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Showing posts from October, 2018

Rocky - tober

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We keep hearing about the "October Effect" - it even has a definition at investopedia.com.au. October 2018 has clearly been a shocker for equity markets. The S&P/ASX 200 Index is down 6.5% and the indices covering smaller Australian stocks are down at least 10%.

Earlier this year we pulled together five years of weekly price data for the S&P/ASX Small Industrials Index and reviewed the week-by-week average performances. So we've returned to that data to have a look at how this index performed in Octobers past.

We counted a week as belonging to a month if its last trading day was in that month - so the week ended September 1, 2017, was grouped in September even though it started in August.

Based on this data, October does not stand out as such a troublesome month: only the first week of October had a negative return on average, with the other weeks up on average. The first and third weeks of October have been negative more often than positive - but other months we…

Ten Thousand Words - October 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, Grandeur Peak shows that the benchmark return can be reliant on just a handful of stocks, while JP Morgan reminds us that when you've really picked the wrong stock, its a long way back. Checking in on S&P/ASX 200 weightings, we see that the financials and materials sectors are just over half of the market benchmark. Cannabis stocks, meanwhile, continue to be favourites with traders and the Wall Street Journal sets out some stark valuation comparisons. And research into private equity deals shows that its increasingly normal for deals such as the transaction this week where accounting software firm MYOB's private equ…

Turning the Spotlight Back on Investment Managers

As investors in listed companies we often highlight the importance of alignment - we want executives and boards to have bought into the ordinary shares of their company just like we have. The data shows - as highlighted in Equitable Investors' "Seeking Advantage" paper (you can read it here) - that listed companies with executives that own a material shareholding perform better than other companies.

So it only seems logical that investors in funds and other investment scheme structures would like to know that the fund managers, similarly, have committed capital alongside the investors.

The Financial Times recently reported that "Half of the 15,000 mutual funds in the US are run by portfolio managers who do not invest a single dollar of their own money in their products". It went on to name funds management giants like Vanguard, Black Rock and State Street as organisations where the majority of their funds were run by managers who had not invested anything in th…

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