Tag: investing

Wry & Dry #36 FY-24 From the Murray to… “That would be the Euphrates”. Rats.

In the most flagrant breach of responsible government since that which caused then PM Whitlam to give Federal Treasurer Jim Cairns the DCM in 1975, Victorian Premier Allen has not given state Treasurer Tim Pallas the DCM.

And in abject bovine indifference, the financial media chewed the cud spewed out by the government’s PR machine and effectively said “Tut, tut. Must do better.”

Even the state opposition leader (err, bowler’s name?) couldn’t bring himself to ask for the head of Pallas to be impaled on a spike at the city gates.

Wry & Dry #28 of FY-24. Gender Equality. Nuclear. Spies.

The rest of the world: focused on Gaza, Ukraine and/or the Trumpster’s latest rambling monologue to bovine masses.

The Australian media: transfixed by the results of the most read survey since Publius Sulpicius Quirinius carried out a census in Judea in 6 AD. That survey (not the one by Quirinius) was by the Workplace Gender Equality Agency (WGEA). It’s a shocker.

Wry & Dry #23 FY-24. Bumper Christmas Issue

Wry & Dry needs to remind himself, and perhaps some Readers, of the major global events of 2023:

Jacinda Ardern, the Queen of Woke and Incompetence, gave herself the DCM

In an outcome that surprised the world, Emperor Eleven was unanimously re-elected as President of China

In a bullet fired into Tsar Vlad’s foot by Tsar Vlad, Finland became the 31st member of NATO.

Wry & Dry #22 FY-24. Emeritus Chairman Dan’s resume. Hamas: making money. GDP per capita falls.

It was feeding time at the media zoo on Wednesday. Hot on the heels of the PISA report showing that 26% of Victorian 15-year-olds’ educational proficiency was too low “to enable them to participate effectively and productively in life,” the long-awaited Ombudsman’s report into the Victorian public service under Emeritus Chairman Dan Andrews was fed to the salivating media mouths.

There was more than enough for indigestion. Victoria’s public service, the Ombudsman’s massive report said, is “ruled at the highest level by a culture of fear.” No subtlety there.

Wry & Dry #21 FY-24. Heaven: a busy week. Dubai: COP that. US: Haley’s comet.

It’s been a busy week at the Members’ Entrance to the pearly gates to heaven.

On Tuesday Charlie Munger arrived in a limmo longer than a bus. Charlie was Warren Buffett’s conservative investment alter ego. He arrived and immediately began arguing with St Peter about heaven’s recent investments (remembering that time doesn’t matter in heaven): “That St Peter’s Basilica property development in Rome was a waste of money.”

Wry & Dry #19 FY-24: Albo: What. Me worry? UK: sinking ship. Israel: maths.

Political opinion polls published on Monday screamed gloom for Albo. His preferred PM rating had fallen to 40% from 47%.

In response, Albo gave the Alfred E Neuman comment. Well, he actually didn’t say it. He didn’t need to: the same poll showed the Coalition’s primary support falling to 30%. Albo will be soundly sleeping; albeit in the pointy end of a Qantas A380.

WRY & DRY #15 FY-24: Voice over. Sleepy Joe’s great speech. Never mess with a nun.

The Voice debacle gave rise to claims and counter claims that would make a lawyer richer than Croesus. The most risible was from journalists, newspaper-letter-writers and deniers who blamed the loss on Opposition Leader Peter Dutton.

Really? Dutton would be pleased to claim he single-handedly defeated a campaign backed by the full forces of the government, the ACTU, an overwhelming casket of cash, the major churches, large companies, universities, the major sporting codes, major industry superannuation funds and… Alan Joyce. SuperDutton? Yeah. Nuh.

Wry & Dry #13 FY-24: Disaster: Chairman Dan’s DCM. Trumpster the fraudster. PwC.

In a DCM-move that surprised many, Chairman Dan gave himself the DCM on Tuesday. This is a disaster of great magnitude.

Cartoonists all over Australia have lost a subject that yielded the Everest of political satire and ridicule. They feasted on the opportunity provided by arguably the most hated politician since Julius Caesar, whose DCM, unlike Chairman Dan’s, was not self-inflicted and caused by 27 knife wounds from six grumpy conspirators.

Emboldened by his own outstanding oratory and aided by an Opposition as weak as the Wallabies and as divided as post-war Germany, a fawning media and an upper house cross bench that were easily bought, he bestrode the political world like a colossus.

Wry & Dry #7 FY-24. “No child will live in poverty.” Trumpster the mobster. VinFast what?

