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 – Dividend season pushes markets lower
Dividend season pushes markets lower, BNPL hits new records, garbage cleaning up
The ASX 200 (ASX:XJO) fell 0.7% for the day pushed lower by dividend payouts from Telstra Corporation Ltd (ASX:TLS) and AGL Energy Ltd (ASX:AGL) among others.
This was despite new records being reached in the US.
The losses were broad based with only the healthcare and consumer sectors finishing higher; the banks were among the worst hit, falling 1.2% and contributing to a quarter of the markets fall.
With reporting season coming to a close Zip Co Ltd (ASX:Z1P) and emerging competitor to Afterpay Ltd (ASX:APT) increased by close to 30% after announcing a partnership with eBay Inc. (NASDAQ:EBAY) and the launch of its Zip Business product as it continues to pivot.
I’ll be discussing this in more detail in tomorrow’s reporting season update with Owen.
Once again, it was a busy day of reporting so my view on the major announcements follows:
- It pays to recycle – Cleanaway Waste Management Ltd (ASX:CWY) delivered a solid result, once again proving that both recycling and waste disposal is among the most defensive businesses in the world.
- The company reported a small increase in revenue by 2.1% to $2.3 billion, with the core Solid Waste division growing 0.8%.
- The result was an 87% increase in profit on an underlying basis, to $153 million and a 10% increase in the final dividend.
- Comment: Progress being made in integration, recycling tailwind to continue. Disclosure: I hold shares via my super fund.
- AdBri cements its recovery – AdBri Ltd (ASX:ABC) reported a 7% fall in revenue but managed to deliver a profit of $29.1 million.
- A 260% increase on 2019 due to major write downs in the previous corresponding period.
- On an underlying basis, profit fell 14% to $47.6 million. Looking more closely at the individual business limes, Cement fell 6% due to the bushfires, Lime sales grew 4%, as gold and nickel mining ramped up, whilst concrete fell 13% due to a slowdown in housing construction.
- Comment: Difficult year and more to come, Boral preferred for infrastructure exposure.
- Ethical concerns abound, assets doubled – Australian Ethical Investments (ASX:AEF) bucked the trend of investment managers adding $660 million for the financial year, doubling the inflow from 2019.
- The group hit $4 billion in assets, boosting revenue by 22% to $49.9 million, with the benefits of scale adding 46% to profit, $9.5 million.
- Such was the strength of the result that management increased the dividend by 20% to 6 cents per share.
- Comment: New growth player in the funds management space.
- Platinum Asset Management Ltd (ASX:PTM) continues to feel the brunt of sustained underperformance, with funds under management falling 14% for the financial year following $3 billion in outflows.
- The group is now just 20% of the size of competitor Magellan with CEO Andrew Clifford blaming the “investment mania” in markets for the underperformance.
- Comment: Growth continues to outperform value.
- The third wheel of groceries, Metcash Ltd (ASX:MTS), added 2.4% after management announced total sales for the first quarter for 2021 were up 14.9% thus far, with wholesale sales improving 18.4% when recent 7-11 and Drakes contract losses are excluded.
- Liquor remains an outperformers with Australian’s indulging while trapped at home, growing 11.4%, along with hardware up 19.2% on 2019.
- Comment: Unexpected surprise, but not sustainable post pandemic.
Juggernaut rolls on, MSCI at record highs, positive economic surprises
The so-called ‘juggernaut’ of stocks rolled on overnight, the S&P 500 finished 1.0% higher and the Nasdaq 1.7% as a trifecta of news boosted confidence.
China appears to be relenting on the US push for greater transparency into the audit books of listed companies, US durable goods orders grew 11.2% three times higher than an expected 4.2% and the German Government extended their version of the JobKeeper program.
Evidence that companies are committed to upgrading their technology and digital systems came from Salesforce.com Inc. (NYSE:CRM) which saw revenue climb 29% in the three months to July leading to a jump in profits; shares finished 26% higher.
Reporting season continues in Australia, with Ramsay Healthcare Ltd (ASX:RHC) and Woolworths Ltd (ASX:WOW) among the blue-chips announcing results.
