Busy time for markets globally
Last week (13th June, 2022) was a busy time for markets globally and ours was no different. Our main reference index, the XJO or ASX200 as it’s better known, was down roughly 12.5% and panic was, as usual, rife in the media. Once again however, this produces opportunities.
So what do we know?
We know that production and supply problems plus an overstimulation of the economy caused the inflation issues. We know that the rush by central banks around the world to correct this by increasing interest rates has tipped us over the edge.
We know that just because governments and central banks run countries doesn’t mean they always get it right so we adjust for that and seek opportunities.
We know that markets correct and recover because of the quality of the companies that underpin them. This is particularly true in Australia with value orientations and dividends being high on the tick list at the moment. For example, below is the final summary part of deeper research from today’s briefing regarding a specific stock that’s being added to some portfolios with particular emphasis on the conclusion. Apologies in advance for the redactions.
The 2-year forward PE of ~21x is attractive relative to history and given upside skew to consensus earnings due to further mergers and acquisitions (M&A) activity. We think little to no value is ascribed to offshore network monetisation and the…………………….. (REDACTED!..sorry this information is exclusively available to clients only)……………believe are not factored into the stock.
Earnings stream is highly defensive, with strong free cash flow generation. EPS growth of >10% p.a. is likely in the medium term, driven by:
- organic GWP growth;
- efficiency improvements through……………. (REDACTED) ……………. consolidation;
- future acquisitions of…….. (REDACTED) …………………….., likely on accretive terms; and
- a relatively defensive business profile.
A few clients I’ve spoken with over the last week or so commented that friends and colleagues had been seeking their advice as to how they were dealing with the latest downturn. Hoping to put some perspective on things, one client asked of his enquiring friend “what was your investment balance during the GFC?” the answer from his friend…… what’s a GFC?
That made me think how quickly we forget about events that seemed absolutely devastating at the time. Finally…… here’s an interesting chart to add perspective to the last 6 major events. Remember when Greece was going broke??????
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