Author: Tabarruk

September 25, 2021

September – Week 1 and 2 update

Global markets, especially in the US and here are weaker and moving sideways after a period touching record highs.

The ASX 200 (XJO) moved is back in the 7,500 range.

Companies continue to release quarterly updates. August / moving into early September every year, seasonally tends to be a weaker period.

We spoke in depth about the market and the likelihood of a correction based on technical analysis. It is not one to be alarmed about for long term investors. They are healthy and return markets back to fair valuations and provide buying opportunities.

The ASX VIX (volatility index) remains under 12.

Volatility doesn’t necessarily show market direction (up or down) but the range of average price changes over time.

The S&P/ASX 200 VIX Index (XVI) calculates the amount of volatility expected in the market over the next 30 days.

•  High readings indicate uncertainty (bearish)
•  Normal readings suggest a slight bullish bias
•  Low readings indicate low volatility (bullish) and strong investor confidence.

CEO Insights

Financial Markets

“Corporate Actions volumes increased in all our major regions as a result of clients raising capital, improved IPO markets…and strong M&A activity” 

Stuart Irving, CEO, Computershare Ltd

“Equities trading is likely to remain robust, given the ongoing uncertainty due to COVID, both here and around the world…the Listings pipeline currently looks well supported as we continue to see interest from New Zealand companies considering listing on the ASX and a buoyant mining sector” 

Dominic Stevens, CEO, ASX Ltd

“As the past 18 months have shown, Australia has a very strong, stable and secure financial system” 

Matt Comyn, CEO, Commonwealth Bank of Australia Ltd

Technology & Telecommunications

“The pandemic has been a catalyst to bring the laggards and the late adopters to the cloud and the new way of doing business” 

Craig Scroggie, CEO, NextDC Ltd

“We continued to see strong customer growth in mobiles albeit there is no doubt the market has slowed considerably due to COVID. This has included the sharp reversal of net immigration and population growth in Australia as well as hardware supply shortages” 

Andy Penn, CEO, Telstra Corporation Ltd

Housing

“Multi-residential activity is expected to remain weak, with a lift in activity not expected until immigration returns” 

Zlatko Todorcevski, CEO, Boral Ltd

“Our customers have never been busier in R&R [renovation & refurbishment] capacity” 

Peter Wilson, CEO, Reece Ltd

“The accessibility and imperative of remote working is accelerating the shift towards lower density and regional residential housing” 

Mark Vassella, CEO, BlueScope Steel Ltd

Construction

“As an international real estate group, we expect FY22 to be the cyclical low point for both development production and profitability” 

Tony Lombardo, CEO, Lendlease Corporation Ltd

Commercial Property

“Healthcare properties remain strongly sought after, with increased domestic and international interest in Australian healthcare property and increasing interest in social infrastructure property more generally” 

Market Statement, Arena REIT

“Retail leasing activity during the period was the strongest it has been for some time as retailers expanded their physical store networks and launched new brands. We also saw encouraging levels of office enquiry, particularly from technology and services companies” 

Bob Johnston, CEO, GPT Group Ltd

Infrastructure

“State and federal governments around the country, particularly, focus on the investment in critical infrastructure to support a post COVID recovery and a strong economy into the future” 

Leigh Mackender, CEO, Service Stream Ltd

Energy

“Although wholesale electricity prices have rallied in recent months, our result reflected the impact over the past two years of increasing generation supply and lower demand arising from the COVID-19 pandemic and milder weather” 

Graeme Hunt, CEO, AGL Energy Ltd

Mining Services

“Strong commodity prices are leading to significant budget increases for exploration programs. Capital raisings have been strong throughout the last 12 months, and a large portion of that money is still to be deployed…We maintain that the industry is certainly keen to increase expenditure, but it may not be able to run as fast as it would like to in the short-term” 

Paul House, CEO, Imdex Ltd

“We continue to see project sanctioning delays in line with the targeted capital expenditure exhibited by our customers, which is expected to continue through FY22” 

Market Statement, Worley Ltd

“While market conditions are expected to be strong, COVID-19 impacts and the skills labour shortage will continue to be a major challenge for the industry” 

Rob Velletri, MD, Monadelphous Group Ltd

Commodities & Resources

“While in the medium term we see supportive industry and end use demand trends, it is uncertain how long the current robust conditions will be sustained” 

Market Statement, BlueScope Steel Ltd

“And when we look at our soft commodities through the months of the financial year because we’ve got long contracts, we don’t actually see much of an increase although there is an expectation that there will be some increases in the second part of the calendar year ’22 with what we’re observing around the world” 

Don Meij, CEO, Domino’s Pizza Ltd

“Government stimulus in response to ongoing COVID-19 pressures has driven strong demand for our products at a time of constrained supply resulting in a significant spike in most [commodity] prices” 

Jakob Stausholm, CEO, Rio Tinto Ltd

Retail

“Consumers have pent up savings and economies are growing as they open, but consumers will begin spending on services [compared with products]” 

Market Statement, Breville Group Ltd

“FY22 has started strongly, YTD revenue is up 26% on PCP [previous corresponding period] with ongoing COVID-19 lockdowns boosting new customer growth and returning customer spend” 

Market Statement, Adore Beauty Group Ltd

“[Post lockdown] we expect spending to recover quickly as we saw when lockdown restrictions were eased in our overseas markets due to pent-up demand” 

Gerry Harvey, Executive Chairman, Harvey Norman Holdings Ltd

E-Commerce

“The strength of e-commerce – up 31.8 per cent as Australians took to online shopping in record numbers – has supported the [FY21] result, as did the temporary regulatory changes which allowed us to meet the significant parcel demand and ongoing mail delivery” 

Rodney Boys, CEO, Australia Post

Buy Now Pay Later

“Buy now, pay later is still in the early stages. If we look at the global opportunity, what we are seeing is a shift from the credit economy to the debit economy, and that is being stimulated by the next generation of Millennials and Gen Z, who want trust-based relationships reflected in everything they do, including payments and spending” 

Anthony Eisen, Co-CEO, Afterpay Ltd

Media & Advertising

“Forward [ad] bookings for the remainder of the year are currently tracking well ahead of the same time last year” 

Market Statement, Here There & Everywhere Ltd

“As conditions have become more fluid during the pandemic, we are seeing advertisers capitalising on the flexibility of digital out of home [advertising]” 

Cathy O’Connor, CEO, oOh!Media Ltd

Automotive

“We continue to experience strong demand for new vehicles, with an increasing order book due to supply constraints” 

Keith Thornton, CEO, Eagers Automotive Ltd

“The customers still want to visit our showrooms. They still want to test drive the cars and they still want to trade-in cars at the dealership” 

Nicholas Pagent, CEO, Autosports Group

Travel & Aviation

“It has been a very difficult time for our industry but after 18 months of being largely shut down, there is finally some light at the end of the tunnel” 

Andrew Burnes, CEO, Helloworld Travel Ltd

“We have seen strong demand as travel restrictions ease in North America and Europe, suggesting significant upside as more international markets reopen” 

John Gusci, CEO, Webjet Ltd

“I wish to put on record our vote of gratitude to the Federal Government without which all passenger airlines in Australia would certainly have entered administration”

Lim Kim Hai, Executive Chairman, Regional Express Group Ltd

Entertainment

“In Entertainment, with cinemas reopening globally, studios began to release blockbuster films and the immediate demand for the cinema experience was evident” 

Market Statement, Event Hospitality & Entertainment Ltd

“It is also encouraging to see our Theme Parks business continue to receive strong support from the local drive market” 

Gary Weiss, Chairman, Ardent Leisure Group Ltd

Health & Wellness

“In ANZ we expect challenging conditions to persist in the vitamins and supplements market as international borders remain closed and state-based lockdowns continue to impact retail spend and foot traffic…Furthermore, we expect e-commerce and Pet to be a source of growth in the ANZ business” 

Alastair Symington, CEO, Blackmores Group Ltd

Healthcare

“I’m especially happy with the Surgical [division], where in spite of a lot of postponed surgical procedures and lines getting longer and longer, we’re seeing good growth in Surgical” 

Magnus Nicolin, CEO, Ansell Ltd

Employment

“The recovery in ANZ job ad volumes began in the second quarter of FY21, and then increased rapidly. By March of this year, job ad volumes exceeded pre COVID-19 levels and were at all-time highs. The centrality of SMEs in the recovery meant that yield also grew, supported by greater depth usage due to high competition for people” 

Ian Narev, CEO, Seek Ltd

Agriculture

“Strong demand for agricultural, off-the-road and 4WD tyres as farm output and regional economic activity reached levels not seen for many years” 

Market Announcement, National Tyre & Wheel Ltd

“We’re seeing excellent demand for high quality Australian grain, particularly with recent weather-related crop production challenges in the northern hemisphere, and July delivered our biggest month of contracted sales on record” 

Robert Spurway, CEO, GrainCorp Ltd

Food & Beverage

“Sales slowed as expected in H2 [FY21] as customers shopped more frequently with smaller basket sizes” 

Brad Banducci, CEO, Woolworths Group Ltd

“Deflation in the fourth quarter was driven by the grocery, dairy, frozen and convenience categories due to the cycling of lower promotional activity following unprecedented demand and uncertainty of supply in the prior corresponding period. This was partially offset by inflation in fresh, particularly in red meat from elevated livestock prices” 

Market Statement, Coles Group Ltd

More updates and video on market and portfolio companies for members follow below.


