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Showing posts from 2020

10k Words - December 2020

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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.  Lets start with Buy Now Pay Later (BNPL - and you can watch Equitable Investors' Martin Pretty and Cyan's Dean Fergie recent chat about BNPL  here ) - with Wilsons running the comps on the eight ASX listings in the space (how many do we need?). While the Robinhood investors remain in focus, data on US equities ownership shows those aged under 54 own less of the equity "pie" now than in past decades. If Deutsche Bank projections on COVID-19 immunity in wealthy nations prove correct, herd immunity is on its way in 2021. Morgan Stanley says global GDP will be back on trend in the next six months. And globally fund manage

Small Talk | November 9 to November 13, 2020

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At the “top-down” level the week past was a wild one with investors jumping back into “value” stocks in a move triggered by positive COVID-19 vaccine developments. Of course, what the market uses as a proxy for “value” is stocks priced on low multiples of their earnings or book value relative to the market - the data above shows how such stocks enjoyed a great resurgence during the week. But whether these stocks are good value (or good buying) is another question altogether. Benchmark Indices | November 9  to November 13 Source: Sentieo, FT.com, Equitable Investors Market’s Best & Worst of the Week - from our “FIT” Index Chart of the Week Long-Short Momentum Factor - Excess Daily Return Source: OSAM Research, FactorInvestor This is an excerpt from the weekly Small Talk update for clients of Equitable Investors.

10k Words - November 2020

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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.  Running with a US focus, TheDailyShot looks at how individual investors are fuelling trade in lowly-priced stocks (in dollar pricing, not valuation multiple), with small caps back in favour according to TradingView and TheDailyShot. BAML shows the market is reacting the opposite way around to tech sector earning surprises, while Bloomberg gives us a look at US EPS growth by sector. Google shows us how retail and recreation foot traffic has been impacted, via WSJ, while Bloomberg and SentimenTrader update us on low and sub-zero bond yields. Finally, we couldn't completely avoid the US Presidential election so WSJ shows us the declin

10k Words - October 2020

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  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 corpo

10k Words - September 2020

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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

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

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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 declined We track a pool of over 600 ASX-listed c

10k Words - August 2020

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  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

10k Words - July 2020

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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

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