Equitable Investors

  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 s...

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 s...

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 b...

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. 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 small cap value starts to perform and charts the significant valuation spread between the cheapest and most expensive. Finally, Macquarie maps...

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. The damage to the Australian retail sector is set out in The Australian's store closure count and reinforced with an update on payments volumes from Tyro Payments (ASX code: TYR). Meanwhile, sell-side analysts have proven slow to respond to the impact of COVID-19 and social-distancing, as evidenced by UBS' aggregatge numbers for the ASX - but they are starting to catch up. Markets threw the baby out with the bath water when the epidemic hit home but now businesses that aren't immediately hit are being looked at again, like The Citadel Group (ASX code: CGL), which sells software and consulting to the government and health s...

In a market where some are pitching a value opportunity based on the forward PE of the overall equities market being below average, be wary. The forward PE is likely based on a very stale "E". To quote strategist Gerard Minack in a recent interview, "just be aware that if that's based on the current forecast earnings, that forecast is bunk". Photo by Jean Carlo Emer on Unsplash Analysis from Ord Minnett highlights how bunk the market-wide "E" is right now. The broker tracked 207 companies of which only 116 had updated the market since late February - that's just 56% of companies. Those stocks that have not yet updated the market have only fallen 33%, Ord Minnett has calculated, compared to a 44% fall for those that have. Analysts have been typically slow to revise their earnings projections, with "downgrades deeper for those that have updated". Is the market being complacent with regard to those companies that have not provi...

Here's an update on what ASX listed companies have been saying in March 2020 regarding coronavirus.There's a series of companies in trading halts relating to COVID-19, an airline that says it is doing well out of the situation, along with some companies capitalising on opportunities presented by the crisis, and a series of companies understandably withdrawing their earnings guidance. Trading Halts Neuren Pharmaceuticals (NEU) - March 20, 2020 The trading halt is requested pending an update regarding ongoing clinical trials following the issue of FDA guidance on the conduct of clinical trials of medical products during the COVID-19 pandemic. Pacific Star Network (PNW) - March 20, 2020 The reason for the voluntary suspension is to allow PNW to continue to assess, and make an announcement to inform the market about, the effects of the COVID-19 on its business. PNW expects that it will take some time for it to undertake the necessary reviews and assessments and be able...