Author: Tabarruk

November 27, 2022

February update

Since our last update, the markets have been volatile, mainly due to the Russia-Ukraine tensions and inflation / rate rises. The Australian market seems mostly unaffected in comparison to the US. The NASDAQ fell almost 10% in the last 10 days and is almost 20% down since the November 2021 highs.

The ASX 200 (XJO) is hanging on around the 7,000 level, down only 1.14% in the last 10 days and 5.6% down from the November highs.

BREAKING: Reports of military strikes are just coming out in Ukraine. ASX is down 3% and US Futures are down 2%.

Companies continue with releasing quarterly updates. 

The likely market correction we spoke about previously based on technical analysis seems to be continuing. 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) has finished the month higher at 19.3.

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

Telecommunications

“The last two years have shown us the criticality of communications [and] the demand for network quality has only increased”

Andy Penn, CEO, Telstra Corporation Ltd

Labour Markets & Workplace

“Businesses continued to rehire following COVID-related cuts, and in many cases restarted investment. Whilst candidate activity on our sites remained high, application rates were weaker”

Ian Narev, CEO, Seek Ltd

Metals & Resources

“The global decarbonisation of steel making, and electricity generation industries is driving demand for recycled metal”

Market Statement, Sims Ltd

“Coal supply is very constrained in all jurisdictions across the world and coal demand is very strong. We see this continuing for some time”

Paul Flynn, CEO, Whitehaven Coal Ltd

Inrastructure & Construction

“New major projects remain slow to move into execution, despite the sizeable infrastructure pipeline”

Zlatko Todorcevski, CEO, Boral Ltd

“We see now that the boost for our sector will expand longer and higher than just a one-for-one compensation of the [COVID] dip, because of savings redirected to renovation because of stimulus plans”

Guillaume Texier, CEO, Rexel S.A. [major multinational electrical supplies distributor]

“This [construction demand] is anecdotally supported by our home builder customers generally now placing orders for their customers 12 to 18 months in advance” 

Ross Taylor, CEO, Fletcher Building Ltd

Domestic Economy

“We certainly haven’t seen the inflation [in Australia] that we’ve seen in North America”

Brian Lowe, CEO, Orora Packaging Ltd

“The impact [of Omicron] has moderated in February”

Market Announcement, Cleanaway Waste Management Ltd

Macroeconomic

“I do think we need to front-load more of our planned removal of accommodation than we would have previously. We’ve been surprised to the upside on inflation. This is a lot of inflation”

James Bullard, Board Member, US Federal Reserve

Defence Spending

“The trend is continuing when it comes to the defence budgets [globally], they are increasing all over the place” 

Micael Johansson, CEO, Saab AB

Agriculture & Farming

“When things are good, you’ll find that farmers are looking to increase their assets and they’re buying more land and putting their cash into machinery” 

Marnie Baker, CEO, Bendigo & Adelaide Bank Ltd

E-commerce

“We believe that the COVID-triggered acceleration of ecommerce that spilled into the first half of 2021 in the form of lockdowns and government stimulus will be absent from 2022” 

Amy Shapero, CFO, Shopify Inc

Sport & Lifestyle

“I believe that currently, the inventory levels in the channel are probably the healthiest they’ve been [for the sector] in the last decade” 

Patrik Frisk, CEO, Under Armour Inc

“These structural shifts [behind golf market growth] include what we believe are long-term increases in remote and hybrid work, the increased desire to get out into nature, the momentum behind casual lifestyle apparel brands, the growth of new golfers with waiting lists to get into golf courses, and the growth and positive impact of off-course golf” 

Chip Brewer, CEO, Callaway Golf Co

Retail

“Our tenant sales are now approaching pre-pandemic levels globally while traffic levels are evolving positively“ 

Jean-Marie Tritant, CEO, Unibail-Rodamco-Westfield SE

“Travel retail has experienced a significant rebound but is still far from the pre-pandemic levels” 

Nicolas Hieronimus, CEO, L’Oréal S.A.

