Author: Tabarruk

April 14, 2021

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.


March – Week 1 and 2 update

March started well before fading away toward the end of week 2 and rallying on the last Friday. Remember, this is after a week or so of turbulence and correction especially in the technology sector both locally and in the US.

The ASX VIX (volatility index) had crept back up, now just over 17.

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

“Australia is relatively well positioned having started from a position of fiscal and economic strength. We have a solid pipeline of infrastructure projects, the outlook of mining and agriculture exports is strong, and the community has benefited from the Governments significant income support measures” 

Matt Comyn, CEO, Commonwealth Bank of Australia Ltd

“The economy is recovering, consumer and business confidence is strong, and the labour market has been much more resilient than expected. At the end of December there were 12.9 million employed Australians compared to 13 million in March 2020

Peter King, CEO, Westpac Banking Corporation  

“Economic conditions in Australia have recovered strongly and the outlook is more positive” 

Rob Scott, CEO, Wesfarmers Ltd

Mining, Resources & Commodities

“Global steel demand exceeded expectations with record crude steel production in China, as well as robust global recovery” 

Market Statement, Fortescue Metals Group Ltd

“The outlook for Australian iron ore investment [is] particularly solid. Ongoing capital and operating expenditure required to sustain the high levels of production in this sector will drive strong and steady demand for engineering construction and maintenance services” 

Market Statement, Monadelphous Group Ltd

“Record inflows in gold ETF’s indicates the strength of investor demand at a time of heightened risk & uncertainty, ultra-low interest rates, fiscal expansion and economic shutdown” 

Market Statement, Newcrest Mining Ltd

“The Commodities division, particularly Geochemistry, demonstrated a significant improvement in performance late in the second quarter which [has] continued into the third quarter of FY21” 

Raj Naran, CEO, ALS Ltd

“Commercial businesses, excluding aviation, to remain robust with potential to benefit from the gradual recovery in aviation and cruise segments” 

Market Statement, Viva Energy Australia Ltd

Construction & Infrastructure

“Our Industrial Services portfolio is benefitting from accelerating mining production and economic stimulus measures to generate building and infrastructure activity” 

Ryan Stokes, CEO, Seven Group Holdings Ltd

“Based on the continued, strong momentum in its business and expectations for continued growth in residential end markets, the Company is raising its outlook for fiscal year 2021” 

Market Statement, James Hardie Industries plc

“Whilst a challenging environment continues for construction of retail, office and accommodation projects, health and industrial construction remains positive, along with the long pipeline of large-scale civil projects” 

Market Statement, Big River Industries.

Commercial Property

“The impact on office demand is not clear, though it is likely to result in some reduction. However, this is expected to be most pronounced for older, secondary grade product as firms seek to upgrade to modern, highly sustainable spaces integrated with smart technology that enables them to seek efficiencies with their occupancies” 

Susan Lloyd-Hurwitz, CEO, Mirvac Group

“Strong demand from the digital economy continues to drive enduring change, sustaining activity and property fundamentals for our business” 

Market Statement, Goodman Group

Residential Property

“Cashed up homeowners, many of whom are prevented from travelling either domestically and internationally, are now largely working from home and as such, are reassessing their lifestyle and surroundings. This is positive for our industry as it results in homeowners either transacting or improving the asset value of their current home” 

Eddie Law, CEO, McGrath Ltd

“Australia’s property market appears to be on the march again” 

Owen Wilson, CEO, REA Group Ltd

Retail

“I’ve been doing retail since the late 1950s and I’ve never seen anything like this. We’ve seen ups and downs and recessions but retail in Australia has never seen this… That’s happening right across the world, it hasn’t stopped. In April, May and June, sales went through the roof and it hasn’t stopped in January and February” 

Gerry Harvey, Chairman, Harvey Norman Holdings Ltd

“Regional and suburban stores [sales] were relatively strong”

 John King, CEO, Myer Holdings Ltd

“Spectacular sales growth throughout all states” 

Market Statement, Beacon Lighting Group Ltd

“Households have accrued a large stock of savings through 2020 due to periods of restrictions, and fiscal and monetary stimulus. Together with an improving employment market and evidence of growth in wages and salaries, prospects for continued recovery in retail consumption are expected” 

