Posts

Showing posts from 2020

10k Words - October 2020

Image
Apparently, Confucius didn’t say “One Picture is 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. A focus on the US to begin with and Yale's monthly surveying showing investor confidence that stocks won't crash has taken a beating this year; while on the other hand Bloomberg shows that US dollar weakness has correlated with strength in US equities. Taking a look at the disconnect between markets and the economy, ASI-Transmatch's rail traffic movements in the US have recovered significant ground but remain below pre-COVID-19 levels; while FactorInvestor shows the step-change in e-commerce penetration. Deutsche Bank's look at US market PEs in different inflation regimes is interesting. Moodys, meanwhile, shows corporat…

10k Words - September 2020

Image
Apparently, Confucius didn’t say “One Picture is 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. Valuation is at the fore this month, starting with the simplistic view of the forward P/E multiple on the S&P 500 being right up at "dot com" boom levels, via The Felder Report. FactorInvestor shows the composition of the S&P 500 has shifted such that the top five "Tech Titans" are a larger part of the index now than they were in that boom twenty years ago. Apple's market cap is now greater than the national aggregate of stocks in countries like Germany - something unimaginable 10 years earlier - but now Apple, Microsoft and Amazon all have market caps greater than Australia's market aggregate. And de…

Blessed were the "cheap" and the loss-makers (or what ASX stocks did in the August earnings season)

Image
Our analysis indicates that August was a month of extremes on the ASX with a renewed focus on price at one end of the spectrum but also a strong element of speculation at the other. This is probably a good environment for micro caps - some of whom have been lowly priced compared to metrics for larger businesses in their sectors; and others that are at an early stage and require "animal spirits" to drive their share prices.The big guns on the ASX, as measured by the S&P/ASX 100, pushed through for a 1.9% gain in August, against a backdrop of dividend cuts and with considerable correlation for many of these large businesses with the weak domestic economy. The S&P/ASX Small Industrials was up 9.5%. Our Dragonfly Fund, which is heavily weighted to micro caps, looks like it had its best ever single month return (for the second consecutive month) - but we're still finalising the figures.2.5 stocks up for every one that declinedWe track a pool of over 600 ASX-listed com…

10k Words - August 2020

Image
Apparently, Confucius didn’t say “One Picture is 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. 
Focusing on drivers of stock valuation, we see corporate bond yields converge with equity yields in the US, as strategist Christophe Barraud highlighted. Verdad studies the impact on "terminal" valuation of long-term growth and discount rate assumptions (no surprises that low interest rates and optimistic growth rates boost "growth" stocks); while George Mason University identified significant sectorial shifts in beta (the measure of the extent to which a stock's moves magnify market moves). Listed private equity in the US is still recovering from the March 2020 sell-off, while Cannacord highlights ASX media sect…

10k Words - July 2020

Image
Apparently, Confucius didn’t say “One Picture is 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. 

"Analysts effectively stopped trying to adjust their forecasts about two months ago", concluded Bloomberg upon looking at Deutsche Bank's S&P 500 earnings revision chart. Volatility, meanwhile, remains elevated despite equity market strength. In an Australian context, Bell Potter shows that retail buying has driven the market higher. In a US context, BAML highlights that the strongest fund flows have been into cash and gold in 2020. At the same time, global corporate debt is soaring, Janus Henderson notes, and based on Capital Economics' debt spread data they are paying more for it. Capital Economics' money sup…

10k Words - June 2020

Image
Apparently, Confucius didn’t say “One Picture is 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. 

On a day where the equities market is pulling back, we look at a snapshot of the surge in activity amid COVID-19 from small traders on discount broking platforms and "free" trading app Robinhood, via CNBC. Yet professional investors surveyed by BAML are holding the highest level of cash since the 9/11 terrorist attack. Leading into this selling, Evans & Partners' highlights record valuations for the ASX. Back to the US, we see via ValueLine how despite strong equity markets the median stock has gone nowhere for 23 years; while Greenlight Capital highlighted SocGen research that shows a significant valuation spread bet…

10k Words - May 2020

Image
Apparently, Confucius didn’t say “One Picture is 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. 

We had to give you something on coronavirus - so it is the most complex infographic we've seen, from DannyDorling.org, then its over to US bonds, where yields are so low, Bloomberg highlights they imply some belief that the Federal Reserve will move to negative rates. Citi sets out the unprededented wave of central bank liquidity and the impact on the risk-free rate, making bond rates relatively more attractive. From government bonds we move to high-yield (or junk) where rates have surged and Goldman Sachs forecasts a spike in defaults. What happens in equities when the spread on high yield bonds expands? Verdad Capital shows US sm…

Disclaimer

Nothing in this blog constitutes investment advice - or advice in any other field. Neither the information, commentary or any opinion contained in this blog constitutes a solicitation or offer by Equitable Investors Pty Ltd (Equitable Investors) or its affiliates to buy or sell any securities or other financial instruments. Nor shall any such security be offered or sold to any person in any jurisdiction in which such offer, solicitation, purchase, or sale would be unlawful under the securities laws of such jurisdiction.

The content of this blog should not be relied upon in making investment decisions.Any decisions based on information contained on this blog are the sole responsibility of the visitor. In exchange for using this blog, the visitor agree to indemnify Equitable Investors and hold Equitable Investors, its officers, directors, employees, affiliates, agents, licensors and suppliers harmless against any and all claims, losses, liability, costs and expenses (including but not limited to legal fees) arising from your use of this blog, from your violation of these Terms or from any decisions that the visitor makes based on such information.

This blog is for information purposes only and is not intended to be relied upon as a forecast, research or investment advice. The information on this blog does not constitute a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Although this material is based upon information that Equitable Investors considers reliable and endeavours to keep current, Equitable Investors does not assure that this material is accurate, current or complete, and it should not be relied upon as such. Any opinions expressed on this blog may change as subsequent conditions vary.

Equitable Investors does not warrant, either expressly or implied, the accuracy or completeness of the information, text, graphics, links or other items contained on this blog and does not warrant that the functions contained in this blog will be uninterrupted or error-free, that defects will be corrected, or that the blog will be free of viruses or other harmful components.Equitable Investors expressly disclaims all liability for errors and omissions in the materials on this blog and for the use or interpretation by others of information contained on the blog.