“Retail trading conditions were subdued in January due to rising cases of the COVID-19 Omicron variant impacting both customer traffic and labour availability, but trading momentum has improved in recent weeks” 

Market Announcement, Wesfarmers Limited

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


January update

Our first update for 2022. As we discussed in our last update, 2 months ago.. the markets were heading to all time highs and were due a correction. We are well and truly in one and what the next phase brings is going to be quite interesting.

The ASX 200 (XJO) fell from 7,600 way down to under 7,000 (a drop of over 10%).

Companies have begun releasing quarterly updates. 

The likely market correction we spoke about previously based on technical analysis seems to have eventuated. 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. This last part of the year can typically be a ‘Santa Rally’ heading into the festive season and new year.

The ASX VIX (volatility index) has finished the month higher at 18.7.

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

Retail

“I talk to the CEOs of almost every major retailer around the world. They are thinking full omni[channel] now. Like how do we engage with consumers digitally, not how do we attract them to our store” 

Dan Schulman, CEO, PayPal Holdings Inc

Banking & Payments

“I think there’s more change going on in our industry today and over the next 3 to 5 years, than we will have seen in the past 10 or 20 years” 

Dan Schulman, CEO, PayPal Holdings Inc

“From where we sit today, customers have largely paid down their debts, repaired balance sheets, saved money and are now ready to get out there to invest and spend” 

Shayne Elliott, CEO, ANZ Banking Group Ltd

Labour Markets & Workplace

“Everybody’s still finding their way [back in the office] and then you get the omicron variant, who knows, we’ll have pi, we’ll have theta and epsilon, and we’ll eventually run out of letters of the alphabet. It’s continuing to be an issue” 

James Gorman, CEO, Morgan Stanley Inc

“We expect the war for talent to be a key theme over the next three-to-five years” 

Steve Johnston, CEO, Suncorp Group Ltd

Childcare

“There is no doubt that retention of educators is a real issue across the sector” 

Gary Carroll, CEO, G8 Education Ltd

Commercial Property

“We expect early-cycle rises in interest rates to have limited impacts on commercial asset values because they are associated with a strong economy” 

Darren Steinberg, CEO, Dexus

Health & Fitness

“2021 has been a challenging year for digital fitness and as I mentioned on our last earnings call, we have seen increasing pressures on CAC [customer acquisition costs] that are impacting the entire industry” 

Calvin McDonald, CEO, Lululemon Athletica Inc

Domestic Economy

“Car sales are expected to lift next year, home construction should continue to be strong, and already we’ve seen business registrations double since COVID restrictions lifted” 

Nick Hawkins, CEO, Insurance Australia Group Ltd

“One measure of economic activity is the commitment companies are prepared to make to media advertising, and we are seeing strong demand for TV and digital advertising across late 2021 and into the new year” 

James Warburton, CEO, Seven West Media Ltd

“The lockdowns have made inner cities very unappealing and prompted tree change and sea change moves. It has also triggered disruptions to the labour market, and induced early retirement decisions” 

Eliza Owen, Head of Research, CoreLogic

Airlines

“We know that for every dollar spent on a ticket a further $10 gets spent in the economy. It will no doubt take 12 to 24 months, assuming no further big demand shocks, to get demand back in balance” 

Jayne Hrdlicka, CEO, Virgin Australia

Consumer Behaviour

“There is pent-up demand, and consumers will want to treat themselves as a reward for two years of constrained choices” 

Amanda Lacaze, CEO, Lynas Rare Earths Ltd

Supply Chain

“I think we’ll have a white-knuckle ride [into Christmas] not in consumer demand but in having the stock there for them to buy” 

Brad Banducci, CEO, Woolworths Group Ltd

Computers & Technology

“This demand momentum is unbelievable” 

Tarek Robbiati, CFO, Hewlett Packard Enterprise Co

Food & Agriculture

“Based on current estimates, to meet the needs of the growing population, we will need to produce more food in the next 40 years than we have in the past 8,000 years sustainably and while matching new consumer expectations. Think about this. This is the challenge of a lifetime” 

Juan Luciano, CEO, Archer-Daniels-Midland Co.

