From Jonathan Bayes, Investment Consultant, Bentleys Wealth Advisors.
Rounding out this week sees Australian corporate reporting season largely done.
Across our portfolio of holding’s we probably came out somewhere in the middle, which as a value-styled investor, is a win in my books – buying ‘value’ is rarely rewarded during results season.
POSITIVE RESULTS FROM SEEK (SEK) and REGIS (REG)
On the positive we had a net upgrade to SEEK’s (SEK) earnings guidance for the current year (the second in 3 months).
Regis Healthcare (REG) was also a pleasant surprise and has seen a reasonable response from the market today in relation to their profit figures and confirmation of both 2018 forecast profit targets and a continuation of the group’s excellent growth profile.
THE MIDDLE GROUND – IOOF (IFL), DOWNER (DOW), OIL SEARCH (OSH), TELSTRA (TLS)
In the middle-ground we have had results from IOOF (IFL), Downer (DOW), Oil Search (OSH) and Telstra (TLS) which failed to cause much of a stir – and there is nothing wrong with that.
We love IFL in the low $10’s given the simplicity of its earnings story (internal cost out) and would encourage those of you yet to re-add it to portfolios to do so.
We also love the momentum in DOW, and though the result was mixed (higher debt, cashflow conversion at Spotless average), we think the fact that 90% of its revenue base is leveraged to an improving domestic Australian economy, and in particular infrastructure spend, augurs well for future profitability.
The OSH results this week were notable not for the profit outcome (solid), but more so for the increasing consensus being formed by each of the partners as to how they will develop the massive Elk-Antelope and P’nyang gas fields in PNG.
OSH pointed to a likely development of 3 new LNG trains and the prospect of basic engineering plans being agreed before the November 2018 APEC meeting in Port Moresby.
AMCOR (AMC), WOOLWORTHS (WOW), APN OUTDOOR (APO) AND QUBE (QUB) MIXED
Whilst far from problematic, we would throw each of AMCOR (AMC), QUBE (QUB), APN Outdoor (APO) and Woolworths (WOW) in the underwhelming basket.
For most of these names we felt that the reasons for slightly tawdry results were well understood by the market, however in the case of WOW we felt a little underwhelmed by the lack of operational leverage in the food business despite continued strength of sales.
Perhaps of more significance, we have moderately reduced our market exposure to international equities, by lowering ever so slightly our weighting to the Vanguard International Shares (VGS) (from 26% to 16%) and putting the money to an active manager in the form of Franklin Global Growth (FRT0009AU).
We have suggested on several occasions that we would likely make this move, and it certainly won’t be the last.
If there is one slow moving, but pervasive, trend you will see from us over the coming months, it is to reduce our outright market exposure either by way of raising cash and awaiting new opportunities, or alternately by shifting assets from outright market bets such as index funds to active funds who have the ability to prosper at best or protect at worse when markets see heavy selling.
We recommended Antipodes Global Fund (IOF0045AU) last year as a global long/short fund manager for precisely the same reason and may have further opportunities to recommend to you in this vein shortly.
This theme is ongoing.
I cannot stress enough that we need to be pre-emptive in our portfolio moves since as the year goes on I fully expect to see more bouts of greater volatility, not unlike what we saw earlier this month.
It will happen again, and it might even be bigger in impact.
Global central banks are taking away the monetary punch-bowl, and as much as you have heard me talk about this as a risk, the risk is only growing larger and drawing closer as the days go by.
I don’t want us to be taken by surprise again when the inevitable volatility returns over the winter period (northern summer), and so we need to keep taking baby-steps in our portfolio moves.
For now, that’s it.
Friday 12pm values
|S&P / ASX 200||5982||+73||+1.2%|
|Property Trust Index||1300||+18||+1.4%|
Thursday Closing Values
|U.S. S&P 500||2703||-28||-1.0%|
Key Dates: Australian Companies
|Mon 26h February||Div Ex-Date – Wesfarmers (WES)
|Tue 27th February||Earnings – Costa Group (CGC)
Div Ex-Date – AGLHA, AMCOR (AMC), Challenger (CGF), WBCPD
|Wed 28th February||Div Ex-Date – Telstra (TLS)
Div Pay Date – Scentre Group (SCG), Westfield Group (WFD), Vicinity Centre (VCX)
|Thu 1st March||Div Ex-Date – Healthscope (HSO), Rio Tinto (RIO)
Div Pay Date – ANZPC
|Fri 2nd March||Div Ex Date – NABPA, SUNPE, SUNPF, SUNPG, WBCPC|
23rd February 2018, 130pm
For more information on the above please contact, Robert Flynn, Senior Financial Advisor, Bentleys Wealth Advisors directly or on 02 9220 0700.
This information is general in nature and is provided by Bentleys Wealth Advisors. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.