Like a kid before Christmas, I am counting down to reporting season. I have found this useful link that shows what appear to be most of the ASX300 companies reporting dates. Alesco (ALS) seem to kick-off reporting season on 26 July, only 2 days until I get a daily dose of Appendix 4E’s to keep me entertained…
I am, despite much of the media commentary pretty optimistic about the up-coming season. Obviously retailers and many industrial companies are going to report some pretty weak results; as investors, we must be mindful to try to look past the end of our nose and really think about the underlying quality of the businesses we examine, and their long-term prospects - the stock-market is supposed to be a leading economic indicator, I don’t think it’s presenting much of a ‘lead’ at the moment.
For example, I can appreciate that the strong $AUD and consumers’ growing confidence with online purchases will ensure a (probably large) proportion of future retail growth will go to this sector, but I think many retail stocks are likely to do particularly (compared to the rest of the market) well over the next few years. When David Jones (DJS) announced a profit downgrade recently, substantially all retailers were sold of indiscriminately. For many, this is short-sighted and likely presents buying opportunities.
I have mentioned JB Hi-Fi (JBH) before as being beaten down beyond any recognition of its likely future results, The Reject Shop (TRS) is a stock that finds itself similarly downtrodden, despite the difficulties they currently face looking predominantly short-term and eminently surmountable. Interestingly, Super Retail Group (SUL), which operates Super-Cheap Auto & BCF stores (among others) has not faced sell-offs in the same way, it has never gotten to the situation where I would refer to the stock as really ‘cheap’, but it is priced quite reasonably at present in my view given the sound business prospects. These 3 stocks are approximately similarly positioned in their phase (i.e. with still considerable room to grow in their respective markets), trade with excellent ROE & cash-flow and have managements that have historically acted with shareholder interest’s front-of-mind. For JBH & SUL, these businesses will pick up a good portion of the substantial disposable incomes much of the economy is generating. Young FIFO workers are particularly prone to want to drive a ‘tricked-out’ (with SUL supplied ‘tricks’) car and enjoy a house full of reasonably priced electronics and accessories (JBH supplied). I am less hopeful for example about David Jones (DJS) and Myer (MYR), as they are more exposed to the ‘slower speed’ of our ‘two speed’ economy, though I believe that said even they are somewhat oversold at current prices in my view.
I feel like a bit of a lone voice with my optimistic posts of the last couple of weeks, but to a reasonable extent, I think my optimism stems from my tendency to look a little further ahead than the majority of the market. Buyers at current prices may be looking at some ‘red ink’ in the short term, but with a little care in the businesses selected, today’s astute equity buyer will do very well in my view. When I still think the businesses facing extremely difficult conditions (such as MYR & DJS) look fairly priced, the market as a whole is probably reasonably priced and those businesses with sound franchises, solid balance sheets and brighter futures could probably be described as quite cheap – Tony Hansen 24/07/2011
Performance:
April 1st 2011 | July 1st 2011 | Current Price | Current Period | Since Inception | |
EGP Fund No. 1 | 1.00000 | 1.08396 | 1.13623 | 4.82% | 13.62% |
35632.05 | 34200.68 | 34164.31 | (0.11%) | (4.12%) | |
EGP 20 | 1000.00 | 883.67 | 908.26 | 2.78% | (9.17%) |
EGP Fund No. 1 Pty Ltd. Up by 4.82%, leading the benchmark by 4.93% since July 1st. Since inception, EGP Fund No. 1 Pty Ltd is Up by 13.62%, leading the benchmark by 17.74% all-time (April 1st 2011).
EGP 20. The EGP20 index is Up by 2.78%, leading the benchmark by 2.89% since July 1st. Since inception the EGP20 is Down by 9.17%, lagging the benchmark by 5.05% all-time (since April 1st 2011).
S&PASX200TR The benchmark index is Down by 0.11% since July 1st. The benchmark is Down 4.12% all-time (since April 1st 2011).
Full website: www.eternalgrowthpartners.com
No comments:
Post a Comment