Susan Lloyd-Hurwitz, CEO, Mirvac Group

Transport, Logistics & Supply

“The huge drop in international passenger flights has created a huge shortage in the cargo capacity that goes with them – meaning the value of freighter space has surged” 

Alan Joyce, CEO, Qantas Group Ltd

“Global supply chains are under pressure to meet increasing consumer requirements and higher utilisation” 

Market Statement, Goodman Group

“Supply chain delays make it difficult to accurately predict sales revenue growth for the second half” 

Anthony Scali, CEO, Nick Scali Ltd

Automotive

“COVID-19 [is] driving unprecedented fluctuations in market conditions” 

Market Statement, Eagers Automotive Ltd

“Demand for vehicles across all our markets has been strong due to lower public transport usage, the absence of international travel and the evolution of more flexible working arrangements” 

Cameron McIntyre, CEO, Carsales.Com Ltd

“Vehicle supply expected to return to market in 4Q21 with normalisation of retail pricing” 

Market Statement, McMillan Shakespeare Ltd

Travel & Leisure

“Based on what we have seen so far, travellers have been keen to take off as soon as they have been allowed to do so, which should ultimately lead to a very solid rebound” 

Graham Turner, CEO, Flight Centre Travel Group Ltd

“This [travel returning to normal] isn’t some far away dream. It’s what we’re heading towards and it’s what we will get to in the next 12 – 18 months” 

Andrew Burnes, CEO, Helloworld Travel Ltd

Media & Advertising

“The advertising market clearly turned in late September, earlier and more sharply than we had anticipated, and this was led by television… The advertising market continues to show strength, with television in particular benefiting from a shift to ‘brand’ by major advertisers” 

Hugh Marks, CEO, Nine Entertainment Co

“Revenue has recovered strongly” 

Market Statement, oOh! Media Ltd

Technology & Telecommunications

“We saw an unprecedented spike in demand for [cybersecurity] devices throughout 2020 and expect this to continue this year. We are anticipating a high level of growth in automation, machine learning and data capture and analysis tools as businesses and governments prioritise efficiency and productivity within their operations” 

David Dicker, CEO, Dicker Data Ltd

Healthcare & Aged Care

“Surgical backlogs and latent demand for non-surgical services are expected to drive volumes as the general public’s comfort with the hospital environment improves.” 

Market Statement, Ramsay Health Care Ltd

“One sector where we have seen digitisation accelerate dramatically is, of course, in healthcare technologies” 

Andy Penn, CEO, Telstra Corporation Ltd

“Inadequate Commonwealth Government funding and prevailing uncertainty across the [aged care] sector needs to be urgently addressed in order to ensure provider viability and build adequate capacity for the future” 

Linda Mellors, CEO, Regis Healthcare Ltd

“In many parts of the world, we have continued to see an influx of COVID-19 patients requiring hospitalisation for respiratory treatment. Healthcare professionals are dealing with pressures unlike anything they have faced before”

 Lewis Gradon, CEO, Fisher & Paykel Healthcare Ltd

Consumer Staples

“Sales for all Group businesses [except Hotels] are expected to decline in March to June compared to the prior year as we cycle COVID sales surge” 

Brad Banducci, CEO, Woolworths Group

“Convenience store sales growth was also strong as Coles Express continued to benefit from the shift in customer behaviour towards the convenience channel and avoiding larger, busier stores” 

Market Statement, Coles Group Ltd

Agriculture & Food

“Favourable weather conditions and recently firming fertilisers prices are expected to drive higher earnings in FY21” 

Market Statement, Incitec Pivot Ltd

“We experienced near optimal conditions across much of eastern Australia during the recent winter cropping season and this has translated into one of the largest crops in recent history” 

Robert Spurway, CEO, GrainCorp Ltd

“Inflation in red meat also continued in the second quarter with cattle prices at record highs” 

Market Statement, Coles Group Ltd

“Many restaurants remain closed or are having to adapt to reduced volumes and it will likely be some time before we see the food service sector return to normal” 

Hugh Killen, CEO, Australian Agricultural Company Ltd

“The increased consumer activity in these [domestic] markets is expected to deliver long term benefits through increased per capita consumption with more consumers now familiar with salmon as a weekly family menu item” 

Peter Bender, CEO, Huon Aquaculture Group Ltd

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


February – Week 3 and 4 update

The market is now inching ever closer to the 7,000 mark. Only 120 points away now. Almost at pre-COVID levels.