Pets

“A lot of us are focused on functional foods and beverages to increase health resiliency and we are extending that view to the pets we own in what is being called the humanisation of pets” 

Juan Luciano, CEO, Archer-Daniels-Midland Co.

Lithium & Batteries

“After decades of investment by the battery industry, we’re starting to see that cost come down, approaching that $100 a kilowatt hour cost which is so pivotal for the tipping point for economics [of electric vehicles] to be on even footing or better as time goes on versus internal combustion engines” 

Eric Norris, Lithium CEO, Albermarle Corporation [major global lithium producer]

AdBlue / Diesel Exhaust Fluid Supply Crisis

“We’re effectively in a bidding war on an hourly basis” 

Simon Henry, CEO, DGL Group Ltd [Australia’s largest AdBlue manufacturer]

“Uncertainty can cause more damage than actual shortages, and the recent nervousness around urea and AdBlue is illustrating how vulnerable our supply chains can be” 

Innes Wilcox, CEO, Australian Industry Group

Earnings Season Gives a Look Beyond Market Tumult

On Thursday, the froth in markets continued to eke down like the deflating foam in a root beer float. The Nasdaq fell to its lowest level since last June and the small-cap Russell 2000 entered official bear market territory by dropping 20% from its peak.

While markets will always do their thing, here’s a peek at how the businesses behind the stock prices are faring:

An Apple a Day Keeps Supply Chain Problems Away

Apple cautioned investors in recent months that supply chain woes and resulting parts shortages would impact its business. The company went ahead and posted its best-ever fourth-quarter results anyway. Despite the supply chain slowdown, the Silicon Valley tech giant banked a record $34.6 billion profit in the quarter, 10% better than analyst estimates. iPhone revenue — which is heavily dependent on a healthy supply of parts — totaled $71.6 billion, up 9% from a year ago, and way out in front of the average analyst estimate of $67.7 billion.

What’s Next: CEO Tim Cook hinted that Apple will soon be in an even stronger position, telling The Wall Street Journal, “We’re forecasting that we will be less constrained in March.”

McDonald’s Showed Labor and Inflation Burdens Aren’t Going Anywhere

On Thursday the fast food king announced that it’s doing what it’s supposed to do: selling burgers. Global same-store sales rose 12.3% in the fourth quarter, better than the 10.5% increase Wall Street expected. But the company’s $1.6 billion profit fell short of expectations, as the weight of inflation — higher prices for everything from meat to wages to vegetable oil — compressed profit margins. 

What’s Next: McDonald’s said it expects to open more than 1,800 restaurants this year and it will unleash $2.4 billion in capital expenditures. Meaning both more and fancier Golden Arches in 2022.


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


November update

Global markets, have had a started November pretty stable before ending weakly amid scares of a new COVID variant.

The ASX 200 (XJO) fell from 7,600 way down to 7,200 (a drop of 5%).

Companies have completed releasing quarterly updates. 

The likely market correction we spoke about last month based on technical analysis seems to have eventuated. 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. This last part of the year can typically be a ‘Santa Rally’ heading into the festive season and new year.

The ASX VIX (volatility index) has finished the month higher at 14.4.

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 & Banking

“When I step back and I think about my 40-year career, there have been periods of time when greed has far outpaced fear. We’re in one of those periods. Generally speaking, my experience says that those periods are not long-lived. Something will rebalance it and bring a little bit more perspective” 

David Solomon, CEO, The Goldman Sachs Group Inc

“The increase in banknotes in circulation against the backdrop of declining transactional cash use can be attributed to the growing role of cash for precautionary and/or store-of-wealth purposes” 

Market Statement, Reserve Bank of Australia

Cryptocurrency

“In my view, consumers should approach investing in crypto with great caution. The maxim, ‘don’t put all your eggs in one basket’, comes to mind” 

