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.
ASX higher, CBA dividend boost
ASX higher, Commonwealth Bank (ASX:CBA) dividend boost, Lend Lease (ASX:LLC) CEO leaves, Crown Ltd (ASX:CWN) has an uncertain future
The ASX200 (ASX:XJO) finished 0.5% higher, with every sector but consumer discretionary adding to returns.
IT was once again the standout with both Afterpay Ltd (ASX:APT) and Zip Co (ASX:Z1P) hitting all-time highs as BNPL valuations took another leap forward.
Whilst reported growth rates are exceptional, it is clear that competition is increasing and likely to impact on profitability going forward.
Challenger Financial (ASX:CGF) recouped a portion of yesterday’s losses finishing 4.7% higher.
Commonwealth Bank (ASX:CBA) lead the earnings reports today, with all eyes on the dividend management delivered $1.50 per share. That represents a 53% increase on the small 2020 dividend but 25% down on the previous year.
Cash profit fell 10.8% to $3.88 billion with business lending beginning to accelerate, growing at three times the rest of the banking system. The company reported a .03% fall in their net interest or profit margin, to 2.01%, as low interest rates impact profitability.
CommSec on the other hand was a highlight, benefitting from the Robinhood story, reporting 230,000 new accounts opened in the last six months and a doubling of trading volume to $110 billion.
Doomsday loan default scenarios have been avoided, with just 25,000 home loans deferred as at 31 December, down from 145,000 in June.
CEO Matt Comyn flagged his intention to continue flexing CBA’s market share muscle, now 34%, in order to expand their services and extract further efficiencies; shares fell 1.5% despite the improved dividend.
CIMIC (ASX:CIM) smashed, Praemium (ASX:PPS) records flow
Construction and engineering firm CIMIC Ltd (ASX:CIM) previously Leighton Holdings, lost close to a third of its market cap, dropping 17.1% after closing out a difficult half.
Management reported a 22.4% fall in revenue to $11.41 billion, with a lack of new contracts and stalling of a number of projects hurting the bottom line.
2019 figures were impacted by significant write-downs, but 2020 hasn’t been much better with underlying profit falling 25% to $600.5 million.
Construction profits, the lowest margin business, were down 34.6% to $307.6 million. Services profit fell 31.7% to $104.6 million and corporate costs netted a loss of $202.3 million. On the positive side, the company declared a sixty-cent dividend, the first since October 2019.
Sticking with construction, Lend Lease (ASX:LLC) CEO Steve McCann resigned with head of Asia Tony Lombardo set to take over the position ahead of a very difficult period for the apartment and commercial builder.
Both CIM and LLC appear to be facing major headwinds and uncertainty, particularly around office and apartment construction.
Praemium’s (ASX:PPS) record breaking year continued, with funds under administration 69% higher to $34.3 billion, now exceeding Hub 24 (ASX:HUB) which administers around $31 billion.
Scale has delivered profitability, albeit a small one, with net profit doubling to $3.0 million in the first half.
US markets mixed, inflation muted, Twitter (NASDAQ:TWTR), GM (NYSE:GM), Coca-Cola surprise (NYSE:KO) surprise
US markets were mixed on Wednesday, with the Nasdaq breaking its winning streak, falling 0.3%, and but the Dow Jones heading to another record high, adding 0.2% after a number of major industrial companies reported earnings.
Concerns that inflation was becoming an issue will abate for another few months, with US inflation just 0.3% in January suggesting the spending boom of 2020 has slowed.
Coca-Cola (NYSE:KO) outperformed expectations, growing earnings per share 6% despite a 5% fall in quarterly revenue to US$8.61 billion.
Profit also fell 28% for the quarter to $US1.46 billion as slower sales impacted margins, with cost cutting not sufficient to offset the falls.
Social media platform Twitter (NASDAQ:TWTR) rallied 13.2% despite struggling to benefit from the best digital ad market in recent memory. Sales did however rise 28% to $1.29 billion ahead of expectations, contributing to a net profit of $222 million for the quarter.