When the Indians are circling your wagon, the lessons of Politics 101 are clear. Divert attention away from the Indians until the cavalry arrives. What better diversion than a big, ‘nation building’ policy.

Former PM Bob Hawke was a master at this. Readers will remember either of “no Australian child will live in poverty” and/or “we will plant one billion trees.”

Wry & Dry #5 FY-24. Trumpster smashes own record. Phoenix Team. US credit downgrade.

What proud citizen of the USA would not want a president who admitted to a business relationship with a porn start? Really, it’s about free speech. And free trade.

Or one whose high intellect and sense of history meant that building a personal library of really historic documents was really understandable.

And now, conspiracy. Really? What’s the fuss? Who in politics hasn’t conspired before, during or after office?

Wry & Dry #34: Sleepy Joe’s real reason for not coming. How to paint a debt ceiling. Cane toads?

Sleepy Joe has decided to cancel his trip to have gumnut tea and a lamington with Albo. His acolytes speak of the need to negotiate the raising of America’s ‘debt ceiling’. Nuh.

The real reason is the worry that Sleepy Joe might fall victim of the food on the Jetstar flight to Sydney.  And return to the US in a more horizontal position than is usually found on Jetstar. Then Armageddon: Kamala Harris would get the gig in the White House, at which she has already been measuring up curtains. 

GLP drugs, Generative AI and Aurelia metals

Generative Ai

With First Samuel’s 2024 CIO Events fast approaching, we were interested to see how the two topics discussed last year, GLP drugs (i.e. weight loss drugs) and Generative AI, had progressed over the past 12 months.
The use of Generative AI and tools such as ChatGPT and Bard (now Google Gemini) has continued to multiply. According to a paper published by the National Bureau of Economic Research, since the debut of generative AI less than two years ago, a broad range of professions have begun using the tools. And 28% of workers now use the technology on the job.
Plus, this week’s Investment Matters returns to the August reporting result for Aurelia Metals, our favourite polymetallic miner in Cobar NSW. Interest in returning to Aurelia Metals was prompted by news from another company in the area and in our portfolio …

Most obviously, this led to CBA becoming the most expensive bank in the world.Although foreshadowed by others and market reaction earlier in the week, the decision to reduce rates for the first time since Covid-19 will have a significant impact on Australia in due course.
Plus, this week, Craig discusses some interesting new research on Newmont mining and results from Emeco and Catalyst Metals.

The rotation begins

Rotation begins

Firstly, for the past nine months global flows into Australian investments from Chinese investments have contributed to the rising share prices of Australian non-mining large capitalisation companies (especially the banks). This is because global managers wanted to avoid a weakening Chinese economy. 

Most obviously, this led to CBA becoming the most expensive bank in the world.Although foreshadowed by others and market reaction earlier in the week, the decision to reduce rates for the first time since Covid-19 will have a significant impact on Australia in due course.
Plus, this week, Craig discusses some interesting new research on Newmont mining and results from Emeco and Catalyst Metals.

What interest rate cuts in the US might mean for Australia

The biggest economic news of the week was not in Australia. In the spirit of the hype associated with interest rate decisions of the GFC and those surrounding Covid 19, commentary by Federal Reserve Chair Jay Powell was once again vital to market sentiment and the future direction of economics around the globe.
Although foreshadowed by others and market reaction earlier in the week, the decision to reduce rates for the first time since Covid-19 will have a significant impact on Australia in due course.
Plus, this week, Craig discusses some interesting new research on Newmont mining and results from Emeco and Catalyst Metals.

Profit Reporting Season Concludes – Steadfast, Johns Lyng, Healius/ACL and Bapcore

This week, the Q2 ABS National Accounts data were released on Wednesday. Although a little backward-looking, the National Accounts can provide corroborative evidence of the trends we see from the company reporting season.
In this week’s Investment Matters, we will briefly discuss interesting trends from the reporting season and outline the results for Steadfast Group (SDF), Bapcor Group (BAP), and the new portfolio positions in Healius (HLS) and Australian Clinical Labs (ACL).

Reporting season continues – Worley, Inghams, Earlypay, Ventia and Woolworths

The BlueScope results clearly distinguished between short-term operating conditions and medium-term value creation. Like the Seek result discussed last week, we have been pleased to build a position in this company at a reasonable price when short-term conditions are challenging while the company invests in long-term improvements. 

Read this week’s Investment Matters as Craig explains reporting season results from Bluescope, Judo Bank, Reliance Worldwide and Cleanaway.

