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 morning report – ASX finished 2.0% higher after adding 0.6% on Friday
ASX finished 2.0% higher after adding 0.6% on Friday
The ASX 200 (ASX:200) finished an important week 2.0% higher after adding 0.6% on Friday. The dispersion of returns continued as reporting season gathered steam, with more company specific than sector moves.
The IT sector was by far the strongest adding 4.2% after share registry provider, Computershare Ltd (ASX:CPU) rallied 7.8% as investors digested a strong finish to the financial year.
All eyes were on RBA Governor’s speech, during which it was made clear that interest rates will remain around 0.25% until at least 2022.
Mesoblast Ltd (ASX:MSB) was the standout, finishing 38% higher after its stem cell treatment with potential COVID-19 applications, was approved by the FDA for treating a rare blood disorder in children.
The other key highlights from reporting season were as follows:
National Australia Bank Ltd (ASX:NAB), +1.2%, shows foresight, deferrals slowing – Management decision to raise capital in March is looking prescient after the company reporting 10% revenue growth and a 16% reduction in deferred home loans.
The company benefited from a recovery in its Markets and Treasury unit which ensured profit fell just 11.6% to $1.55 billion for the third quarter.
Summary: Great result in the circumstances, supporting a second half dividend.
Baby Bunting Ltd (ASX:BBN), +10.4%, benefiting from a lockdown baby boom – The baby product seller reported 11.8% growth in sales and confirmed it was not a recipient of any JobKeeper payments.
The strong result was driven by 39% growth in online sales, 66% in the second half as lockdowns tightened.
The result was a 34% increase in net profit to $19.3 million and a 25% increase in its dividend; a record payout.
Summary: Reporting season standout, little wonder the company is now sitting at all-time highs.
Praemium Ltd (ASX:PPS) showing the future for advice – The investment platform provider announced 91% profit growth to $49 million despite volatile sharemarkets.
Assets under management increased 14% to $20.3 billion and should be further bolstered by the acquisition of Powerwrap Ltd (ASX:PWL), which has $8 billion of its own.
The highlight was a 73% increase in managed account assets of $4.8 billion as financial advisers flock to the platform.
Summary: Excellent year in challenging conditions, adviser tailwind to continue.
What to watch for….
Sharemarkets will face a weak lead, after the S&P 500 finished flat, adding just 0.6% for the week. With a lack of economic data ahead and reporting season all but over, investors will likely focus on heightened geopolitical risk.
The three things I’m watching for to start the week are earnings results from JB Hi-Fi Ltd (ASX:JBH), Lend Lease Group (ASX:LLC) on Monday, and the outlook for what has become the most popular investment of 2020, gold bullion (and gold stocks).
I’m wary of the impacts of Victoria’s lockdown on JBH’s earnings result, with risk to the downside, and will be interested to see if LLC decides to devalue their massive portfolio of property assets.
Despite being quoted regularly on his avoidance of an investment in gold Warren Buffets Berkshire Hathaway Inc. (NYSE:BRK.A) announced it had purchased $565 million of gold miner Barrick Gold Corp. (NYSE:GOLD).
