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Showing posts from September, 2018

Ten Thousand Words - September 2018

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Apparently, Confucius didn’t say “One Picture Worth Ten Thousand Words” after all. It was an advertisement in a 1920s trade journal for the use of images in advertisements on the sides of streetcars. Even without the credibility of Confucius behind it, we think this saying has merit. Each month we share a few charts or images we consider noteworthy.

This month State Street demonstrates that buying stocks based on valuation has usually worked - but not in the current calendar year. Does that mean growth is in a bubble? Others ask if there are bubbles in cannabis or in the bond market. Fund managers are fearing trade wars. But Morgan Stanley shows that pulling money in and out of the market is often a flawed approach.

Meanwhile, fund services group Mainstream (ASX code: MAI) and drug prescription adherence tech play Medadvisor (ASX code: MDR) chart out some of their target markets (equitable Investors Dragonfly Fund has positions in both companies).

Value is usually rewarded in both high…

Reporting Season - Plenty of Energy but More Broadly EPS Targets Retreat

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Share prices should be reflective of future expectations rather than the past. Earnings reports provide vital new information to tune expectations but on their own shouldn't dictate share prices. That is why, with the ASX reporting season now at an end, we look at changes in analysts' earnings expectations as an indicator of the strength of the season. We see these changes as far more instructive than simply whether the reported financials were better or worse than analysts' targets.

Analysts have been forecasting earnings on just under 500 ASX listed companies. In aggregate we didn't find much to get excited about. Over the course of the month of August, the average change in the consensus earnings per share forecast for fiscal 2019 was -1.76% - or -0.54% if the average is weighted by market cap.

Looking back over the past two months, capturing the impact of earnings guidance announcements made by man companies in July, the simple average EPS revision for 2019 was -1.…

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