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 to open higher on US policy
ASX to open higher on US policy, mining sell off, Woolworths (ASX:WOW) drinks demerging, Platinum (ASX:PTM) delivers performance fee
The ASX200 struggled to keep up with the positive US lead, falling 0.9% in the session with a number of companies going ex-dividend key to the weakness.
Despite having no impact on the companies’ operations, the payment of dividends by the company reduces their value and therefore the market’s, making it difficult to post positive returns. Telstra (ASX:TLS) for instance fell 3.1% or 10 cents.
Woolworths (ASX:WOW) was the big name report of the day, with the company reporting a 16% increase in profit to $1.13 billion and delivering a 15% increase in the dividend after another strong half.
The strength was broad-based with most business lines benefitting from the pandemic conditions, supermarket sales were 11% higher, Endeavour Group 19%, and BIG W the strongest at 20%.
The strength in these units overcame a 45% drop in earnings in the hotel division, the only weak spot in the business.
After putting the demerger of their hotels and liquor division on hold in 2020, management confirmed the businesses had been structurally separated and the deal should proceed in June 2021; shares increased 1.1% on the news.
Interestingly, the company’s inventory turnover level fell by 3 days in the half down from 38 days, with strong sales seeing significant product turnover.
Platinum (ASX:PTM) dividend delivers, Sydney (ASX:SYD) pushing for vaccine rollout, City Chic Collective (ASX:CCX) dividend on hold
Platinum Asset Management (ASX:PTM) is staging somewhat of a renaissance, with the company reporting a 14% increase in profit to $90 million despite an 11% fall in average funds under management to $22.2 billion.
Fee revenue also fell 12%, but lower costs combined with a $3.7 million boost from performance fees helped support a 12 cent dividend, down just 8% on the prior year.
With value investing showing signs of recovery, investors are hoping for a return to consistent performance fees, like that of Magellan (ASX:MFG).
With every underlying strategy outperforming its benchmark over the last 3 months, the signs are good. Shares increased 6.4% on the news.
The prospect of a vaccine rollout was the highlight of an otherwise dreary update from Sydney Airport (ASX:SYD). There was nothing to hide with full year traffic falling 74.7% to just 11.2 million passengers and traffic in the final quarter off 93% from 2019 levels. The result was a 150% fall in profit to a loss of $107.5 million and the dividend remains on hold.
Management has focused on cutting costs, with operating costs for the year down 32.3%. Running a lean business and holding onto $3.5 billion in liquidity will see them through the gradual recovery in travel; shares finished 2.5% higher.
Federal Reserve doubles down, markets push higher, positive lead for Australia
All three key US markets pushed higher overnight on the back of additional testimony from the Federal Reserve Governor.
Whilst being questioned on the risk of overheating and obvious signs of price increases in sectors like car sales, Jerome Powell confirmed that the economy still had a long way to go.
With unemployment well above where it should be, the news sent the Dow Jones up 1.4%, the S&P500 1.1%, and the Nasdaq 1.0%.
Energy stocks remain the biggest beneficiaries of the so-called ‘reflation’ trade, with the likes of Marathon Oil (NYSE:MRO) jumping 8.1%, and both air and cruise liners jumping on the back of the approval of Johnson & Johnson’s (NYSE:JJ) COVID-19 vaccine approval.
The rotation out of big tech continues, with a decidedly US smaller company focus, emerging market facing companies ranging from Pinduoduo (NASDAQ:PDD) and Mercado Libre (NASDAQ:MELI) among the hardest hit.
NVIDIA (NASDAQ:NVDA) released their quarterly profit result after market close, with quarterly sales topping US$5 billion for the first time ever. Shares were 2.5% higher during the session even as concerns about a chip shortage spread around the world.