August – Week 1 and 2 update

Global markets, especially in the US and here are at record highs.

The ASX 200 (XJO) briefly touched 7,610 yesterday before finishing around 7,500.

In the short term we’re seeing a lot of companies also at highs and priced above they’re moving averages. Higher valuations mean they are more sensitive and prone to corrections on any news perceived to be negative by the market. It tends to be more pronounced in companies with smaller market capitalisation.

Companies continue to release quarterly updates. August / moving into early September every year, seasonally tends to be a weaker period.

A correction is coming, not one to be alarmed about for long term investors. They are healthy and return markets back to fair valuations and provide buying opportunities.

The ASX VIX (volatility index) has fallen to under 12.

Volatility doesn’t necessarily show market direction (up or down) but the range of average price changes over time.

The S&P/ASX 200 VIX Index (XVI) calculates the amount of volatility expected in the market over the next 30 days.

•  High readings indicate uncertainty (bearish)
•  Normal readings suggest a slight bullish bias
•  Low readings indicate low volatility (bullish) and strong investor confidence.

CEO Insights

Consumer Behaviour

“There are two drivers behind this [battery category] growth. Devices owned per household are up mid-single-digits…and an increase in the amount of time those devices are being used. As a result, consumers are replacing batteries more frequently” 

Mark LaVigne, CEO, Energizer Holdings Inc

Mining & Resources

“I feel our industry is still too fragmented and needs to lift its horizon and focus a little more on the future. We have been living on a rising gold price going back to the turn of the century with not much focus on replacing the ore bodies we mine with similar quality” 

Dennis Bristow, CEO, Barrick Gold Corp Inc

Travel & Outdoors

“We are, of course, closely monitoring the impact of the Delta variant on the rising COVID case counts around the world as well as some newly imposed travel restrictions, which have led to a modest pullback in our booking trends in the month of July relative to June” 

Glenn Fogel, Booking Holdings Inc

“Right at the beginning of COVID, in February of 2020, I think I said when I was asked “Our inventory levels have been very stressed this whole season just because the demand is high” 

Helen Johnson-Leipold, CEO, Johnson Outdoors, Inc. [fishing, diving, camping & watercraft conglomerate]

“Fortunately, experience has shown us that traffic rebounds quickly when restrictions are lifted although the rate of recovery depends on the length and nature of ongoing restrictions” 

Scott Charlton, CEO, Transurban Ltd

Transport & Logistics

“You’ve got this huge increase in global steel prices, you’ve got these huge increases in shipping costs, you’ve got congestion at the wharves…sometimes you can’t even get your product off the port overseas” 

David Buchanan, CEO, Australian Steel Association

Automotive

“The currency that matters in our industry today is how large is a vehicle’s carbon footprint throughout the whole of its life cycle?” 

Oliver Zipse, Chairman, BMW AG

“The visibility that we have in the automotive industry on the semiconductor supply is still quite poor”

Carlos Tavares, CEO, Stellantis NV [parent company of Fiat Chrysler/Peugeot Group]

“By 2025, three of every one hundred new vehicles sold is projected to be battery or plug-in hybrid electric” 

Market Statement, GUD Holdings Ltd

Domestic Economy

“As the past 18 months have shown, Australia has a very strong, stable and secure financial system” 

Matt Comyn, CEO, Commonwealth Bank of Australia Ltd

Inflation

“We have seen operating costs including labour, transportation, and commodities rise rapidly over past few months. This is a trend we expect to continue” 

Mark LaVigne, CEO, Energizer Holdings Inc

“We have seen accelerating and unprecedented inflation” 

Donnie King, CEO, Tyson Foods, Inc [world’s 2nd largest meat processor]

“What you saw historically, freight cost could have been as low as $2,000 a container, coming out of China today I’ve seen prices as high as $18,000 a container. So, you’re looking at a 900% increase in those costs…and I think it’s going to go on for a few quarters at least” 

Selwyn Joffe, CEO, Motorcar Parts of America, Inc

E-Commerce

“The longer this pandemic goes, the more entrenched the way we’re living, [which] also means that we’re spending more online…and I think the world will be at 40% online sales through retail sooner than was forecast 12, 18 months ago” 

Greg Goodman, CEO, Goodman Group

Technology

“But regardless of where a company is on the growth spectrum, we’re seeing the same response today. Those companies that enjoyed accelerated growth [during COVID] now need to market effectively to sustain that growth. Those that were struggling and hit the pause button are now playing catch up [and] aggressively marketing to make up for lost time” 

Jeff Green, CEO, The Trade Desk Inc [world’s largest programmatic media buying platform]

Technology

“This increase [in mobile subscribers] is despite a decline in Australia’s population, a trend which is expected to continue to impact industry growth” 

Andy Penn, CEO, Telstra Corporation Ltd

“We expect this [cloud communications] trend will continue long after the world reopens. This is because enterprises around the world now understand that, if they are to compete and win they need to offer a stellar customer experience. They need the quality, scalability and flexibility that can only be found in the cloud” 

David Morken, CEO, Bandwidth Inc

“We now have many ambitious founders in Australia too, who have been very successful and, for me, that’s a really important part of creating that multiple generational industry, that you can start small and take on big audacious goals” 

Robyn Denholm, Chairman, Technology Council of Australia & Tesla Inc

More updates on the market and highlights for members follow below.


July – Week 1 and 2 update

Global markets, including the ASX have entered a corrective phase after a period of sideways movement. Renewed lockdowns in the US and growing case numbers locally and overseas are a factor.

The ASX 200 (XJO) briefly touched 7200 today and could retest the 7100 mark too.

Covid beneficiaries and defensive stocks in the consumer staples and healthcare sectors are expected to show some resilience relative to the wider market, with gains likely muted.

Companies planning to release guidance updates could see even the most positive updates drowned out by the selling pressure. 

Whats the strategy and approach in this period for us? Read on to find out. Members can also see a 30 minute video from Fahd and Moin, below with most recent portfolio company news.

The ASX VIX (volatility index) has started to creep up and is over 12.

source: marketindex.com.au

Volatility doesn’t necessarily show market direction (up or down) but the range of average price changes over time.

The S&P/ASX 200 VIX Index (XVI) calculates the amount of volatility expected in the market over the next 30 days.

•  High readings indicate uncertainty (bearish)
•  Normal readings suggest a slight bullish bias
•  Low readings indicate low volatility (bullish) and strong investor confidence.

CEO Insights

Consumer Behaviour

“We are optimistic about the long-term trends [of e-commerce and urban store formats] – we’re not planning a business for the long-term based on the last 12 to 15 months of COVID-19”

Tom Daunt, CEO, Aldi Australia

“We’re seeing the pendulum swing in consumer behaviour from the stockpiling and search demand for essentials in Q3 of last year to an increased demand for discretionary items this year”

Sherry Bahrambeygui, CEO, PriceSmart, Inc [multinational membership shopping operator]

“It is a sign of the times that you can place ads in newspapers, in shopping centres, online, on Seek, and pay all sorts of large amounts for that and there is just no response”

Warren Pearce, CEO, Association of Mining and Exploration Companies

“Spending on books is up double digits, maybe 15% and that’s true around the world…We’ve seen people turn to books as a form of entertainment, as an escape. People have gotten time back that they used to spend maybe commuting or traveling. There’s definitely this renaissance in book reading and book interest” 

Brian Murray, CEO, HarperCollins Publishing LLC

Food & Beverage

“Demand for almonds, both in their natural form and as a value-added food ingredient, in products such as plant-based milks and yoghurts, continues to grow”

Paul Thompson, MD, Select Harvests Ltd

“I think the non-sugar portfolio is excellent and that’s the area of the [drinks] category that is growing the fastest” 

Ramon Laguarta, CEO, PepsiCo Inc

Workplace & Employment

“Right at the beginning of COVID, in February of 2020, I think I said when I was asked how would this end up, I think I said that I felt 80% of all employee hours worked would be done in one of our offices, and that’s probably where it’s going to end up. Not 100%, but not 0%”

James Gorman, CEO, Morgan Stanley

Healthcare

“What we’re hearing from them [pharmacies] is that they are often overwhelmed trying to manage different health conditions, providers, appointments, bills and medication, all of which are on different platforms and channels…the overall healthcare space is sprawling and incredibly complicated”

Rosalind Brewer, CEO, Walgreen Boots Alliance Inc [global leader in retail pharmacy]

Automotive

“After 2035, you won’t be able to buy a new fossil fuel-powered car in Europe. That’s not far away, and the sheer scale of lithium that Europe will require to achieve that is just phenomenal” 

Francis Wedin, CEO, Vulcan Energy Resources Ltd

Domestic Economy

“Among global investors Australia continues to be a highly attractive investment destination and we expect continued strength in investment demand for quality assets in the year ahead” 

Darren Steinberg, CEO, Dexus

Technology

“The world is becoming digital, driven by four superpowers: cloud, connectivity 5G, artificial intelligence and the intelligent edge. I call these superpowers because each expands the impact of the others and, together, they are reshaping every aspect of our lives and work” 

Patrick Gelsinger, CEO, Intel Corporation

“It’s simple. Businesses across every industry will adapt or they’ll perish and with $100 trillion flowing into the global economy, demand for digital infrastructure will continue to explode” 

Charles Meyers, CEO, Equinix Inc [world’s largest colocation data centre provider]

“Pre-COVID our research showed a digital achievement gap with leaders growing 2x faster than laggers and we estimate that gap has now widened to 5x, with leaders stepping up their investment in technology and innovation, and lead progress taking accelerated steps to catch up” 

“Security is top of mind for our clients as the threat landscape expands” 

Julie Sweet, CEO, Accenture plc

“To some extent, there’s a gradual generational change that’s occurring inside companies, as the executives have a greater understanding of the role technology plays…But last year digital transformation really kicked into a whole other gear, and organisations figured out that the only thing that worked during the lockdowns was technology” 

Michael Dell, CEO, Dell Technologies Inc

More updates on the market and highlights video for members follow below.


