Investment Matters

What Matters this week

What Mattered were earnings announcements. And boy there were a lot of them.

Some of the high and lowlights were:

Shares in Seven West Media (-27.5%) took a large hit as the advertising sector experienced a difficult half (with advertising revenue -8.5% more broadly for the half).

Wesfarmers (+2.8%) pocketed a cool $1.1 billion as it sold a third of its stake in Coles – which is now trading around 30% higher since it was spun off in November of 2018. A healthy return for shareholders.

Meanwhile, Bendigo Bank (-5.4%) left the (now dwindling) ranks of banks that have managed to hold their dividend, cutting as it raised capital to shore up its regulatory capital.

Cochlear (+4%) shareholders were bailed out following what was a poor result, as a product recall by a competitor sent its shares higher.

Fellow sector darling CSL (+2.3%) reached a milestone, officially overtaking CBA as the largest company on the boards (and in all likelihood the largest holding in many investment managers’ portfolios) – now representing more than 8% of the ASX200. Putting this into perspective, Microsoft and Amazon combined represent approximately the same portion of the S&P500.

A bidding war for Caltex (+3.4%) has broken out, with EG Group (current owner of Woolworths branded fuel convenience sites) lobbing a bid for the company shortly after Canadian convenience retailer bumped its initial offer in November of A$32.00 per share up to $35.25.

Lastly, with concerns around COVID-19 still lingering, there was general caution from companies when it came to any future guidance. This uncertainty spread across the boards this week, dragging down several names including:

  • WiseTech (-35%) – an underwhelming result and downgrade in earnings guidance given a Coronavirus related slowdown in earnings (although short-seller J Capital may argue this isn’t the principal cause…)
  • Corporate Travel (-7.9%) – following acquisition led growth story Corporate Travel downgraded its earnings guidance by a whopping 19% (at the midpoint) reflecting uncertainty around the severity and duration of the virus.
  • Altium (-14.2%) - sneaking in its result after the market closed which was below expectations and indicating operating profit for the full year will be at the bottom end of its range due to Corona-related uncertainty.
Note: Price changes reflect performance for the week to the close of market on Thursday.