Reporting season continues – BlueScope, Judo Bank, Reliance Worldwide, Cleanaway

Image from khunkorn Via Canva

The BlueScope results clearly distinguished between short-term operating conditions and medium-term value creation. Like the Seek result discussed last week, we have been pleased to build a position in this company at a reasonable price when short-term conditions are challenging while the company invests in long-term improvements. 

Read this week’s Investment Matters as Craig explains reporting season results from Bluescope, Judo Bank, Reliance Worldwide and Cleanaway.

Reporting season continues – Seek, Seven Group Holdings, Beach Energy and Nufarm

Most companies who have an accounting year-end date in June, select August as the month to report their full year results. We’ll provide updates in Investment Matters over the course of the next few weeks. Here’s a snapshot of results reported in the week just past for stocks held within client portfolios.
A weak US employment report on Friday 2nd August added to the level of uncertainty. 

For market participants the principal task was determining whether the level of dislocation was indicative of sharp changes in a relatively narrow set of conditions, or whether concerns were much broader and more permanent. 

By the end of the week the outlook was much clearer and markets across the globe recovered much of their losses. This was especially the case in Australia where the markets are now only slightly down a year-to-date basis. More importantly measures of uncertainty such as the US VIX index of volatility had fallen 60 per cent from the highs of Monday.

Quick Return to Stability

Global equity, currency and bond markets experience some gyrations over the past week. Headline movements in Japanese equities, large moves in currencies and sharp falls in equities markets in Australia and the US hinted at significant changes in either positioning or fundamentals. 

A weak US employment report on Friday 2nd August added to the level of uncertainty. 

For market participants the principal task was determining whether the level of dislocation was indicative of sharp changes in a relatively narrow set of conditions, or whether concerns were much broader and more permanent. 

By the end of the week the outlook was much clearer and markets across the globe recovered much of their losses. This was especially the case in Australia where the markets are now only slightly down a year-to-date basis. More importantly measures of uncertainty such as the US VIX index of volatility had fallen 60 per cent from the highs of Monday.

Critical CPI print reduces risks of policy error 

this week’s fascinating Investment Matters as Craig explains the trepidations surrounding Wednesday’s release of the estimate for the Q2 Consumer Price Index.

The market responded positively this week to an encouraging reduction in inflation in Australia. The direction and scale of the response can be readily understood – moving from the risk of higher interest rates to the opportunity of lower rates is a positive for Australian companies.

New Financial Year, New Opportunities Part II – Energy sector

Beach Energy, is a leading Australian independent oil and gas exploration and production company. While the energy sector is subject to volatility given underlying commodity prices, Beach Energy’s strategic positioning, future cashflow outlook and growth prospects make it an attractive investment within the sector.
Read this week’s Investment Matters as Craig explains why we think Beach Energy presents a prospective investment opportunity. Many investment banks’ Energy-sector experts see excellent value in Beach Energy at current prices.
Read why we are predominantly interested in owning exposure to movements in the price of gold, both as an insurance policy against global uncertainty or conflict and as a hedge against inflation. Plus, Craig explains why we suspect that the Mining Services and Industrials sector is likely to continue to outperform despite tough conditions.

New Financial Year, New Opportunities – Pathology and Healthcare

Part four of the year-end stocktake will outline our exposure to a final basket of stocks, the gold basket, our mining services exposure, three large industrial companies and two long-held smaller companies.
Read why we are predominantly interested in owning exposure to movements in the price of gold, both as an insurance policy against global uncertainty or conflict and as a hedge against inflation. Plus, Craig explains why we suspect that the Mining Services and Industrials sector is likely to continue to outperform despite tough conditions.

Year-end stocktake part 4: Gold, Mining and Industrial companies

Part four of the year-end stocktake will outline our exposure to a final basket of stocks, the gold basket, our mining services exposure, three large industrial companies and two long-held smaller companies.
Read why we are predominantly interested in owning exposure to movements in the price of gold, both as an insurance policy against global uncertainty or conflict and as a hedge against inflation. Plus, Craig explains why we suspect that the Mining Services and Industrials sector is likely to continue to outperform despite tough conditions.

Year-end stocktake part 3: Non-bank financials and technology  

Part Three of the year-end stocktake will outline our exposure to non-bank financial stocks and several technology and medical device companies our clients own.
Discover why we have chosen to invest in areas of the non-bank financial sector, including business banking, global and domestic insurance, invoice financing, and insurance.