June – Week 3 and 4 update

The official end of the financial year. Tax returns or Tax paying time.

The ASX 200 (XJO) remains close to all time highs. US markets similar. US Jobs numbers were slightly higher than expected (850k vs 700k). Wages were up slightly too. These numbers led Joe Biden to quote:

“This is historic progress, pulling our economy out of the worst crisis in 100 years, driven in part by our dramatic progress in vaccinating our nation and beating back the pandemic as well as other elements of the American Rescue Plan”.

Interestingly 40% of the job gains came in the hospitality & leisure industry. 150 million Americans are now fully immunised allowing the US to lift restrictions for businesses. It’s a hint that Australia could take to achieve higher breadth and depth of vaccinations. Far better we all go and get vaccinated than lock people up and lock the country down. If the US can do it with 330 million people surely Australia can do a bit better with 24 million people.

What were the highlights and companies that we focussed on this period? Members can find out in a 30 minute video from Fahd and Moin, below, including a deep dive into another company that seems to have currently bottomed.

The ASX VIX (volatility index) has seesawed remains currently under 12.

source: marketindex.com.au

Volatility doesn’t necessarily show market direction (up or down) but the range of average price changes over time.

The S&P/ASX 200 VIX Index (XVI) calculates the amount of volatility expected in the market over the next 30 days.

•  High readings indicate uncertainty (bearish)
•  Normal readings suggest a slight bullish bias
•  Low readings indicate low volatility (bullish) and strong investor confidence.

CEO Insights

Automotive

“To put it a simpler way: electric vehicles account for less than 1 per cent of vehicles globally at the moment. To reach net zero emissions that needs to be much closer to 100 per cent within 30 years. So that’s at least a 100-fold increase ahead, just for vehicles” 

Robyn Denholm, Tesla chairwoman

Aviation

“Space [exploration] has always been a competitive environment…These new players [SpaceX, Blue Origin, Virgin Galactic, etc] are here to stay, I think, and we’re working with them” 

James Taiclet, CEO, Lockheed Martin Corporation

Workplace & Employment

“There isn’t a CEO I speak to who isn’t seeing their industry transforming at the moment in many different ways, from their customer behaviours to the actual structure of its competitive nature” 

Jane Fraser, CEO, Citigroup Inc

“Of course, working at home just went crazy, but those that did a temporary solution are now realising this is the way I’m going to run my life for the future, maybe working hybrid 50-50 [home-office], so now I will upgrade my lighting and chair, so we are seeing the second wave of those investments” 

Jan Gardnerg, CEO, IKEA Australia

“I think most businesses and companies have moved into remote-only work with their organic teams and they’ve noticed that this is actually a pretty viable way of working and because of that, they’ve been also more open to figuring out how to integrate freelancers into that mix. So that has been a massive tailwind” 

Micha Kaufman, CEO, Fiverr International Ltd [top-tier global freelance marketplace]

Technology

“We just have never seen customer demand like this” 

Marc Benioff, CEO, Salesforce.com Inc

“We see three important industry trends now…The first trend is consumption upgrades as people spend the most time on their devices, leaving them to buy more devices and upgrade more often…The second trend is the infrastructure upgrade. The ever-growing use of online applications has not only increased the demand, but also raised the bar for ICT [information & communications technology] infrastructure…The third trend is application upgrade” 

Yang Yuanqing, CEO, Lenovo Group [worlds biggest PC company]

“We have found that clients on average have typically only moved about 20 per cent of their operations to the cloud. And the big thing that clients are now trying to solve is how you go from 20 per cent on the cloud to 80 per cent on the cloud” 

Matt Coates, Managing Director, Accenture ANZ

“The fact that almost one in three households [4 million out of 12 million] is not using the NBN today, illustrates the dynamic nature of the market” 

Market Statement, NBN Co Ltd

Electronics & Chip Shortage

“If you want electronics, buy them now. Otherwise, next year I think it will be very difficult to find anything” 

Serena Ross, CEO Circuitwise [Australian electronics manufacturer for medical device industry]

Media & Entertainment

“For markets that are opening up, where people are going back to school, going back to work, returning to their normal“The importance of the PC extends far beyond work and school. In many cases, this has become the entertainment center of the home from streaming and content creation to the rise of gaming and eSports” 

Enrique Lores, CEO, HP Inc

Residential Property & Households

“Coming through the other side of the pandemic…my view is that as first home buyers — particularly who look at apartments and smaller places and so forth — come out of the market, that volume will probably be replaced by investors” 

David Bailey, CEO, AFG Ltd

“In Australia, the significant uptick in housing approvals is now translating to increased building activity, with our sales particularly strong in Queensland and Western Australia over recent months” 

Lindsay Partridge, Managing Director, Brickworks Ltd

“We all can see that affordable homes are not coming forward, prices are just continuing to go up…we believe people will continue to want a home but will demand more value out of every dollar spent. That means for the future we will see much more competition into the affordable and smart home solutions” 

Jan Gardnerg, CEO, IKEA Australia

Banking & Finance

“That business [commercial banking] is really exploding with newborn digital players, as well as more and more companies that are looking at going into different geographies” 

Jane Fraser, CEO, Citigroup Inc

“There could be some pent-up demand out of COVID, but my belief is there is going to be more steady continuous momentum during the next couple of years as many businesses start shifting their financials to the cloud” 

Chano Fernandez, CEO, Workday Inc

Payments & Lending

“Open banking [sharing banking data with verified third parties] is a trend” 

Michael Miebach, CEO, Mastercard Inc

“So, what you’re seeing is that even as people are up and about and going into stores and card-present [payments] is recovering, card-not-present [payments] is still almost 60% above 2019 levels. So, you’re starting to see that that card-not-present is not slowing down, even as card-present recovers to, let’s say, almost pre-pandemic levels” 

Vasant Prabhu, CFO, Visa Inc

Agriculture, Food & Beverage

“Food production is Australia’s biggest manufacturing sector, with a third of all manufacturing jobs and over 14,000 food businesses. With our total food exports going up by 60 per cent since our first Global Food Forum in 2013, I’m confident more and more countries will be looking for safe Australian food as global markets realign” 

Anthony Pratt, CEO, Visy Industries

“There is increased competitive activity when it comes to milk supply in Australia. So, we are seeing some of our competitors that are offering higher milk prices” 

Kai Brockmann, COO, Saputo Inc [one of the worlds largest dairy processing companies]

Energy, Raw Materials & Resources

“Australia has the minerals to power the renewable energy age throughout the world in the coming years” 

Robyn Denholm, Chairwoman, Tesla Inc 

“Miners continue to benefit from global commodity consumption growth. Decarbonisation [is] expected to generate a structural change in metal demand including lithium, copper, and aluminium. Miners [are] continuing to increase their efforts to decarbonise their supply chain” 

Market Statement, Worley Ltd

“If our solution is entirely just to get a green world, we’re going to have much higher inflation, because we do not have the technology to do all this, yet. That’s going to be a big policy issue going forward too: Are we going to be willing to accept more inflation if inflation is to accelerate our green footprint?” 

Larry Fink, CEO Blackrock Inc

“Analysis by the International Energy Agency shows that half the global reductions required to achieve net zero will come from technologies that are not yet ready for commercial deployment” 

Angus Taylor, Federal Energy Minister

Commodities

“Although doubling in production over the past decade [and now the world’s second largest steel producer behind China] India is considered at an early stage of development with consumption per capita around a third of the global average” 

Andrew Harding, CEO, Aurizon Holdings Ltd

More updates on the market and highlights video for members follow below.


June – Week 1 and 2 update

And so the ‘Sell in May’ period may finally be done. The market as a whole is at record highs, but parts of it, certain sectors don’t necessarily feel that way. Short attacks on many companies, including some we hold in our folio, added to the volatility our portfolio experienced.

The ASX 200 (XJO) briefly traded above 7400 as banks, industrials and healthcare moved higher. Technology was flat. Miners like BHP were down so far this month.

