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Showing posts from 2021

10k Words - November 2021

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Apparently , Confucius did not 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 kick off with Australia outpacing Hong Kong in IPO activity, as highlighted by Bloomberg. We can't avoid the inflation discussion and FactorInvestor charts US inflation expectations, while we go back to Bloomberg for a look at inflation-protected treasury yields, which have not followed the script of 2013. IFM Investors looked at how Australia's monthly inflation (using the Melbourne Institute monthly inflation gauge) was still accelerating in year-on-year terms, despite decelerating in terms of month-on-month increases. Then we turn to equity valuation where Redpoint's Tomasz Tunguz explores the phenomenon of Software-a

10k Words - October 2021

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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. This month we start off with a picture that really does tell a story - Goldman Sachs looking at Return on Equity at an industry level and where it sits currently relative to the past. Bloomberg has the inflation story covered off, showing expectations at both extremes had levelled off after recent rises and providing greater perspective by using a two-year inflation figure. Then we leverage off charts we have highlighted in recent weekly Small Talk updates to Equitable Investors' clients: The FT showed us how equity portfolio weightings to China and Hong Kong have been in decline. Kailash Capital charts the huge run in US price/sal

The Great Investment Books You May Not Have Heard Of (Part 1)

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There's a wealth of knowledge for investors hidden in the pages of books that haven't become all-time best sellers like The Intelligent Investor. Here's several that I not only found insightful on first read but also found myself referring back to from time to time. Quality of Earnings - Thornton L O'Glove Scrutinising financial statements is a core skill for fundamental investors and this book, written back in 1987 by a veteran analyst who turned his curiosity as a stockbroker (meaning he reviewed disclosure documents) into an institutional advisory service scrutinising financials and "telling people what stocks not to buy". O'Glove walks the reader through some colourful stories of company attempts to cover-up or gloss over deficiencies. It takes a talented writer who has mastered his craft to explain how to read accounts and what trickery to look out for and still keep the reader engaged. From time to time I've wondered about following down O'Gl

10k Words - September 2021

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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. We kick off with Equitable Investors' updated study on the distribution of five year returns for ASX-listed industrials. The FT highlights the recent surge in global M&A activity. Leading electronics retailer JB Hi-Fi (JBH) suffered a decline in like-for-like sales amid COVID-19 lockdowns in eastern Australia, ending a long sequence of continual growth, as charted by Evans & Partners. And Wilsons shows how ASX stocks were divided into the winners and losers as the latest round of lockdowns in Sydney and Melbourne were initiated. Westpac highlights how volatile iron ore spot prices have become - at the same time the cost of

10k Words - August 2021

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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. There's plenty of takeover action on the ASX at the moment as is evident from dealogic data and Deloitte surveying. But it isn't just the listed markets - crunchbase highlights the unprecedented pace at which VC-backed startups by other VC-backed startups. What's relatively cheap or expensive in the Internet space? Research boutique MoffettNathanson has a crack at answering. Goldman Sachs, meanwhile, upgrades its return expectations for US equities. With Sydney in lockdown for weeks now and Melbourne recently joining it, data from ANZ shows a decline in consumer transactions since May BUT data from payments company Tyro sho

10k Words - July 2021

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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.  Bank of America has charted the phenomenal amount of capital flowing into equity markets. It's also a bull market for used cars, Bloomberg reminds us. The Financial Times sets out China's economic development through time. Then we get back to equities with Morgan Stanley highlighting a spread between large and small cap valuations in the US that Equitable Investors also identifies in Australia. BCA Research charts the extraordinary rise of loss making businesses as IPOs. Finally, lower multiple stocks generated the greater returns in FY21, based on Equitable Investors' number crunching. June half annualised inflow to equiti

Cost of Capital v. Distant Cashflow Projections

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Our May 2021 update for Equitable Investors Dragonfly Fund includes commentary on inflation and the cost of capital. If it isn’t about “meme” stocks, most of the market commentary and chatter at the time of writing this update is about inflation. The US Consumer Price Index jumped 5% in May 2021 from a year ago, the largest annual gain since August 2008 according to Bloomberg. The debate continues over whether this increase in inflation  is “transitory” and reflective of the re-opening of economies OR whether it reflects a more permanent shift. The argument matters not just because central banks will try to use interest rates to control inflation if it is persistently higher but because the return investors will require will need to increase for their capital to maintain its relative buying power.  We included in the May 2021 update a chart published by Sanford Bernstein that we've used in the part when discussing with clients the impact of higher inflation and higher interest rat

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