Joe Longo, Chairman, Australian Securities & Investments Commission

“As an industry, and as a government, we need to acknowledge this is not a fad. Don’t be the person in 1995 who said the internet was just a place for geeks and criminals and would never become mainstream. And don’t be the person who argued that email was a passing fad. If the last 20 or 30 years have taught us anything, it’s that all innovation begins as disruption and ends as a household name” 

Jane Hume, Financial Services Minister

Technology & Telecommunications

“Every second, 127 devices hook up to the internet for the first time” 

Market Statement, Altium Ltd

“As we look forward, all signposts point to continued strong market demand” 

Chuck Whitten, COO, Dell Inc 

“The idea falsely promoted by the platforms that algorithms are somehow objective and solely scientific is complete nonsense. Algorithms are subjective and they can be manipulated by people to kill competition and damage other people, publishers and businesses” 

Rupert Murdoch, Chairman, News Corp.

Electric Vehicles

“Absolutely it’s a Kodak moment. Some [fuel retailers] are already closing. And you’re starting to see in the United States signs up to sell not just petrol…but also electrification with a price next to it, which is a change we haven’t seen yet in Australia” 

Jane Hunter, CEO, Tritium [E.V. charging infrastructure company]

Housing

“Consumer confidence is high, especially in NSW, with similar trends expected in Victoria. It pays to be a tradie, with record job numbers up for the taking“ 

Roby Sharon-Zipser, CEO, Hipages Group Holdings Ltd

“Many Australians are clearly on the brink and are sleepwalking into disaster, living in the false hope that rates will stay this low” 

Peter White, CEO, Finance Brokers Association of Australia

E-Commerce

“I think we have witnessed a very healthy growth and very rapid growth [in China] and if you look at the penetration of e-commerce in many other markets outside China, I think it’s still in a very early stage” 

Daniel Zhang, CEO, Alibaba Group Holdings Ltd

Consumer Spending

“There’s more money sitting in bank accounts in Australia than there ever has been” 

Gerry Harvey, Chairman, Harvey Norman Holdings Ltd

“We’re expecting a really strong holiday season, and it’s all being fuelled by a super-strong consumer right now, the home balance sheet has probably not been stronger than this in a real long time” 

Chip Bergh, CEO, Levi Strauss & Co.

“The overall athleisure trend and further casualisation of society [is driving demand]. Some of this is aided by the continued work-from-home environment, some of it by the new return-to-work hybrid model, but overall, people want to be more comfortable”  

Dick Johnson, CEO, Foot Locker Inc

Labour & Skills

“Border restrictions are expected to be relaxed in the coming months, however with demand remaining strong across all industries, labour constraints are expected to continue for some time” 

Rob Velletri, CEO, Monadelphous Group Ltd 

“As we reflect on the [last] 18 months, I would say, I’d much rather have a supply problem than a demand problem” 

Sonia Syngal, CEO & Director, Gap Clothing Inc.

Universities & International Students

“March is traditionally one of the largest university intakes for new international students, [but] given the late timing of the government’s announcement we believe that we won’t see significant new intakes of international students in Australia until July 2022” 

Jake Foster, CCO, AECC Global [International overseas education consultancy]

“There is some serious global competition now for international students, with countries like Canada and the United Kingdom rolling out the red carpet” 

Jake Foster, CCO, AECC Global [International overseas education consultancy]

Travel & Aviation

“It’s interesting for us to note as an organisation that runs a global business to see that where demand does come back, it comes back in a hurry” 

John Guscic, Managing Director, Webjet Ltd

“The sheer physics of flights, and the cost associated with the technologies to be developed, means that this is a lot more complex [to make electric engines] than it is with automobile technology”  

Tony Douglas, CEO, Etihad Airways

Energy & Mining Services

“Customers are continually pushing production by extending the life of their fleet, creating a high level of demand for support activity. Customers are also focused on optimising their fleet over the long term. We have seen the first wave of technological step-change through autonomous haulage, which is ongoing and expanding from trucks to other ancillary equipment” 