After a spike, crypto stayed true to its volatile character and crashed by 50%. We’ve heard the analogy, when everyone at the BBQ and the Uber drivers are asking about <insert any overhyped asset>, then it’s probably the peak.

It is an interesting time indeed. Are we out of the worst phase of the economic part of this crisis? Read on to find out. Members can also see a 30 minute video from Fahd and Moin, below, analysing our portfolio performance and a deep dive into a company that seems to have currently bottomed.

The ASX VIX (volatility index) has seesawed over May and into June and is currently under 12. Interestingly, the VIX in the US has gone up higher.

source: marketindex.com.au

Volatility doesn’t necessarily show market direction (up or down) but the range of average price changes over time.

The S&P/ASX 200 VIX Index (XVI) calculates the amount of volatility expected in the market over the next 30 days.

•  High readings indicate uncertainty (bearish)
•  Normal readings suggest a slight bullish bias
•  Low readings indicate low volatility (bullish) and strong investor confidence.

CEO Insights

Aviation

“Airlines will disappear. Weak airlines will become weaker, strong airlines will become stronger and hopefully margins come back to at least pre-crisis margins…So, I think once this crisis is behind us, we’ll look at a more healthy industry” 

Carsten Spohr, CEO, Lufthansa AG

Automotive

“We’re seeing nice improvement as it relates to the supply situation, more drivers coming on the road, more supply hours” 

Dara Khosrowshahi, CEO, Uber Technologies Inc

“The business continues to benefit from increased use of private vehicles compared to public transport and an increase in domestic drive holidays” 

Market Statement, AMA Group Ltd

Workplace & Employment

“Most significantly, unemployment is falling and there are more people employed now than pre-COVID” 

Peter King, CEO, Westpac Banking Corporation

“SEEK ANZ continues to benefit from record high levels of SME hiring activity” 

Andrew Bassat, CEO, Seek Ltd

“Consumer sentiment has improved, and the Australian economy has largely emerged from the pandemic evidenced by, among other things, rising house prices, the unemployment rate returning to pre-pandemic levels, and job advertisement, at 13 year highs” 

Grant Kelley, CEO, Vicinity Centres

“Many companies have downsized these [internal] hiring teams and suddenly, with the end of COVID-19 pandemic in sight, companies may want to hire more people. But because they have already downsized their hiring teams, they need to hire people to be in the hiring team. That’s the situation many companies find right now” 

Hisayuki Idekoba, CEO, Recruit Holdings Co Ltd [one of the largest HR/staffing companies in the world]

“People have rebelled, they don’t want to travel two hours to work and two hours back any more” 

Harry Triguboff, CEO, Meriton

Telecommunications & Technology

“For markets that are opening up, where people are going back to school, going back to work, returning to their normal life, it appears they’re taking mobile games with them” 

Frank Gibeau, CEO, Zynga Inc [multinational mobile videogame company] 

“We now see over two-thirds of our bookings come through the mobile devices” 

Glen Fogel, CEO, Booking.com Holdings

“Customers are now seeking to transform from a world where data informs people to one in which data drives operations directly. Data drives digital transformation. Data is the beating heart of the modern enterprise”

Frank Slootman, CEO, Snowflake Inc

“The market is only about 25% into this entire cloud journey…what a hybrid [a combination of public & private] cloud environment does is it’s going to start breaking down those barriers to scale that 25% even faster. What barriers am I talking about? Data sovereignty, latency and security and regulatory requirements” 

Jim Kavanaugh, CFO, IBM Corporation

Semiconductors

“All of our businesses have more demand than supply. I will argue in the current environment if you’re a semiconductor company and you don’t have more demand than supply, you should be worried about it because we have everything in short [supply]” Cristiano Amon, CEO, Qualcomm Inc [leading global semiconductor manufacturer]

Global Economy

“The business environment has changed sharply, compared to three years ago…The prolonged impact of COVID-19 trade friction between the United States and China and increase in your raw material costs are all having an effect”  

 Satoshi Tsunakawa, CEO, Toshiba Corporation

Domestic Economy

“The biggest issue we are most anxious about right now is consumer confidence — actually now it is pretty good. But it is hard to believe it will continue” 

Brad Banducci, CEO, Woolworths Group Ltd

Residential Property & Households

“I think that people have understood and consumers, homeowners have realised that equipping their home, making it a joyful, a pleasant place to be, is something important that we have learned during the crisis and that will be kept moving forward” 

Eric Rondolat, CEO, Signify N.V. [parent company of Philips Lighting/multinational lighting corporation]  

Consumer Spending & Retail + E-commerce

“We feel that the next phase of e-commerce revolution will be merchant led. Thousands of new businesses have started during the past year that never even considered a brick-and-mortar store. This changes the shopping equation fundamentally” 

Ajay Virmani, CEO, Cargojet Inc [international air freight group]

“Athleisure and fitness consumer trends continued to drive strong [shoe] demand” 

Richard Johnson, CEO, Foot Locker Inc

Agriculture, Food & Beverage

“Meat and Livestock Australia has revised down cattle slaughter forecasts to their lowest level in 36 years and a fall of 11% on 2020 levels. The national cattle herd is also coming off its lowest level in 25 years, in 2020” 

Hugh Killen, CEO, Australian Agricultural Company

“Australian beef price or selling prices is very, very high” 

Wesley Filho, CEO, JBS SA [world’s biggest meat processor]

“The hiring demand [in hospitality] is increasing at a rapid speed…In the past 2 or 3 decades, this is the most difficult period to hire someone” 

Hisayuki Idekoba, CEO, Recruit Holdings Co Ltd [one of the largest HR/staffing companies in the world]

Travel, Leisure

“Corporate travel, including the small business segment, is now back to around 65 per cent of pre-COVID levels, and increasing month-on-month” 

Alan Joyce, CEO, Qantas Airways Ltd

“This is a global phenomenon…COVID created a step functional change where people who may never have thought about alternative [non-traditional] accommodations, now they’re thinking I want to go to a home that’s not near people, maybe near the beach or near the mountains and I feel safer there” 

Glen Fogel, CEO, Booking.com Holdings

“Leisure demand is growing strongly, with deferred international holidays converting into multiple domestic trips” 

Market Statement, Qantas Group Ltd

Energy, Raw Materials & Resources

“In the last three months, material prices have gone up further to, I would say, unprecedented levels. I think all basic materials, copper, nickel, zinc, aluminium, they’re all very high double-digit up. I think the most extreme is steel” 

Peter Coleman, CEO, Woodside Petroleum LtdNico Delvaux, CEO, ASSA ABLOY [world’s largest lock manufacturer]Peter Coleman, CEO, Woodside Petroleum Ltd

“We have a buoyant and transforming energy sector. It is indeed an incredible moment for us and for the industry…Renewables development is booming and the world is expecting to more than triple its renewable capacity over the next 20 years” 

Catherine MacGregor, CEO, ENGIE S.A [world’s biggest independent power producer]

“If you look at the remainder of this year, the demand in China and demand in the rest of the world is really just growing very, very quickly and that makes perfect sense, because when you step back and think about where you’re using aluminium, it’s in transportation, it’s in consumer durables, it’s in electrification, it’s in automotive.” 

Roy Harvey, CEO, Alcoa Corporation [top tier global aluminium producer]

Inflation

“We’re seeing very substantial inflation. It’s very interesting. We’re raising prices. People are raising prices to us and it’s being accepted” 

Warren Buffett, CEO, Berkshire Hathaway Inc

“Looking ahead, we’re facing a significantly higher inflationary environment. More specifically, we’re seeing increases in commodities, freight and labour costs” 

Daniel Servitje, CEO, Grupo Bimbo [world’s largest baked goods conglomerate including Sara Lee]

More updates on the market and highlights video for members follow below.


May – Week 1 and 2 update

The quiet, deceptive bull market continues. The numbers show almost 7,100 points for the ASX 200 with a high last week of almost 7,200. The reality is a different kind of K shaped pattern emerging with the technology and related sectors that did well last year, coming off the boil and Materials and banks etc. are seeing a rise. Also companies that were trading well above fair value are coming back to earth. Money is also being taken out of the riskier / more speculative end of the ASX and used in different ways. Crypto has increased in popularity. This is all part of the cycles a market goes through over time and as long term investors would attest to having experienced.

The Federal Budget was also announced for 2021, yesterday.