Year-end stocktake part 2: Lithium and Domestic economy

House connected to lithium battery

This week’s investment sought to highlight the logic and investment fundamentals we are creating in our lithium basket. Once again, the impact of baskets is to increase the number of stocks clients see in their portfolio, from a purely numeric perspective, but not from a thematic perspective.
The stocktake also highlights the economic outlook for our domestic economy exposure by referencing how current conditions mix with the type of management and asset features we are looking for to create an overall exposure.

Understanding Portfolio Diversification: a year-end stocktake 

wooden block representing portfolio diversification

Each week in Investment Matters, we discuss the types of thematics that are crucial in building portfolios. We aim to combine these thematics with thorough bottom-up company research to create a well-diversified portfolio that can outperform in the medium term.
Over the next four weeks, leading into the end of the financial year, we will go towards a more detailed level, looking at individual positions. We will present an update on the portfolio companies, a year-end stocktake.

Macquarie Group and Perpetual – analysis of FY24 results and company outlook.

Macquarie and Perpetual results and analysis

As part of the usual ‘confession season’ leading into the Macquarie Australasian Companies Conference in Sydney this week, weakness has been apparent in businesses exposed to the consumer and these stocks have been sold off. We hold little exposure to these names.  

Several significant announcements by our portfolio companies have also been made in the past week. We focus on two of these in Investment Matters discussion this week.

Finding the crunch point – RBA raising rates? What? 

In our recent communications, we have suggested that the RBA, while it can reduce interest rates and mortgage costs through 2024, could benefit significantly by following the rest of the world’s lead in reducing rates. This approach would result in a longer pause at current rate levels, particularly in the face of higher or persistent domestic inflation. 

Read as our CIO explains how interest rate increases can disproportionately affect different segments of the economy.

Is gold the new haven? The mystery behind the price surge

Pile of gold

This week’s Investment Matters will shed light on the surge in the price of gold and gold stocks in the past few months. 

We hold gold stocks in our clients’ sub-portfolios for several reasons. It is therefore useful to understand why increases in the gold price warrant special attention. 

The task for First Samuel is to profit from such price increases. 

In discussing this, I have split this week’s Investment Matters into two lengthy sections. I urge you not to skip straight to the second section (on how we profit from gold prices increases).

Optimistic optimism: strong returns to both Australian and global equities

This week’s Investment Matters will focus on different asset classes, their relative performance, and our broad thoughts on the implications of tactical asset allocation decisions. 

When we survey benchmark performance, we see that Australian and Global equities portfolios have delivered returns well above expected long-term returns for those asset classes this financial year. 

Revisiting takeovers

we’ve maintained higher weights in cash holdings within property sub-portfolios with an expectation that a significant rises in interest rates would necessitate an increase in cap rates (implied returns on property values), a resultant reduction in property book valuations and trigger a resultant slew of equity capital raises at discounted share prices in order to restore balance sheets to within bank funding covenants.

While the dull shine of copper comes in focus, we shed little light on BHP. Similarly, our focus this week on financial services dives deeper than the four major banks.

Profit Reporting Season – Stockland, Mirvac, Garda and Lendlease

laptop with the words property on it with small colourful illustrated houses

we’ve maintained higher weights in cash holdings within property sub-portfolios with an expectation that a significant rises in interest rates would necessitate an increase in cap rates (implied returns on property values), a resultant reduction in property book valuations and trigger a resultant slew of equity capital raises at discounted share prices in order to restore balance sheets to within bank funding covenants.

While the dull shine of copper comes in focus, we shed little light on BHP. Similarly, our focus this week on financial services dives deeper than the four major banks.

Profit Reporting Season – Sandfire, Perpetual and Judo Bank

This week’s Investment Matters will continue to focus on the recent reporting season.

While the dull shine of copper comes in focus, we shed little light on BHP. Similarly, our focus this week on financial services dives deeper than the four major banks.

Profit Reporting Season – Cleanaway, Emeco, ParagonCare and Worley

This week’s Investment Matters will concentrate on key company results as the reporting season winds down. On balance, market strategists have noted that earnings revisions have been neutral across the board, which is better than historical outcomes of net negative earnings revisions by optimistic investment banking equity analysts. 

Profit Reporting Season – Ventia, Johns Lyng, Earlypay and Nanosonics

Read key company results as the reporting season winds down. On balance, market strategists have noted that earnings revisions have been neutral across the board, which is a better than historic outcomes of net negative earnings revisions by optimistic investment banking equity analysts.

Early profit reporting season and news update

In last week’s Investment Matters we concentrated on the confession season, the period in which companies make early announcements to the market surrounding material changes to upcoming earnings.

