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Printed: 07 July 2022 9:02 PM

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03 Sep 2021 - Hedge Clippings | 03 September 2021
By: Australian Fund Monitors

    

Hedge Clippings | Friday, 03 September 2021

 

Last week we flagged the record second quarter earnings season in the US. By any measure the Australian reporting season just ended will also go down as one of the strongest on record, no doubt justifying market valuations which are also being supported by record low interest rates and government and RBA stimulus.

Along with the records goes a massive payout by listed companies of dividends or buybacks to the tune of over $6bn, which will hit shareholders' bank accounts in the December quarter, and/or be reinvested - either way further bolstering prices and valuations.

This week we spoke with two local fund managers, Rodney Brott from DS Capital and Graeme Carson from Cyan Investment Management, to get their take on reporting season. You can see each interview below.

Unsurprisingly, given the generally positive reports from the market as a whole and the companies each fund invests in, both Rodney and Graeme were cautiously optimistic about the market's overall direction. Both indicated that whilst face to face visits with company management have been hard to achieve over recent months, the level of guidance and communication from them has, if anything, improved - possibly as a result of lockdowns.

Reporting season is always an interesting time. It allows shareholders and the market to take stock and review past performance, as well as looking forward to gauge the company's future prospects, understanding that, all too often, today's fair value is based on future earnings 12 or 24 months ahead.

Unlike individual equities - which can suffer significant price swings and fluctuations on even a daily basis (but provide daily liquidity in return) - investing via managed funds, as both Rodney and Graeme emphasised, requires a longer term approach and, as good as things have been in the past 12 months, there's no guarantee that 2022 will produce another market performance of 25%.

Reporting season also gives investors the opportunity to measure the fund managers, and their ability to have made good investment decisions over the prior year, or years. As a result we'll watch with interest to see how the funds on www.fundmonitors.com have performed once their August results have been reported.

Meanwhile, we turn away from the local market to Asia, or more particularly, China - albeit whatever happens to China's economy affects Australia to some degree. The more many investors see of President (more correctly, Dictator) Xi's control over both the economy and everyday life, the more many of them seem to grow concerned.

According to Jack Dwyer from Conduit Capital, in recent months over $1 trillion has been wiped off the value of US listed Chinese technology firms in response to regulatory developments. Many western commentators have called China 'un-investable' and as a result many fund managers' exposure over the past decade has never been lower than it is now.

Dywer's Conduit Capital has taken the opposite view and sees China as an opportunity, increasing exposure to selective Chinese assets and proxies in recent weeks. Hedge Clippings is not an expert, or close enough to either the opportunity or the risk to say which view will prevail. However, it is fair to say our opinion of China's Dictator and his authoritarian regime is not high, even though we are an admirer of many of China's achievements in the past, and Chinese culture as a whole.

To try to throw more light and knowledge on the subject, next week we will reach out to a number of fund managers to discuss China's current position and future outlook. Watch this space.

For the first time in many weeks we've thankfully managed to get to the end of Hedge Clippings without mentioning the 'C(ovid)' word.

Until the next time, stay safe and have a good weekend.


News & Insights


New Funds on Fundmonitors.com

Reporting Season Insights | Interview with DS Capital

Reporting Season Insights | Interview with Cyan Investment Management

Best and Less Group Case Study | article by Vantage Asset Management

Fund Review for FY21 | video by Frazis Capital Partners

Cutting Through the Noise | video by AIM

2021 Mid-Year Pan-Asian Equity Market Review | article by Longlead Capital Partners

Domino's set to fatten wallets too | article by Insync Fund Managers

Big Tech's success incites a backlash | article by Magellan Asset Management

 

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