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.
Finally, some positive action at AMP; All is not well in America; Fortescue pumping out records; Isolation beards boosting Shaver Shop
Finally, some positive action at AMP
AMP Ltd (ASX:AMP): Management at AMP finally bowed to public pressure with Chairman David Murray, Director John Fraser and recently appointed CEO of AMP Capital Boe Pahari all stepping down over the weekend.
Importantly, Debra Hazelton who is also a board member of the Treasury Corporation of Victoria will be taking over as Chairwoman and Mr Pahari will move back to his original position with Group CEO Francesco de Ferrari taking on board the position at AMP Capital.
Whilst this decision took somewhat longer than we would have liked, it is the right move as the company seeks to move forward, rather than look to the past.
The company’s recent earning result, in which it highlighted strong underlying growth and announced the wide-ranging reduction of fees on its superannuation products, was at risk of being derailed by this leadership and cultural crisis.
Having spent some time personally at the Commonwealth Bank during Murray’s tenure, I had always question his ability to change their entire nature of AMP’s business model, this change gives me increased confidence in the probability of a successful turnaround.
I’m expecting a new appointment to AMP Capital will be made in the coming months, with the CEO holding a caretaking role until that time, with the potential for a rebrand and eventual spin off to improve shareholder value.
The shares look to open higher this morning.
Comment: Finally the shackles of the past have been released.
All is not well in America
Boral Ltd (ASX:BLD) unexpectedly announced a $1.3 billion write-down of their North American operations over the weekend, pricing in lower housing starts and reducing good will on their major Headwaters purchase and related Joint Ventures.
It is the first move of the new CEO as he seeks to clear the decks and embark on a growth program coinciding with the post pandemic recovery.
The Australian businesses were similarly written down by a much smaller $12 million due to slowing construction.
The result of both changes was earnings to fall between $820 – $825 million and profit before the $1.3 billion significant, non-cash impact of the above, at $175 to $180 million.
Unfortunately, the second half dividend has been cancelled ahead of their full earnings report on Friday.
For those interesting, management are required to update the market as soon as they are aware of these changes, hence why they could not wait until Friday.
Comment: Disappointed but not unexpected decisions amid a global slowdown.
Fortescue pumping out records
Fortescue Metals Group Ltd (ASX:FMG) delivered recover revenue of $12.8 billion on the back of a 6% increase in iron ore shipments for the financial year.
Net profit was $4.7 billion, ahead of the $4.6 billion expected which will send shares higher today.
The company has continued to benefit from its growing scale and has shown a remarkable recovery after near capitulation in 2019 now pumping out $4.5 billion in free cash flow each year.
The low cost of production at $12.94 per tonne is allowing return on equity of 40% and this is likely to continue improving as reports of Chinese ore stockpiles are well below pre-pandemic levels.
Importantly, the dividend looks to be a major beat at $1.0 compared to $0.72 expected.
Comment: Great result from a booming sector.
Isolation beards boosting Shaver Shop
It seems the boom in isolation beards among Victorian’s locked at home is resulting in a massive improvement in sales at Shaver Shop Ltd (ASX:SSG).
Management reported sales growth of $195 million to $195 million, which is 15.3% on a like for like basis (meaning based on the same number of stores as FY19).
Online sales were up to 103% for the year and unlike most retailers actually represent more than 22% of sales; and near doubling of the 13% level in 2019.
The result was stronger net profit, up 44% to $10.6 million and an increased dividend on 2019; bucking the trend of the sector.
The company did not receive Job Keeper payments and appears to be one built for the future.
Comment: Solid result, but boosted by reducing stock levels, which may become an issued.