This week’s Investment Matters will also concentrate on news flow and early reporting season results.

Confessions of a corporate earnings season

Most ASX-listed companies in Australia have a June fiscal/financial year-end. Accordingly, those with June and December balance days will tend to present their (half-year/annual) financial results to the market in each of the months of February and August.

Perpetual – finding a way to unlock value

In the past year, we have often commented that we’ll exhibit due patience as part of our investment approach. This is required as we often seek to invest in businesses that are significantly unloved and misunderstood and where assets may, therefore be mispriced.

Premier Investments – A deep dive into a new opportunity

In recent weeks, clients will have seen the addition of Premier Investments to their Australian equity sub-portfolios. Famously partly owned and operated (whether formally or informally) by Solomon Lew, Premier Investments is amongst the most successful discretionary retailers in Australian history.

Steadfast in its approach

© 2024 First Samuel Limited The Markets This week: ASX v Wall Street FYTD: ASX v Wall Street Steadfast Group Limited is an Australian insurance broking network that provides insurance broking services to businesses and individuals across Australia and New Zealand. The company was founded in 1991 and has become one of Australia’s largest insurance […]

Growing – in two very different ways

In recent weeks, we heard the mildly alarming statistics that the ASX had fallen to a low in October 2023 of 6703.2, lower than the levels seen in the broad market index at the close of October in 2007 (6770).

Inghams: laying golden eggs

Inghams is the dominant supplier of chicken products in Australia. It is also amongst the largest positions in client portfolios. In the past week, it delivered an update on progress within the business across the first half of the fiscal year.

Company Profit ‘Reporting Season’ preview

It’s an intense time of year for equity market professionals. But one that is welcomed because of the opportunity to review financial data, hear about company strategy, assess management and operational performance, and to review one’s own stock selection and analytical prowess.

Lull before company profit reporting season

Late July is when there is a lull in company news, as industrial companies are in communication lockdown before company profit reporting in August. Mining companies are busy releasing production reports and not much else, also ahead of profit reporting.

Out with the old, in with the new

There has been a significant period of de-equitisation in the Australian equity markets in the past couple of years. Our portfolios, and performance, have been the beneficiaries of this phenomenon.  Several stocks we own are subject to takeover bids:

Selectivity and Productivity

This week we discuss two major topics. Japan and why we are more heavily invested than global benchmarks and Productivity: why is this a problem for Australia and how does it impact returns?

Going, Going, Gone – the de-equitization of the Australian Equities Market

Two of our investments, Costa Group and United Malt, received confirmation relating to takeover bids this week.

Both takeovers provided support for our investment strategy. This strategy concentrates on finding opportunities where the market fails to price either the long-run asset or the franchise-based value of a company, and instead focuses on short-term earnings fluctuations. In such cases it is often an external party, via a takeover, that unlocks the value.

Did Aussies just stop spending?

In addition to the usual market updates, this week’s Investment Matters provides updates on two companies in client portfolios: Costa Group and Aristocrat.

Some interesting introductions

We’re always looking for new ideas to introduce into the investment portfolios. A spate of recent takeovers within the portfolio (think Newcrest, Origin, United Malt, Pushpay, Eildon Capital) has accelerated the need for fresh ideas to replenish building cash positions.

Misstep or side-step? 

The Reserve Bank of Australia (RBA) is currently an impasse. Will it continue to hike interest rates in lockstep with the US Federal Reserve? Or will it choose to take a divergent path? And what might the consequences (of either approach) be?

“Gilty” as charged

The Australian market fell by a whopping 8% over the past two weeks. However, it’s set to end the week higher than it began.

We try to draw some lessons from a wild, but ultimately uneventful few weeks in markets.

Insurance via Superannuation – at what cost?

Firstly, insurance policies offered via superannuation may not always be suitable for every person, particularly those who have specific insurance needs. Examples include those requiring the added protection of an ‘own-occupation’ policy definition – such as surgeons. Such policy definitions were rendered incompatible with superannuation.

Medical rooms ownership: Opportunities and pitfalls

Female doctor seeing a patient in her medical room

When the share-market does not see value or investment merit in a particular stock the stock’s share price will recede. This could be because the company’s earnings (i.e. profit) outlook is poor (e.g. Bega Cheese Ltd) or perhaps the industry in the which the company operates is struggling (e.g. ARN Media Limited).
But often someone or a company will see value where the share-market does not. The logical outcome of this is one of the more interesting aspects of investment: the merger or the acquisition. Or, in jargon: M&A.