Return of volatility interesting, February ultimately about profits

While the return of volatility is interesting, February will ultimately be about profit results and the outlook commentary that accompanies them.

ASX listings with a December 31 half-year or full-year balance date have until the end of February to release their financials for the relevant period.

Our analysis of Reuters’ consensus earnings forecasts for fiscal 2018 shows that over the past month the average earnings per share forecast drifted 1.4% lower but the median was unchanged. Most of the large downgrades were for resources businesses.

Last week alone Canaccord added eight downgrades to their earnings revision list - and noted that eight small industrials have already downgraded at least twice. Myer Holdings (MYR) and Murray River Organics (MRG) were notable for having delivered multiple downgrades.

The Equitable Investors Dragonfly Fund maintains a position in MRG because it trades at a discount to its net tangible assets (something that cannot be said of MYR) and we are also optimistic about MRG’s new management team, should the even-newer board of directors elect to run with them.

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