Since the emergence of “Modern Portfolio Theory” and the “Capital Asset Pricing Model” in the late 1960s, institutional investors have taken a quantitatively driven approach to portfolio construction, looking to create portfolio diversification and obtain better risk-adjusted returns by balancing their asset-class exposures. This journey has seen several important advancements in thinking about how to optimally achieve desired results.
Funds that want to take the total portfolio approach first need to get the total portfolio view. To do that they not only need data – and lots of it – but a rock-solid understanding of exactly how they’re going to use it.
Financial Planner’s morning report – Friday
Bears punished
Experts and investors still expecting a second wave or calling the current rally a “dead cat bounce” continued to be left behind on Thursday, with the ASX adding another 1.3%. At one point the market was up over 150 points, prior to the US futures falling as the Chinese ‘Treason’ Law in Hong Kong was passed.
Once again, the rotation into the big banks drove returns with National Australia Bank (ASX: NAB) and Australia and New Zealand Banking Group (ASX: ANZ) both adding 4% for the day. Overnight, the Eurostoxx rallied for a fourth consecutive day, adding 1.4%, riding the wave of re-openings as consumer businesses like Hermes (+5%) moved forward. The US market gave up gains of around 1% to finish down 0.6% as President Trump flagged a press conference on China on Friday. Trader’s should be looking to sell given the history of such announcements over weekends.
No surprises here…
For anyone that has been working at home constantly hearing drills, nail guns or general construction activity, there will be no surprise that Australia’s construction gauge fell just 1% for April, to $49 billion. This is supported by the likes of Boral Ltd (ASX: BLD), which now faces a second class action over the disastrous US windows acquisitions.
In a sign that renegotiations may be the new normal, Wisetech Global (ASX: WTC), announced the earnouts on 17 recent acquisitions had been renegotiated — saving millions. European Toll Road operator Atlas Arteria (ASX: ALX) was the next company to seek capital, wanting over $500 million, to avoid debt covenants, with the deal priced at $6.20 (around a 10% discount). The ‘deferred’ dividend was also cancelled.
Seller’s envy
There is no doubt the likes of ANZ and the Commonwealth Bank of Australia (ASX: CBA) may have some envy towards NAB. The company managed to pay its reduced dividend and then raise an oversubscribed Share Purchase Plan to $1.25 billion. There is clearly some question around whether a ‘deferred’ dividend is simply a cancellation.
Nearmap Ltd (ASX: NEA) announced it had reached $102 million in annual contracted revenue after releasing its commercially available AI platform, which offers digital imaging and assessments. Finally, Hewlett Packard or HP (NYSE: HPC) announced an 11% fall in quarterly sales of $12.5 billion as laptop demand remained flat but its core printing (-19%) and desktop sales (-18%) fell off a cliff.
The daily report is written by Drew Meredith, Financial Adviser and Director of Wattle Partners.