Federal Budget 2021 key takeaways
  • Additional 1.9B allocated for vaccine rollout
  • 1.5B for COVID related health, testing, respiratory clinics and telehealth
  • Tax cuts for low and middle income earners. Individuals to get $1,080 and couples $2,160
  • Additional 10,000 first home buyers able to buy with 5% deposit
  • 10,000 single parents able to buy with a 2% deposit
  • First Home Super Saver amount increased to 50k from 30k
  • 60 years olds and over can contribute 300k to their super by downsizing home
  • 19B for universities
  • 17.7B in new aged care funding
  • 15B for new terminals in Melbourne and Sydney
  • Spend 13.2B for NDIS over 4 years
  • 10B guarantee to make insurance cheaper in Norther Australia
  • 2.3B for mental health and suicide prevention
  • 2.1B allocated for aviation, tourism, arts and international education
  • 2B for pre-schools
  • 1.9B for national security over a decade
  • 1.7B investment in childcare
  • 1.6B for tech including clean hydrogen and energy storage
  • 1.2B for digital infrastructure, skills and cybersecurity
  • Launch of new patent box for medical and biotech sectors for concessional tax of 17% for income from new patents
  • 1.1B funding from women’s safety
  • 600M for community relief from natural disasters
  • 480M for environment, 100M for ocean protection
  • 170M to boost internet and mobile coverage in regional areas
  • $450 monthly minimum income threshold removed for super guarantee

The ASX VIX (volatility index) has crept up close to 13. Interestingly, the VIX in the US has gone up higher.

source: marketindex.com.au

Volatility doesn’t necessarily show market direction (up or down) but the range of average price changes over time.

The S&P/ASX 200 VIX Index (XVI) calculates the amount of volatility expected in the market over the next 30 days.

•  High readings indicate uncertainty (bearish)
•  Normal readings suggest a slight bullish bias
•  Low readings indicate low volatility (bullish) and strong investor confidence.

CEO Insights

Travel & Leisure

“We’ve seen strong demand since the [NZ travel] bubble was announced, with tens of thousands of bookings made in the first few days” 

Alan Joyce, CEO, Qantas Airways Ltd

“Safety has always been an important consideration for travellers in terms of destination choice, and Australia has always ranked highly in this regard, but the latest research shows it is increasingly becoming a competitive advantage for Australia” 

Phillipa Harrison, MD, Tourism Australia

“So outside of China, I think pay television peaked about 800 million households, and that was several years ago that it peaked [so we have] lots of room to grow” 

Reed Hastings, Co-CEO, Netflix Inc

“It is very clear from both customer feedback and client activity that businesses are keen to get back on the road. Corporate travel and company success are highly correlated” 

Jamie Pherous, CEO, Corporate Travel Management Ltd

“Through the use of our products, business leaders were able to see that flexible work could and should be something that continues long after the pandemic. Not only because data shows it’s what employees want, but also because it’s what can help our environment” 

Bill Wagner, CEO, LogMeIn [remote working collaboration tool]

Workplace & Employment

“For every 100 employees, we may need seats for only 60 on average. This will significantly reduce our need for real estate” 

Jamie Dimon, CEO, JP Morgan Chase & Co.

“All tenants are saying those days [10 square meters per person] are gone. The reversal, going back to 14 square metres per person is a massive change for the market which will offset the demand drain caused by people working from home two days a week” 

David Harrison, CEO, Charter Hall Group

“I think we are entering a period where it starts to get less cool to work from home” 

Harold Goddijn, CEO, TomTom N.V.

“The pandemic has fundamentally changed the concept of work…This is going to drive the continued consumerisation of corporate IT and a new wave of innovation, from more versatile and secure technology” 

Enrique Lores, CEO, HP Inc.

“Operationally, capacity across labour and transport markets remains tight in all regions and we continue to see increasing levels of lumber inflation” 

Graham Chipchase, CEO, Brambles Ltd

Office Property

“Several lead indicators of office demand have now turned positive including elevated business confidence for the financial and professional services sectors and higher levels of job vacancies” 

Susan Lloyd Hurwitz, CEO, Mirvac Group

“Clearly, that [office building] pressure remains very acute right now particularly in densely populated gateway cities and will remain challenging for some time to come. However, we strongly believe the pressures on Office will recede from today’s extreme levels, as vaccine rollouts continue” 

Bob Sulentic, CEO, CBRE Group Inc

Healthcare

“AI [artificial intelligence] is technology’s most important priority, and health care is its most urgent application” 

Satya Nadella, CEO, Microsoft Corporation

“The Australian vitamin and dietary supplement category has been [negatively] impacted by structural shifts as a result of COVID-19” 

Market Statement, Blackmores Ltd

Telecommunications & Technology

“We heard from our customers that companies like Facebook, Amazon and Google were simply not doing their planned expansions and upgrades [of data centres] during COVID, even with all the pressure for more data and more bandwidth. As business conditions improve, we believe we will see a strong increase in investment in the space due to pent-up demand” 

Gayn Erickson, CEO, Aehr Test Systems Inc [worldwide provider of testing systems for semiconductor manufacturers]

“In terms of what we’ve seen in the demand environment, I think, it’s one of the strongest demand environments that we’ve seen for a while”

Salil Parekh, CEO, Infosys Ltd [top 10 multinational IT consulting & outsourcing firm]

“We’re going to see [with 5G] much like we did with 4G, applications explode that we don’t even know today. We have no idea what they’re going to be…I mean, if you go back to the early days of 4G, no one expected we would be carrying the computing power and the number of applications we carry our pockets every day” 

Chuck Robbins, CEO, Cisco Systems Inc

Venture Capital & Innovation

“We still have a long way to go before we see the level of venture funding that we need in order to meet the demand from our rapidly expanding innovation ecosystem” 

Yasser El-Ansary, CEO, Australian Investment Council

“We feel that the next two to three years will be the best there’s been for innovation and new companies since the 1994-99 era” 

Paul Bassat, CEO, Square Peg Ventures [Australia’s largest venture capital firm]

Global Economy

“I feel we’re going to be talking not just about COVID-19, but COVID-22 and COVID-24, We’re going to have the stop-start economy for quite a while. I think we’re going to need to be prepared for a long haul” 

Magnus Nicolin, CEO, Ansell Ltd

“Rising yields on the back of a robust recovery is a positive as opposed to rising yields solely on inflation concern. Moving away from very low rates lessens the search for yield and lessens distortions to financial and non-financial asset prices”     

Doug Peterson, CEO, S&P Global Inc

Domestic Economy

“As we sit before you today, we are facing the most positive economic conditions that we have seen in the six years this [senate] committee has been enquiring into the major banks” 

Shayne Elliott, CEO, Australia & New Zealand Banking Group Ltd

Supply & Logistics

“We are seeing in ports around the world there’s a lot of constraint. Constraint and rising activity create one thing and that is inflationary pressures, and we are seeing that. Pretty nominal impact to the first quarter [of 2021], we do anticipate seeing a larger impact as we move into Q2 and Q3” 

Dan Florness, CEO, Fastenal Company [multinational distributor of industrial, safety and construction supplies]

“We have been able to continue to supply customers with product despite tightness in raw material supply and disruptions in ocean freight capacity which has resulted in an increase in transportation transit times” 

Market Statement, Ansell Ltd

“Growth in our non-aviation commercial sectors has also contributed to strong diesel sales, and we are beginning to see recovery in domestic aviation sales as domestic travel resumes” 

Scott Wyatt, CEO, Viva Energy Group Ltd

Construction & Infrastructure

“The Australian Government’s economic recovery plan includes substantial investments in infrastructure construction. Spending on major projects in Australia is expected to average around $30 billion per year for the coming years” 

Juan Santamaria, CEO, CIMIC Group Ltd

“BlueScope is a very different type of steel company and is in a compelling position to take advantage of emerging trends, such as demand for lower density and regional housing and for e-commerce and logistics infrastructure” 

Mark Vassella, CEO, BlueScope Steel Ltd

“Investors have begun to return to the [residential] market, primarily focused on masterplanned communities but demand is also gathering pace in the apartment markets” 

Susan Lloyd Hurwitz, CEO, Mirvac Group

Residential Property & Households

“[Industry is] looking beyond this JobKeeper and HomeBuilder period and seeing that the normalisation of population growth [through immigration] needs to be addressed and, at the moment, the timelines around international borders is very unclear”   

Ken Morrison, CEO, Property Council of Australia

“We expect house prices to continue to grow through this year and next but not at the rapid levels we have seen in the first two months of the year” 

Matt Comyn, CEO, Commonwealth Bank of Australia Ltd

“In some cultures where there was a longstanding do-it-for-me preference, we are seeing a new mindset emerge. COVID has created an environment in which people have not wanted to invite professionals into their homes. Therefore, to fix something in the home, one must do it themselves. We believe this trend has created a DIY tipping point in many markets and cultures around the world” 

Steve Brass, COO, WD-40 Company

Consumer Spending & Retail + E-commerce

“Consumer excitement and optimism is returning in ways it hasn’t since well before the pandemic, and we’re seeing a denim resurgence as more people are going out” 

Chip Bergh, CEO, Levi Strauss & Co.

