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 set for a weak open, $2bn for Sydney Airport (ASX:SYD), James Hardie (ASX:JHX) wins market share
ASX set for a weak open, $2bn for Sydney Airport (ASX:SYD), James Hardie (ASX:JHX) wins market share
It was another busy day as reporting season ramped up, the ASX 200 (ASX:XJO) finishing 0.5% higher as signs of slowing Victorian COVID-19 cases boosted National Australia Bank Ltd (ASX:NAB), rising 2.4%.
Sydney Airport (ASX:SYD) finally capitulated going cap in hand to investors seeking $2 billion to ‘strengthen its balance sheet’ as the impacts of the pandemic look like extending beyond 2021. No dividend will be paid in 2020.
The offer is at a discount of just 13% ($4.56 per share) and I wouldn’t be surprised if retail investors stay away as they did with Qantas Holdings Ltd (ASX:QAN) last month; one to avoid particularly given the IATA has predicted it won’t be until 2024 that travel returns to normal.
James Hardie Industries plc (ASX:JHX) lead the market higher, adding 6.8% despite announcing an 89% fall in quarterly profit to a paltry USD$9.4 million.
Investors were surprised by JHXs market share gains as the company managed to avoid shutdowns in the US; management guided towards a strong recovery with a $330 – 390 million profit for 2021.
Mesoblast tanks, Challenger facing an existential crisis, Computershare keeps its dividend
Stem-cell research company Mesoblast Ltd (ASX:MSB) who have an application in to the US FDA for a potential COVID-19 treatment (not vaccine) tanked 30.1% on Tuesday, as briefing notes for their upcoming review did not reflect positively on their hopes for an approval this week.
Annuity seller Challenger Financial Group Ltd (ASX:CGF) also disappointed investors, falling 7.6% after writing down their Life time annuity business by $750 million; a combination of weaker investment returns and higher capital requirements due to lower interest rates is hitting the company’s bottom line.
Net profit was down 13% to $344 million but fell to a statutory loss of $416 million after the write-down. Life and annuity sales in Japan were a particular highlight, the unit growing 13%, as was specialist fixed income and credit manager Fidante Partners, which saw $3.8 billion in net inflows.
In an income starved world, Computershare Ltd (ASX:CPU) managed to maintain its dividend despite announcing a 2.3% fall in revenue and 3.7% fall in earnings.
A Russian vaccine, trump to cut capital gains tax, overseas markets split
US markets fell into the close, with the S&P 500 off 0.7% after nearing all-time highs during the session. As reporting season near its close investors are turning back to economic results, with the comments suggesting more stimulus is a long way off hitting confidence.
President Trump continued his one man re-election campaign flagging a potential reduction in capital gains tax by introducing an Australian-like inflation adjustment.
The news was positive in Europe with markets cheering a jump in Chinese automobile sales, +16.4% in July, supporting BMW (ETR:BMW) which headed 5.8% higher.
Vladimir Putin approved the first COVID-19 vaccine in the world, Russia’s own, after testing on just 76 people; only time will tell if it is the cure the market is seeking.
On a lighter note, reads of my Unconventional Wisdom newsletter may remember the Tom King of Nanuk Asset Management, a sustainable technology focused global equity fund, highlighted the potential benefits of feeding seaweed to cows in order to reduce emissions; well Graincorp Ltd (ASX:GNC) and Twiggy Forrest just sign a deal with the CSIRO to commercialise the product.