Ryan Stokes, CEO, Seven Group Holdings Ltd

Healthcare & Hospitals

“In recent years, dramatic consolidation of generic drug buying groups, pharmacy benefit managers and health insurers has created significant downward pressure on manufacturers margins, both generic and specialty brands. At the same time the out-of-pocket cost of drugs to patients is rising and prescribers are being given less choice on patient treatment” 

Scott Richards, CEO, Mayne Pharma Ltd

“And the other thing that I see the hospital [industry] is doing, where we’re spending a lot of time with them is adoption on more remote capabilities and business models” 

Geoffrey Martha, CEO, Medtronic plc

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


October update

Global markets, have had a weak month overall after a period of touching record highs.

The ASX 200 (XJO) fell from 7,600 all the way down to 7,150 (a drop of 6.5%) and then rallied back to 7,450 before ending the month at 7,323 range.

Companies are continuing to release quarterly updates. 

We spoke previously 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. This last part of the year can typically be a ‘Santa Rally’ heading into the festive season and new year.

The ASX VIX (volatility index) has finished the moth at 13.

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 & Banking

“It’s difficult to overstate how transformative blockchain technology, digital assets and the thousands of decentralised apps that have yet to be created could potentially be. We expect rapid changes to the current market structure – new use cases will be discovered, and others will be discarded”

Market Statement, Bank of America Corporation

“No matter what anyone in the room thinks, nor what any libertarian thinks, nor what anyone thinks about it, government’s going to regulate it”

Jamie Dimon, CEO, JPMorgan Chase & Co

Technology & Telecommunications

“We’re in the worst of it now [semiconductor shortage], every quarter next year we’ll get incrementally better, but they’re not going to have supply-demand balance until 2023” 

Pat Gelsinger, CEO, Intel Corporation

“We are also seeing an acceleration in our consumer IoT business, driven by rapid growth in devices such as VR headsets, smart exercise equipment, and smart speakers” 

Sanjay Mehrotra, CEO, Micron Technology Inc [one of the world’s biggest computer chip makers]

“We’re all chasing each other in this massive musical chairs being played across the industry, where we get [staff] from the banks and the banks get from us, and then the energy companies do the same, and then we go and steal the mining company’s cloud people; so it’s just a mess” 

Nikos Katinakis, CEO Networks & IT, Telstra Group Ltd

“There is a technology revolution going on. There is compliance and getting operational resilience things right but we also have to keep up with the world of technology, which is changing so quickly” 

Dominic Stevens, CEO, ASX Ltd

Housing

“A buoyant housing market and a reduction in travel spend are also supporting the growth of our sector” 

Mark Coulter, CEO, Temple & Webster Ltd

“While the banking system is well capitalised and lending standards overall have held up, increases in the share of heavily indebted borrowers, and leverage in the household sector more broadly, mean that medium-term risks to financial stability are building” 

Wayne Byres, Chairman, Australian Prudential Regulatory Authority [APRA]

“The sector is enjoying positive growth, which we start believing can become structural” 

Antonio Achille, CEO, Natuzzi S.p.A [Italy’s largest furniture company]

Consumer Spending

“The end of lockdowns will no doubt have the world return to a more “normal” distribution of discretionary spend” 

Mark Coulter, CEO, Temple & Webster Ltd

“We are seeing the world shift; it has been going on for some time… The greater financial literacy [of younger generations] means people shop around more and Australian consumers are extremely sophisticated in how they think about which products they consume” 

Chris de Bruin, CEO Consumer & Business Banking, Westpac Banking Corporation

“There’s a lot of catching up to do. There’s $100 billion extra sitting in people’s bank accounts. We expect a fair share of that to be spent on food and drink” 

Steven Cain, CEO, Coles Group Ltd

“In Australia, I think retail is going to be fine. We’ve got the advantage of knowing what happens when other countries opened. Australia is sort of lagging from that point of view” 

