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 – Vic case numbers buoy the ASX, more property pain, banks keep running
Vic case numbers buoy the ASX, more property pain, banks keep running
The ASX 200 (ASX:XJO) hit a three week high to start the week, adding 1.8% as slowing Victorian Coronavirus case numbers boost confidence. The strength should continue into Tuesday, but investors should be wary of key companies reporting to finish the week.
The highlights were the Commonwealth Bank of Australia Ltd (ASX:CBA) and Westpac Corporation (ASX:WBC) increasing 3.4% and 3.3%. With no indication on the figure required to warrant a loosening of restrictions, markets appear overly optimistic.
President Trump’s decision to overrule Congress and extend social security payments further buoyed markets at the same time as ramping up pressure on Chinese businesses.
Blood donor issues facing CSL Ltd (ASX:CSL) US operations appear to have been overcome, with foot traffic to donation centres just 25% below 2019 levels in July; shares finished 1.9% higher.
Kogan Ltd (ASX:KGN) hit another all-time high, reporting another 110% increase in sales in July. Unfortunately, this one looks like a poor man’s Amazon Inc. to me and is best avoided at current levels.
Short of a dollar
Qantas Ltd (ASX:QAN) surprised markets announcing that just $71.7 million of the $500 million retail share purchase plan was applied for, leaving them $400 million short.
Are retail investors being more prudent with their capital than fund managers and super funds investing on behalf of others? Only time will tell but given Warren Buffet’s recent components suggesting only a vaccine will save airlines they may be in for a rough period.
Diversified real estate investment trust (REIT) GPT Group (ASX:GPT) was the latest property owner to disappoint investors, reporting a $519.1 million net loss for the year after cutting property valuations by $711.3 million; the net asset value of the trust fell 4.8%.
Rental income fell some 23.3% and forced a similar 30% cut in the dividend to just 9.3 cents. Management highlighted strong retail leasing results for the financial year, averaging 4.7% rent increases, yet with $48.2 million in waived rent and arrears accumulating, this could be papering over the cracks ahead of what will be a very difficult few years for the business and sector.
Overseas markets mixed, ASX looking for direction
Overseas markets finished mixed to start the week, with investors seemingly balancing the benefits of Trump’s social security policy with the increasing tit-for-tat playing out between US and Chinese officials.
What began with Tik Tok has expanded to sanctions on US and Chinese officials. The pressure saw the Nasdaq weaken 0.5% but the S&P 500 continue to close the gap, adding 0.3% on the back of a global rally in the oil price; this case after Saudi Aramco announced a 73% fall in profit but suggested demand was improving.
Other beneficiaries were travel and leisure stocks including Las Vegas casino owner MGM Resorts Inc. (NYSE:MGM), up 13.8% and cruise line Carnival Corp. up 8.6%, as President Trump suggested he is still open to negotiations on further aid.