“Customers complete 28% of purchases on Amazon in three minutes or less, and half of all purchases are finished in less than 15 minutes. Compare that to the typical shopping trip to a physical store – driving, parking, searching store aisles, waiting in the checkout line, finding your car, and driving home. Research suggests the typical physical store trip takes about an hour” 

Jeff Bezos, outgoing CEO/Founder, Amazon Inc

“You only need to look at the US to see how the e-commerce market is playing out, and why we remain bullish about the shift from offline to online. We are at the start of this once in a generation shift” 

Mark Coulter, CEO, Temple & Webster Ltd

“Small business and consumer sellers are thriving” 

Jamie Iannone, CEO, eBay Inc

“I think more and more, especially in younger generations are interested in the re-commerce of pre-loved items and so it’s why we’re leaning in so much towards that” 

Jamie Iannone, CEO, eBay Inc

Food & Beverage

“We’re seeing this unique period where there is both a continuance of that at-home consumer behaviour, as well as increasing away-from-home behaviour” 

Michele Buck, CEO, The Hershey Company [one of the largest chocolate manufacturers in the world]

“We are seeing overall that some of the changes that [have] happened with consumers through this pandemic, like doing more delivery, like going through drive-thru, those we expect are going to be enduring” 

Chris Kempczinski, CEO, McDonald’s Corporation

Travel, Leisure & Transport

“Corporate travel, including the small business segment, is now back to around 65 per cent of pre-COVID levels, and increasing month-on-month” 

Alan Joyce, CEO, Qantas Airways Ltd

“The current environment is characterised by extremely strong leisure demand – helped by the Federal Government’s half-price fare offer” 

Company Announcement, Qantas Airways Ltd

“The change we’ve actually seen is more people driving private transport and not using public transport” 

Robbie Blau, CEO, SG Fleet Ltd

Automotive & Microchip shortage

“Typically, carmakers will go for the latest and greatest [technology]” 

Harold Goddijn, CEO, TomTom N.V.

“I would suspect we’ll see this sort of [automotive market] buoyancy for a while yet but then we may see things start to contract marginally towards the end of the year” 

Mark Weaver, CEO, Peter Warren Automotive Holdings Group

“We are missing the most simple of chips that maybe only cost cents or dollars. That’s holding us up from building a product that costs $US75,000” 

Ola Kallenius, CEO, The Daimler Group [owner of Mercedes-Benz & worlds largest commercial vehicle manufacturer]

“We’ve had some of the most difficult supply-chain challenges that we’ve ever experienced in the life of Tesla” 

Elon Musk, CEO, Tesla Inc

Energy & Resources

“What’s fundamentally changed now is the capital discipline in the [LNG] industry that wasn’t there before and obviously the focus on climate change…It’s gone from being almost an industry that were [climate change] deniers to an industry that has accepted we need to be part of the change” 

Peter Coleman, CEO, Woodside Petroleum Ltd

“The high iron ore price won’t last, given other lower cost countries with huge resources, and huge higher-grade resources, will come into production in future” 

Market Statement, Roy Hill [Hancock Prospecting’s WA iron ore mine]

“We are talking with a number of miners about building their own 5G private network on a mine location where they can provide connectivity. They do that…because to try and automate the mine with robotics they need sensors infused in everything, but that then needs to be communicated” 

Andy Penn, CEO, Telstra Corporation Ltd

“Favourable commodity prices support higher CapEx [capital expenditure] for mining customers. We continue to feel optimistic about mining” 

Jim Umpleby, CEO, Caterpillar Inc

Environmental, Social & Governance

“Climate change risks are deeply imbedded in the financial system and impact all sectors and asset classes” 

Louise Davidson, CEO, The Australian Council of Superannuation Investors [industry body for ESG issues of superfunds & institutional investors]

“Distinctions between the corporate brand and the consumer brand are blurry. They are now two sides of the same coin and you can’t build an inclusive family focused global consumer brand like McDonald’s unless the corporations actions give evidence to those attributes” 

Chris Kempczinski, CEO, McDonald’s Corporation

More updates on the market and purchase entries for members follow below.


April – Week 3 and 4 update

After cracking the 7,000 point mark, the second half of April has been ‘Kangaroo’ like for the ASX. The earnings season in the US and talk tax increases have had a downward effect on their markets which have bled into the ASX.

The ASX VIX (volatility index) has remained around 13 to 11 this period.

Volatility doesn’t necessarily show market direction (up or down) but the range of average price changes over time.

The S&P/ASX 200 VIX Index (XVI) calculates the amount of volatility expected in the market over the next 30 days.

•  High readings indicate uncertainty (bearish)
•  Normal readings suggest a slight bullish bias
•  Low readings indicate low volatility (bullish) and strong investor confidence.

source: marketindex.com.au

CEO Insights

Technology

“Cyber security has to be high on the agenda for any listed company. If you’ve got something at stake, you’re a target. Every company on the ASX is utterly dependent on technology, but how many of these boards are ensuring that the risks are understood and appropriately responded to?”

Aidan Tudehope, MD, Macquarie Telecom Group Ltd

“For the larger and more complicated enterprise deals, being face-to-face for some of that sales cycle, as well as the implementation will [continue] to have some degree of importance”

Phil Snow, CEO, FactSet Research Systems Inc

“As the market is showing optimism with regards to a potential COVID recovery, we are seeing demand returning from industrial customers”

Mark Adams, CEO, SMART Global Holdings Inc [global computer memory & storage provider]

Global Economy

“I have little doubt that with excess savings, new stimulus savings, huge deficit spending, more QE [quantitative easing], a new potential infrastructure bill, a successful vaccine and euphoria around the end of the pandemic, the US economy will likely boom”

Jamie Dimon, CEO, JPMorgan Chase & Co.

Clothing & Textiles

“Pre-COVID, there was already an unprecedented amount of change taking place in the apparel industry driven mostly by technology and the consumer, which the pandemic only accelerated. The new normal will not be a static state, rather an ever-increasing rate of change”

Stefan Larsson, CEO, PVH Corporation [international clothing conglomerate/owner of brands inc. Van Heusen, Tommy Hilfiger & Calvin Klein]

“The trends that existed before the pandemic are even more important now and will only continue to grow post the pandemic. For example, people wanting to live an active and healthy lifestyle combined with the growth in demand for technical athletic apparel that performs, and finally, the innate need to feel part of a community and to share a human connection with one another”

Calvin McDonald, CEO, Lululemon Athletica Inc

“Having been present there [manufacturing clothing] for more than 30 years, we have witnessed remarkable progress within the Chinese textile industry. Being at the forefront of innovation and technology, China will clearly continue to play an important role in further developing the entire industry”

Helena Helmersson, CEO, Hennes & Mauritz AB [parent company of H&M clothing stores]

Automotive

“This is the strongest March result in two years with private buyers representing the largest proportion of new vehicle purchasers” 

Tony Weber, CEO, Federal Chamber of Automotive Industries

“It’s hard to know when the new car supply is going to continue to ramp up. I mean, they’re obviously facing some major chip shortages. I think the supply, the tightening of the supply is going to be around here for a while” 

William Nash, CEO, CarMax Inc [USA’s largest used car retailer]

“What we’re seeing in the UK is that drivers are saving money by going electric. It’s more cost-effective for us to provide an EV vehicle and more cost-effective for the driver. We’re starting to see that come into Australia now too, and one of the biggest drivers is that the cost of EVs is coming down. A lot of that is driven by the decrease in the price of batteries and the price of battery packs” 

Chris King, CEO, Splend [global car leasing operator to Uber drivers]

“Deloitte estimate that the CAGR, the compound annual growth rate for global EV growth sales will be around 29% over the next 10 years” 

John Chen, CEO, BlackBerry Limited [BlackBerry is now a car software provider]

Food & Beverage

“Psychology experts assert that it takes on average, 66 days for a new behaviour to become habitual…we are nearly 400 days into the COVID-19 pandemic. Consumers have adapted to at-home eating and formed new habits that we expect to sustain well beyond the current conditions and early data supports our hypothesis” 

Sean Connolly, CEO, Conagra Brands Inc [multinational packaged foods brands conglomerate including brands Birds Eye & Healthy Choice]

“Our projections show that Australian non-food online retailing has more than five years of growth in 11 months. Non-food retail sales hit $2.1bn in January 2021, which would have taken until April 2025 in line with the pre-COVID-19 growth trajectory” 

Vanessa Brennan, Partner, Retail, Consumer and Digital Consulting, PricewaterhouseCoopers

Energy & Resources

“What sometimes gets lost is that when you look at the resource sector in Australia, it has an economic impact locally but that is tenfold regionally. Don’t underestimate how significant an impact Australia played in allowing China’s economy to continue to rebound like it did, to be able to allow Japan and other regional economies to sustain themselves like they did [during COVID]”

Al Williams, CEO, Chevron Australia

Commercial Property

“The golden days of landlords milking retailers is gone. This [post COVID] is a complete reset” 

Paul Zahra, CEO, Australian Retailers Association

“If customers are choosing to shop a brand in store in a shopping centre then, yes, that’s a relationship with the landlord. If customers are choosing to shop online because we’ve invested tens of millions of dollars in infrastructure then landlords have nothing do with that” 

Mark McInnes, CEO, Premier Investments Ltd

“Data centre demand is pushing industrial land prices up across the country” 

Cameron Grier, ANZ Industrial & Logistics Director, CBRE Group

Residential Property

“Given the environment of rising housing prices and low interest rates, the bank will be monitoring trends in housing borrowing carefully and it is important that lending standards are maintained” 

Dr Philip Lowe, Governor, Reserve Bank of Australia

“There is definitely a sense of buyers having a fear of missing out as they know prices are rising” 

