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 to open flat, AMP delivers, Telstra feeling the pressure
ASX to open flat, AMP delivers, Telstra feeling the pressure
The ASX 200 (ASX:XJO) started the day strongly, but finished on its lows (-0.7%) as investors digested a flurry of earnings reports from AMP Ltd (ASX:AMP), Telstra Corporation Ltd (ASX:TLS), and AGL Energy Ltd (ASX:AGL).Most sectors fell, with telecommunications off 4.7% and the banks giving back recent gains, down 1.1%.The leaders for the day included TWE, adding 12.3%, after delivering better than expected sales growth, and Premier Investments Ltd (ASX:PMV) who reported record profits despite being recipients of JobKeeper and refusing to pay rent on many of their properties.Unemployment data showed an increase to 7.5%, meaning 1 million people are now out of work, and this is before Stage 4 Lockdowns in Victoria.Once again, my views on the key takeaways from today’s reports is as follows:AMP stems the bleeding, pays a special dividend – Despite a series of self-inflicted pain and missteps, AMP has shown signs of bottoming, announcing a special dividend of 10 cents per share following the sale of AMP Life; the share price rallied 10.9% as a result.Underlying profit was $149 million, a 42% fall on 2019, but outflows from wealth management were just $1.2 billion. Management have acquired the 15% of AMP Capital they don’t own, affording full control of this $200 billion growth engine.Summary: A solid result, capital return and renewed focus on growth.Telstra maintains dividend – Despite reporting in line with guidance, a 14.4% in net profit to $1.8 billion, and maintaining its dividend, TLS ended the day down 8.3%.Investors were clearly concerned about managements guidance on the lingering impacts of COVID-19, ignoring the $40 million profit growth excluding NBN losses.TLS has ramped up its 5G connectivity, targeting 74% of the population by June 2021, leveraging off the surge in digitisation.Summary: Good signs for this digital infrastructure business.AGL runs out of franking credits, but special dividends to come – AGL reported a 12% increase in statutory profit, benefitting from the revaluation of electricity futures contracts, but profit actually fell to $816 million.The final dividend was cut 18%, sending the share price down 9.6%, the worst performer in the ASX 200.Of greatest concern was management’s decision to cease paying franking credits, as years of losses have eaten away at their reserves.Summary: Difficult period ahead for the coal-reliant company.
S&P 500 weaker, Apple rallies on new service
The S&P 500 remains just shy of its record, falling 0.3% on Thursday, as cyclical sectors continue to sell off whilst investors await an announcement on further stimulus.Once again, the Nasdaq finished 0.3% higher, on the back of an announcement that Apple Inc. (NASDAQ:AAPL) would be launching Apple One, a subscription service that includes their many products in a simple package; it seems they are heading in the same direction as Adobe Inc.(NASDAQ:ADBE) as they seek to lock in annual revenues.At the time of writing the ASX 200 looks to open slightly weaker, with Newcrest Mining Ltd (ASX:NCM) and Baby Bunting Ltd (ASX:BBN) due to report earnings.
