Investment Matters

Being a contrarian

Well, we are officially in correction territory. After this week’s fall of 4.5%, the -10% threshold, measured from the recent late August peak, has been breached (All Ordinaries Index, source: IRESS, data as at when we go to print).  Not that breaching an arbitrary threshold really means anything in particular.

The current environment includes rising global interest rates, some mixed results coming through in the current US reporting season, trade disputes, damp Chinese economic data, Brexit fears, Italian sovereign debt and the list goes on.  But at the core, the reason for the correction is the US market was expensive. Especially the big-tech names. And now it seems the US market has finally pulled its head out of the collective sand.  At least part of the way.

Australia’s market was not as expensive.  But with markets looking globally, and a little unease creeping in about Australia’s political machinations and the residential property market, the jitters passed to Australia.

Where to from here?

No one knows for sure.  We would not be at all surprised to see the volatility continue.  But volatility brings with it …

… opportunity.

Finding good opportunities to invest, that meet our investment criteria, has been difficult over the last year or so.  But we are starting to see opportunities emerge.  Making investments at times such as these can be fruitful (as it has certainly been in times of past market volatility / downturns), as when market conditions recover the investments benefit.  The timing of both market corrections, and the individual investment opportunity coming to fruition, are uncertain though.

Currently, your equity portfolio has a high cash position (circa 25% at the end of today i.e. after the additions noted below).  This includes the recent receipt of the HT&E special dividend (associated with its sale of the Adshel business), and the receipt of funds from the repayment of the 360 Capital debenture.

We will make additional investments, including top-ups to some existing holdings, in a measured and paced manner.