jumping onboard global financial conditions have improved in the past few months. Despite the Fed's poor form investors seem complacent about recession prospects, but the stakes are high. The Aussie stock market tends to underperform in both the slowdown and recession scenarios. A 16% return, on average, occurs during a US slowdown, while a recession scenario delivers a -12% decline on ave...
- Shane Lee
Aussie Equities Month in Review - June 2019
The RBA cut interest rates for the first time since August 2016 lifting banks and many domestic cyclical names. Despite the bearish sentiment by analysts, the market posted another strong gain (3.7%) led by Resources, Healthcare and Financials. Global stock markets rallied by 6.6% has markets decided the Fed will provide a safety net for the global slowdown that is unfolding. The strong relative performance of Australia during the May global market correction and the solid performance d...
- Shane Lee
to Dissect Aussie Growth Stocks
Growth stocks have again out-performed Value since the start of the year supported by declining bond yields and solid EPS growth. In this note, we cast our eye over a selection of 55 Growth stocks constrained by a 12-month forward PE multiple of 18 and long-term consensus EPS growth of 7.5%. We then compare each stock using their cash conversion, asset turnover, reinvestment rate, net debt, EBITDA margin and Good Will. Within the group of stocks with a high PE and strong ea...
- Shane Lee
Aussie Equities Month in Review - December 2018
No major changes to guidance. The return for the ASX 200 was -2.8% for the year vs -4.4% in the US and -11.2% in Europe. Materials had a strong month, posting a 5.3% return vs the broader index (-0.1%). We moved our model portfolio to a more defensive positioning since the September correction and it has performed broadly in line with the benchmark. A lack of downgrades meant the upgrades: downgrades ratio for the market was above the long-run average. In Financials, earnings certainty m...
- Shane Lee
Crunch Time for Aussie Housing
Australia is in uncharted territory. The economy shrugged off the decline in Sydney and Melbourne house prices last year due mainly to a backdrop of strong employment growth. We estimate that the macro-prudential measures taken by the regulator (The Australian Prudential Regulatory Authority) combined with the reaction of the Banks to the Banking Royal Commission hearings have been equivalent to an additional 150bp increase in the average mortgage rate on top of the 15bp delivered by the Ban...
- Shane Lee
A Houdini Act Worth Considering: Implications of a pick up in US Prod...
The US yield curve has flattened sharply since our 2019 outlook was released lifting the risk that the end of the business cycle is rapidly approaching. Other indicators of the business cycle such as credit spreads, the 2-year yield, the Fed’s Loan Officer’s Survey and the Philly Fed survey all suggest the cycle still has some way to go. In our 2019 outlook, we lifted the bar further on defence. We shifted overweight Property and added to our overweight in Healthcare, but we also added our e...
- Shane Lee
Aussie Equities Month in Review (Nov 2018)
Downgrades and market weakness. Most sectors fell during the month, but IT and Financials helped limit the rout. Lack of upgrades rather than excessive downgrades was the main problem. Follow Earnings During a Correction. NSR and SFR have seen relatively large increases in short-positioning, while heavily shorted stocks SYR and GXY saw relatively large falls. Labour market, consumer confidence and business confidence indicators all suggest the economy remains solid, despite evidence the ...
- Shane Lee
Aussie Equities 2019: On a Wing and a Prayer
We expect 2019 will be challenging. The risks for the domestic economy seem skewed to the downside. An Election Year with a change of Government Likely. Accumulate, but Don’t Over-pay for Defendable Earnings. Private equity bids for NVT and TME have forced us to remove these stocks from the portfolio and we take profit in these names. We think bond yields are past their peak for now and have been gradually building positions in property.
- Shane Lee
- Shane Lee
- Shane Lee
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