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 higher, retail pain for Myer, Resmed dives
ASX to open higher, retail pain for Myer, Resmed dives
The ASX 200 (XJO:ASX) finished another 0.7% higher with BHP Group Ltd (ASX:BHP) contributing close to 40% of the gain alone, after rallying another 4.9% as iron ore prices hit USD$114 per tonne.
With daily press conferences becoming the norm, today was a gloomy one as the Federal Government flagged a $12 billion hit to the Australian economy and expected spike in inflation to 10% due to Victoria’s severe lockdown measures.
Myer Holdings Ltd (ASX:MYR) offered a rare bright spot, with the now $180 million company, announcing it had negotiated a waiver of its debt covenants and 12 month extension on the maturing $360 million loan.
As highlighted regularly in this column, the world is changing quickly, with those companies carrying legacy issues like branch and store networks and large work forces likely to be lucky to survive 2020 intact.
It’s not all bad news, but time to be wary
Nick Scali Ltd (ASX:NCK) continued the recent trend of e-commerce powered retailers usurping the incumbents. The share price rallied 14.5% after announcing sales had increased 9% on 2019 to $293m although net profit remained flat at $42.1 million as store closures hit margins.
The company announced a 12.5% increase in its dividend moving to a 90% payout ratio. Despite the strong result I’m personally wary of such a high percentage of profit being paid out for a fast-growing company and suggest investors remain wary.
Resmed Inc. (ASX:RMD) offered investors a unique insight into why buying the companies that are benefitting from the immediate conditions may not always pay dividends in the long-term. RMD dropped 7.4% despite seeing huge growth in the sale of ventilators but a weakening of recent growth in their core Sleep Apnoea machines.
Another bite of the Apple, Nintendo smashes expectations, stimulus getting closer
The S&P 500 delivered a fifth straight day of gains, finishing 0.6% higher, whilst the Nasdaq was up 1.0% as Apple Inc. (NASDAQ:AAPL) hit another all-time record finishing up 3.5%.
This should convert to a positive lead for the Australian market, driven by three key factors; lower than expected unemployment claims of 1.18m, positive news on another round of Government stimulus and a report from Goldman Sachs Inc. (NYSE:GS) suggesting markets are not prepared for the increasing probability of a vaccine being available in November.
The UK market was pushed lower by Glencore plc (LON:GLEN) who announced a dividend cut and weaker than expected results. On the positive side, people are still chasing Pokemon; Nintendo (TYO:7974) reported a 428% increase in quarterly profit, 108% increase in sales amid a boom in gaming as the world is stuck in lockdown.