Dan White, MD, Ray White Group

“It [current property market] is a bit different from what we’ve seen in the past. It hasn’t made investors come in and speculate and increase prices. This has all been about owner-occupiers. It is supply-and-demand driven as opposed to anything else” 

George Frazis, CEO, Bank of Queensland Ltd

“Trying to control prices through taxes and what not, sometimes it works sometimes it doesn’t. I’d lean to more supply, to me if you have a supply/demand issue, let’s see how you can do that by increasing supply” 

Peter King, CEO, Westpac Banking Corporation

Retail

“I think if you ask anybody that’s providing a product these days, we’ve seen a seismic shift [to online] over the last 12 months” 

Gary Medved, CEO, Mace Security International inc [global manufacturer of personal safety & security products]

Agriculture

“Australia, right now, we don’t have a great statistic from the country, but my guess is that Australia is probably processing less than 100,000 cattle per week, has been this way since last quarter. It’s not new, and the normal would be 140,000” 

“Farm condition or ranch condition in Australia is extremely good and they received even more rain this week pretty much all over the place…So we’re going to continue to see a very strong retention and rebuild of the [cattle] herds in Australia”

Andre Nogueira, CEO, JBS Inc. [world’s largest beef processor]

Travel & Leisure

“The car rental shortage is a critical problem but at the moment there’s not much we can do about it” 

Luke Martin, CEO, Tourism Industry Council of Tasmania

“Around 38 per cent of Australian tourism businesses have told us they’re cutting jobs and reducing workforce hours to stay viable with the ending of JobKeeper, Sixty per cent of tourism enterprises are in a weaker position since COVID-19, 47 per cent remain open but have fewer staff, and the end of JobKeeper is having a major impact on exposed sectors” 

Simon Westaway, Executive Director, Australian Tourism Industry Council

“We’ve experienced significant latent demand upon opening new sailings this summer. In fact P&O [Cruises] opened to a single biggest booking day in seven years on the announcement of coastal sailings for its two ships this summer” 

Arnold Donald, CEO, Carnival Corporation [world’s largest cruise ship company]

International Education

“As a sector [ESL – English as a Second Language] that’s 100 per cent reliant on foreign nationals, we’re seeing other sectors like aviation and tourism being singled out [for COVID relief], but nothing dedicated for our sector at the moment, which is really disturbing”

Brett Blacker, CEO, Education Australia [national body for the English language sector of international education]

Transport & Logistics

“Reforms to address climate change are ushering in an era of modal shift for freight, from polluting and congested road travel to efficient higher speed rail service. This will drive significant growth in railcar demand in the years to come above and beyond replacement demand growth” 

Bill Furman, CEO, The Greenbrier Companies Inc [global manufacturer/repairer of railcars]

“Rail freight traffic has actually grown over pre-crisis levels in some countries” 

Bill Furman, CEO, The Greenbrier Companies Inc [global manufacturer/repairer of railcars]

“The spot rate on containers has gone up massively – there are less containers and less ships so there’s more demand than supply” 

Andre Reich, CEO, The Reject Shop Ltd

Inflation

“No matter what commodity you look at, whether its poly[ethylene], resin, oil or gas, commodity prices are up and a lot of them impact raw material costs” 

Bernie Brookes, Exec Chairman, Colette [handbag & jewellery retailer]

“As we navigate the current environment, we are seeing input cost inflation accelerate in many of our categories and across the industry” 

Sean Connolly, CEO, Conagra Brands Inc [multinational packaged foods brands conglomerate including brands Birds Eye & Healthy Choice]

More updates and purchase entries for members follow.


April – Week 1 and 2 update

April has been off to a better start so far in week 1. A string of good days has seen the ASX 200 get almost to 7,000 points. (Broke 7000 but closed at 6,999 points on Thursday 8th Apr 2021). This is a 14-month high (since Feb 2020).

The ASX VIX (volatility index) had dropped nicely down to 11.

source: marketindex.com.au

Volatility doesn’t necessarily show market direction (up or down) but the range of average price changes over time.

The S&P/ASX 200 VIX Index (XVI) calculates the amount of volatility expected in the market over the next 30 days.

•  High readings indicate uncertainty (bearish)
•  Normal readings suggest a slight bullish bias
•  Low readings indicate low volatility (bullish) and strong investor confidence.

CEO Insights

Travel & Leisure

“In some cases, we think the airfares could be half of what they were pre-Covid and that will be there to stimulate demand. Internationally it’s going to take a while for it to recover to 2019 levels” 

Alan Joyce, CEO, Qantas Group

Retail

“The consumer is really clear that they want to get what they want, when they want it, how they want it and they want a seamless, premium digital and physical experience. In fact, in many cases, they don’t see a difference between digital and physical” 

John Donahoe, CEO, Nike Inc

“Our brands remain well positioned to capitalise on consumer trends that have seen increased participation in surfing, camping and hiking” 

Xavier Simonet, CEO, Kathmandu Holdings Ltd

“One of the most interesting things we have seen in the last year is also the emergence of new cohorts of young DIY’ers, with a big increase in motivation, new skills and enthusiasm for DIY. Recent surveys we undertook across our market highlight that 18 to 34-year-olds have done more home improvement than any other age group…All of this is very encouraging for the future of our industry” 

Thierry Garnier, CEO, Kingfisher plc [multinational home improvement retailer]

Construction & Infrastructure

“I know that our competitors in Australia may have [based on their communicated guidance] a little bit of a different view on this but from what we see, also on the back of good infrastructure pipelines, there are significant infrastructure programs locally by state and nationally in place, we are optimistic for Australia” 

Dominik von Achten, CEO, HeidelbergCement Group [one of the world’s largest building materials companies]

“We are seeing very strong detached housing building approvals in Australia” 

Todd Barlow, MD, Washington H. Soul Pattinson Ltd

Domestic Housing

“I think they [house prices] will level out because people will run out of buying capacity” 

Lindsay Partridge, CEO, Brickworks Ltd

Food & Beverage

“Stores with fresh food fast have been performing well relative to control [status quo] stores within the same markets” 

Brian Hannasch, CEO, Alimentation Couche-Tard Inc [one of the world’s largest convenience store operators]

Transport & Logistics

“FedEx is prepared to transport vaccines to more than 220 countries and territories for as long as necessary to help eradicate COVID-19” 

Fred Smith, CEO, FedEx Corporation

Cryptocurrencies

“It’s more a speculative asset [cryptocurrencies] that’s essentially a substitute for gold rather than for the dollar” 

Jerome Powell, Chairman, US Federal Reserve

“You can now buy a Tesla with Bitcoin” 

Elon Musk, CEO, Tesla Inc

Automotive

“Australia is easily the most hostile environment for electric vehicles in the world” 

Behyad Jafari, CEO, Electric Vehicle Council [Australia’s national EV industry body]

“Every six months we do an update with a [Volkswagen] board meeting on the EV environment in Australia. They are sitting in waiting for something to change [improving regulations], you know, but nothing ever changes” 

Michael Bartsch, MD, Volkswagen Australia

“We also continue to be restrained from hitting full manufacturing potential given almost daily [vehicle] component availability challenges” 

Michael Happe, CEO, Winnebago Industries Inc

Inflation

“I cannot see a long-term rise in inflation. I talk to the chief executives who occupy Charter Hall’s $50 billion portfolio. No one I talk to predicts a wage breakout and technology will continue to be a wage deflator” 

David Harrison, CEO, Charter Hall Group

“We are seeing it across the globe, we are seeing inflation and it’s broad-based across commodities, across logistics, across things like aluminium and steel and so whenever you see this kind of broad-based inflation and it’s global, that’s an environment where you are going to realise net pricing [see less discounting]” 

Jeff Harmening, CEO, General Mills Inc [world’s 6th biggest food producer]

Employment & Workforce

“As employees return to offices, companies will discover that hybrid is hard to get right. Every meeting might have a remote participant but it’s not going to feel the same as when everyone was remote…Individual work will be different too, as it will often include the need to jump on a video call without distracting others” 

Jim Keane, CEO, Steelcase Inc [largest office furniture manufacturer in the world]

Technology

“Creation and consumption across phones, tablets and desktops is exploding” 

Shantanu Narayen, CEO, Adobe Inc

“All the CEOs that I’m talking to, those who’ve already invested in digital are absolutely doubling down because they recognise that this is the way to further differentiate” 

Shantanu Narayen, CEO, Adobe Inc

Energy & Resources

“They [energy storage batteries] are getting cheaper and cheaper by the minute” 

Brett Redman, CEO, AGL Energy Ltd

More updates on the market and purchase entries for members follow below.


March – Week 3 and 4 update

The market is attempting a recovery in the latter half of March, heading back over the 6,800 mark and staying there.

The ASX VIX (volatility index) has dropped down from around 13 to 11 this month.

Volatility doesn’t necessarily show market direction (up or down) but the range of average price changes over time.

The S&P/ASX 200 VIX Index (XVI) calculates the amount of volatility expected in the market over the next 30 days.