Brett Blundy, Chairman, Lovisa Holdings Ltd

“Across the world consumers seem to be looking at pricing a little bit differently than before…consumers are shopping faster in-store and they might be paying less attention to pricing as a decision factor, and they might be giving more relevance to the brands that they feel a bit closer to…We’re seeing less [price] elasticity” 

Ramon Laguarta, CEO, PepsiCo Inc

Labour & Skills

“From a wage inflation point of view in the market, what we’re seeing is that there’s more pressure at the lower end of the wage spectrum where there is a lot of movement there to attract people to jobs that have been really hard hit during the pandemic” 

Martine Ferland, CEO, Mercer Inc

“One size fits all is dead. The corporate headquarters as we knew it, 9-5, five days a week, corporate HQ, I don’t think we’re ever going back to that” 

Marcelo Claure, Exec. Chairman, WeWork Inc

“The labour market and labour shortages have replaced returning to work as the conversation starter for everyone” 

Jane Fraser, CEO, Citigroup Inc

“There is already a lot of demand for engineers, supervisors and health and safety professionals, and this will just increase in coming years” 

Joe Barr, CEO, John Holland Group

Travel & Aviation

“People are optimistic but cautious; they’re keen to go overseas again, but they’re mindful of the risks” 

Simon McGrath, CEO, Accor Hotels APAC

“A lot of today’s issues should be in the rear-view mirror by then. It is a great time to start an airline; there is pent-up demand, and we can also leverage good opportunities in the aviation market like cheap jets” 

Tim Jordan, CEO, Bonza [new Australian low-cost airline]

“International leisure bookings have now surpassed domestic bookings in Australia for the first time since the start of the pandemic and almost tripled between July and September” 

Graham Turner, CEO, Flight Centre Travel Group Ltd

Energy & Mining Services

“We continue to see strong market demand from our customers across Australia for DDH1’s industry leading drilling services, particularly across gold, iron ore and – increasingly – battery minerals” 

Sy van Dyk, CEO, DDH1 Ltd [major Australian drilling company]

“Copper is critical to the global shift to decarbonisation and this is a shift we are participating in as a company” 

Sandeep Biswas, CEO, Newcrest Mining Ltd

“I’d compare green hydrogen to the beginning of the Industrial Revolution where everything changed. And I see this legitimately as the next great industrial revolution, but this one is entirely pollution free” 

Andrew Forrest, Executive Chairman, Fortescue Ltd

“By our analysis if governments and private sector continue to develop energy infrastructure the way we always have, we won’t get to net zero by 2050. We might not get even half-way” 

Chris Ashton, CEO, Worley Ltd

Automotive

“The modern automotive industry has heard this message loud and clear. If you don’t give your customers an electric option, they won’t stay your customer for long” 

Behyad Jafari, CEO, Electric Vehicle Council

“Elon Musk would have you believe everyone will be owning an electric vehicle very soon…There is certainly no technology that is going to replace the tractors and trucks out there” 

Simon Henry, CEO, DGL Group Ltd [ASX listed diversified industrials group]

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

“The behavioural science tells us that when people learn to cook in early age, they continue to cook at elevated levels as they get older, and consumers of all ages are rediscovering their kitchens, and cooking more at home” 

“Another enduring trend is the growth of snacking, which has long been the fastest growing occasion in food and shows no signs of slowing down”

Sean Connolly, CEO, Conagra Brands Inc [major global packaged food brand conglomerate]

“I think during the pandemic, we’ve proved to the world what we can do if we work differently ourselves but also if the interactions with regulators is different and has a higher sense of urgency. So then if you could do that for COVID, why not for cancer? Why not for rare diseases? Why not for inflammation, cardiovascular disease?” 

Albert Bourla, CEO, Pfizer Inc

“Part of the tailwind we’re seeing is sport is becoming part of everyone’s everyday life. And that’s a powerful tailwind for us” 

John Donahoe, CEO, Nike Inc

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


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]

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