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 – Wednesday
Marching on
Global sharemarkets continued their incredible rally even as protests and riots continued in the US, following President Trump’s call to bring in the military. The Dow Jones added 1% and the S&P 500 0.8%, with two companies increasing for every one that fell. The highlights remained the cyclical businesses, with American Express (AXP:US) and Caterpillar (CAT:US), pushing higher as shutdowns eased.
The ASX 200 recovered 0.3%, despite a mixed day but with most sectors flat it was the retail exposed businesses like Unibail-Rodamco-Westfield (ASX:URW) moving higher. The likelihood of another $500 billion in stimulus in Europe sent the Eurostoxx (SX5E:IND) up over 2.6% on the back of a strong banking sector; ING Groep (INGA:NA) rallied 3%.
Zooming in
Zoom Video Communications (NASDAQ:ZM), the platform that has become ubiquitous during this Work From Home (WFH) experience continued its incredible rally hitting another all-time high and tripling in 2020. Management reported a 169% increase in quarterly revenue to $328 million and now expects the full year result to be $1.775 billion, double that originally forecast.
Australia’s own technology darling Zip Co Ltd (ASX:ZIP), one of the few competitors to Afterpay (ASX:APT) saw its rally close to 40% on Wednesday after announcing the acquisition of New York-based Buy Now Pay Later (BNPL) platform Quadpay, for $403 million. The acquisition will be funded from a $200 million capital raising and position ZIP as a true global player in the sector with some $3 billion in total transaction value expected.
Taking off
The group of Virgin Australia Holdings Ltd (ASX:VAH) suitors was reduced to two on Tuesday, with Bain Capital and Cyrus Capital Partners the lucky two. Both have indicated a preference to retain the Virgin branding and will seek to partner with Richard Branson. The Kerry Stokes owned Seven Group Holdings (ASX:SVW) announced it had acquired a substantial but ‘friendly’ stake in embattled cement producer Boral Ltd (ASX:BLD), once again opening the discussion on acquisition activity.
Amaysim (ASX:AYS), the provider of mobile phone and energy plans through is Click Energy business, refused to comment on rumours of a takeover offer from Origin Energy Ltd (ASX:ORG), but that didn’t stop the share price from increasing 12% for the day. Finally, Wednesday will see the long awaited GDP figures for the Australian economy, with experts predicting a contraction of just 0.2% to 0.3%.
The daily report is written by Drew Meredith, Financial Adviser and Director of Wattle Partners.
