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 market update – AMP cleans house, ASX 200 to open higher, Trump relents
AMP cleans house (finally), ASX 200 to open higher, Trump relents
The ASX 200 (ASX:XJO) overcame a weak lead from overseas markets to finish 0.3% higher, behind another rally in Wesfarmers Ltd (ASX:WES), up 1.5%.
Elsewhere, dividend payments are placing downward pressure on the market with ANZ Banking Group Ltd (ASX:ANZ), -0.9%, and Aurizon Holdings Ltd (ASX:AZJ) the major payers today.
The materials sector continued to push higher as Fortescue Metals Group Ltd (ASX:FMG) announced a record profit and dividend, whilst highlighting that Chinese ore stockpiles remain well below previous levels and likely to support current prices for the foreseeable future.
Zip Co Ltd (ASX:Z1P) added 13% after achieving record monthly transaction volumes of $70 million, a 600% year on year increase as the company added 133k new customers.
My take on the other key reports follows:
- Finally, some positive action at 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.
- 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 finished higher.
- Comment: Finally the shackles of the past have been released.
- All is not well in America for Boral Ltd (ASX:BLD): Boral Ltd (ASX:BLD) unexpectedly announced a $1.3 billion write-down of their North American operations, pricing in lower housing starts and reducing good will on their major Headwaters purchase and related Joint Ventures.
- 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.
- Comment: Disappointing but not unexpected decisions amid a global slowdown.
- Fortescue Metals Group Ltd (ASX:FMG) 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 low cost of production at $12.94 per tonne is allowing return on equity of 40%.
- 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 Ltd (ASX:SSG): 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 15.3% on a like for like basis.
- Online sales were up to 103% for the year representing more than 22% of sales.
- 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.
Double records, COVID-19 treatment fast tracked, value winning
Both the S&P 500 and Nasdaq finished at all-time highs, up 1.4% and 0.6% respectively on a flurry of positive news.
The US Government reported over the weekend that it was fast tracking a blood plasma treatment for COVID-19, whilst President Trump appeared to be lightening his approach on US businesses using We Chat, amid a recent uproar.
Shares in Tencent (HKG:0700) finished 5.8% higher.
As expected, signs of a vaccine sent the ‘value’ sectors of the market higher, American Airlines Group Inc. (NYSE:AAL) and Carnival Corp. (NYSE:CCL) both over 10% higher.
This bodes well for another strong open in Australia.