•  High readings indicate uncertainty (bearish)
•  Normal readings suggest a slight bullish bias
•  Low readings indicate low volatility (bullish) and strong investor confidence.

source: marketindex.com.au

CEO Insights

Domestic Economy & JobKeeper

“For inflation to be sustainably within the 2 to 3 per cent target range, wages growth needs to be materially higher than it is currently. This is the basis for our assessment that the cash rate is very likely to remain at its current level until at least 2024” 

Dr Philip Lowe, Governor, Reserve Bank of Australia

“There has never been a time where there has been such enormous disruption of industries, technology change, changes to consumer behaviours and ways of working” 

Rob Scott, CEO, Wesfarmers Ltd

“The reality is that the so-called [post JobKeeper] cliff that we all feared is a very, very shallow cliff, if at all” 

Shayne Elliott, CEO, ANZ Bank Group Ltd

“It feels like customers are becoming more prudent in terms of their spending – we’ve definitely seen that change in the last month” 

Andre Reich, CEO, The Reject Shop Ltd

“As confidence builds the savings rate will reduce to more normal levels, which will be another retail stimulus effect dropping into the economy” 

Ian Bailey, MD, Kmart Group

Global Economy

“At the Fed [Federal Reserve], we will continue to provide the economy the support that it needs for as long as it takes” 

Jay Powell, Chair, US Federal Reserve

“We’re also seeing an increasing tailwind from inflation, which started in commodities, but is now flowing through in the finished goods due to rising input, manufacturing, and transportation costs” 

Kevin Murphy, CEO, Ferguson plc [multinational plumbing/heating product company]

Global Semiconductor Chip Supply Crisis

“We’re seeing some constraints in the semiconductor supply chain. It’s impacting global automotive. The build rates have been rolled down from where we thought we would be as we entered into the year. We’re seeing that connection between electronics and automotive ever more impactful” 

“The digital-first world, everybody talked about the trends that accelerated in 2020. The digital-first world [has] put a big increase in demand as we’ve seen on semiconductor fabrication” 

Mike Roman, CEO, 3M Company [global industrial conglomerate]

“There’s a serious imbalance in supply and demand of chips in the IT sector globally” 

Koh Dong-jin, Co-CEO, Samsung Electronics

“We expect the situation to become critical during the second quarter and have therefore decided to take measures [reducing car production]” 

Market Statement, The Volvo Group

Technology & Telecommunications

“Today the data centre industry is supporting an enormous boom in technology and information creation, all of which are powered by computers and global networks that consume significant amounts of electricity” 

Craig Scroggie, CEO, NextDC Ltd

“Our ageing [national fibre] infrastructure isn’t really designed for where the world is going. When these were built, the cloud and Space X weren’t around” 

Bevan Slattery, Founder, HyperOne/Megaport/NextDC/PIPE Networks/Superloop

“Even as we can now see the other side of the pandemic – people have learned behaviours of the new digital world. It’s work from anywhere, do from anywhere – that world is here to stay. I believe the available opportunity for us is expanding” 

Michael Dell, CEO, Dell Technologies Inc

Automotive

“Within 2 life cycles the car industry will change dramatically, radically. Profit pools will shift from conventional cars, first into EVs [electric vehicles] and then radically into software. That has a lot to do with automated driving, which is going to happen” 

Herbert Diess, CEO, Volkswagen AG

“Technology companies entering the car industry means that the car industry has a future and choices for customers will widen” 

Akio Toyoda, CEO, Toyota Motor Corporation

“2021 is the tipping point toward EVs [electric vehicles]” 

Mark Reuss, President, General Motors Company

Healthcare

“Technology is rapidly going to disrupt the [healthcare] industry which has been really hard to change” 

Tom Seymour, CEO, PwC Australia

Energy & Resources

“All of us in the resources sector, including our colleagues in the coal industry, know that [environmental] change is coming” 

Andrew Forrest, Chairman, Fortescue Metals Group Ltd

“We haven’t seen any change in our relationship with our customers. We are seeing ongoing strength in demand” 

Elizabeth Gaines, CEO, Fortescue Metals Group Ltd

Commercial Property

“We’re seeing rents come down but it’s not a material number at this stage. As we get through the latter half of this year, vacancy rates will probably increase in shopping centres, so rental deals will become better” 

Andre Reich, CEO, The Reject Shop Ltd

Housing & Construction

“Everybody’s expecting a boom and so, if there is a boom, that’s when subcontractors’ and suppliers’ prices rise. If you go in really cheap now and activity picks up, you’ll lose money. The subcontractors and supplier prices will go up” 

Scott Hutchinson, Chairman, Hutchinson Builders [one of Australia’s largest privately owned construction companies]

“Given the profile of work we now see in front of us, especially in the key civil infrastructure markets on the east coast and particularly in Queensland, and across various industries including rail, road, energy, water and defence, we are very confident that earnings will continue to grow at a strong rate in the coming years” 

Steven Boland, CEO, Acrow Formwork & Construction Services Ltd [national formwork/scaffolding company]

“The housing stimulus has created more demand than ever, it’s absolutely unprecedented. Builders are all fighting over a limited number of subcontractors and now are more worried about securing enough tradies to deliver the projects, than winning more work” 

Russ Stephens, CEO, Association of Professional Builders

Retail

“Last year, we suddenly discovered a number: $60 billion – which is money that Australians spend overseas. I think most retailers will never ever forget that number again. Whilst we feel for international tourism operators…while Australians can’t travel, the harsh reality is that money is staying in Australia and with low-interest rates being pretty good for the property market…[this has been] very good for retail.” 

Richard Murray, CEO, JB Hi-Fi Ltd

“Safety and hygiene are here to stay – we’ll be selling a lot of hand sanitiser for many years to come” 

Sarah Hunter, Managing Director, Officeworks

“Beauty is a habit-forming, high frequency purchase – our customers see beauty shopping as essential not discretionary” 

Tennealle O’Shannessy, CEO, Adore Beauty Group Ltd

E-Commerce

“It’s a long-term trend that’s been accelerated in the last year, but it’s early days for e-commerce” 

Dhivya Suryadevara, CFO, Stripe [US$95bn global payment processing software company]

Financial Markets

“There is no question that digitisation and technology is expanding access, and the expansion of that access breeds more participation [in equity markets]” 

David Solomon, CEO, Goldman Sachs Inc

Food & Beverage

[Due to eating more at home] “We are seeing no shortage of [butter] demand” 

Rene Dedoncker, MD, Fonterra Australia

Travel & Leisure

“We’re seeing an improving trend in forward bookings across the globe” 

Kyle Gendreau, CEO, Samsonite International S.A. [world’s biggest luggage manufacturer & retailer]

“I don’t want to talk about hearsay or the feedback we get, but I would not expect it to be realistic that more than 30-50 per cent of people [would be] vaccinated in the western world before [the northern hemisphere] summer next year” 

Detlef Trefzger, CEO, Kuehne+Nagel International AG [world’s 2nd largest freight company/major vaccine distributor]

“Regions that haven’t been able to snare the ‘drive market’ are now down by about 40 per cent year-on-year for forward bookings, according to our 1200 members across the nation” 

Simon Westaway, Executive Director, Australian Industry Tourism Council

“Strong social distancing rules are still in place within the community; the vaccine rollout remains in its infant stages; our international border is still slammed shut, and local consumer confidence has been rocked by ongoing rolling state border closures. Until those four blockages are removed, the industry is in dire trouble” 

Simon McGrath, CEO, Accor Hotels Australia

Manufacturing

“The next really ‘holy grail’ in textiles will be recycling… I believe that for this industry, it’s unacceptable that we don’t have proper recycling solutions, something a bit more comparable towards what the paper, steel, aluminium [industries] have” 

Stefan Doboczky, CEO, The Lenzing Group [global textile manufacturer]

“Labour is very expensive in this country. You need to make premium products that people want to pay for and ensure that you are manufacturing in a smart way” 

Darren O’Brien, CEO, Mondelez Australia [world’s 2nd largest snack food company]

Education & Learning

“A growing global middle class and longer careers are driving lifelong and non-academic learning, particularly re[skilling] and upskilling, a trend that has been accelerated over the past year. This all adds up to a huge momentum in our industry” 

Andy Bird, CEO, Pearson Publishing PLC [multinational publishing & education company]

Workplace & Employment

“The gap between employment and learning is narrowing. Employers are becoming the universities of the future” 

Andy Bird, CEO, Pearson Publishing PLC [multinational publishing & education company]

“We don’t see anybody just saying, okay, we’re not sending you any new boxes…it is very steady in the business, if that someone sends us a box today, it will sit there for 15 years on average, that [tenure of box retention] has not changed during COVID, it didn’t change before COVID” 

William Meaney, CEO, Iron Mountain Inc [multinational document storage company]

“What Australia lacks is not the [tech sector workforce] talent, just the experience. When you are creating global platforms, getting the experience level in the country is a real key enabler” 

Anthony Eisen, Co-CEO, Afterpay Ltd

“I think you’re going to see a large creation of an onshore-centre-type workforce in this country in places like Adelaide, where you can get a labour arbitrage. You’re going to see a distribution of the workforce differently. COVID allowed us to do that” 

Tom Seymour, CEO, PwC Australia

More updates and purchase entries for members follow.


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