The ASX VIX (volatility index) remains under 15.

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

More updates on the market and folio / watchlist companies for members follow.

Members should also check out the new article, The edge in investing lies beyond fundamental analysis.


February – Week 1 and 2 update

The market is about 200 points away from 7000. That was the level almost exactly a year ago. We may agree with it, or be shocked at how that’s possible, but that’s what we have in front of us.

The longest uptrend streak since August 2020.

The ASX VIX (volatility index) had inched over 15 last month, but has now settled back under 15.

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

More updates on the market and folio / watchlist companies for members follow.

Members should also check out the new article, The edge in investing lies beyond fundamental analysis.


January – Week 3 and 4 update

Combining Week 3 and shortened Week 4 updates.

The ASX VIX (volatility index) started week 3 under 15, but with the volatility in the US bound to have some effect on the ASX, we ended Thursday (28th Jan) almost at 16.

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.

Purchase entries and Watchlist updates for members are at the bottom of this update.

On to the latest CEO insights.

CEO Insights by Sector

Travel & Aviation

“While it’s good news that domestic travel is coming back strongly, international travel will remain largely off the cards until vaccines are rolled out.”

“It’s also unclear what the economic recovery will look like. So while we expect 2021 to be a lot better than 2020, we’ll be a long way off the kind of trading conditions we enjoyed in 2019.”

Alan Joyce, CEO, Qantas

“We have pushed forward with a few projects that take advantage of the empty terminals, like a refresh of our international retail precinct”

Geoff Culbert, CEO, Sydney Airport

“I am fairly pessimistic. Very pessimistic for travel and tourism.”

Graham Turner, Flight Centre

Local Economy

“This year we’ve seen business, government, environmental groups, unions and the broader community co-operate as never before,” she said.

“If we can keep this level of co-operation going, we can start to solve some of the big issues we’ve struggled with for decades and position Australia to emerge stronger for the future.”

“Sensible micro-economic reforms have the potential to pay dividends for future generations.”

Jennifer Westacott, CEO, Business Council of Australia

“The Treasurer has laid out a strong framework to pay down public debt by focusing on growing the economy through productivity-boosting reforms.”

“Sensible micro-economic reforms have the potential to pay dividends for future generations.”

Steve Johnson, CEO, Suncorp

“We also expect that the first half of next year may be the toughest economically, and so even though the outlook is very positive, we need to be prepared for a range of different scenarios”

Matt Comyn, CEO, Commbank

“As employment here continues to pick up and exceed expectations, we should see household spending increase and confidence return, which benefits the domestic economy”

“However, uncertainties exist, and we have seen how quickly outbreaks can take hold.

“Some sectors will inevitably do it tough until all restrictions are removed, or the threat remains of restrictions being reinstated, including interstate and international travel.

“We still have challenges to address in boosting investment and productivity, which I hope federal and state governments will now turn their attention to.”

Scott, Wesfarmers

Mining & Metals

“Lynas is one of only a few Australian companies whose sales are 100 per cent outside Australia”

“We are already seeing demand coming back in key markets as a result of the huge stimulus provided by governments globally, with many using this opportunity to address key policy areas.

“Some key areas include investing in resilient and diverse supply chains, investing in advanced manufacturing capability, and investing in product categories that respond to sustainability challenges. All these policy areas are good for our business.”

Amanda Lacaze CEO, Lynas Corp

Strategy in January and beyond

One of our strategies and themes this year is to accumulate and increase our positions in our existing company holdings as corrections play out.

We’ve made 3 purchases in existing companies in Week 3 and another purchase in Week 4.

Purchases detailed below for members.


January – Week 2 update

A flat week on the markets with 6,700 continuing to act as a key level.

Key headlines:

  • Biden expected to reveal COVID relief package details tonight
  • Early trial data points to Johnson & Johnson’s COVID vaccine being safe and effective in the short term. Long term data will also be studied.
  • 2 new variants of COVID being studied
  • 10 million people have received a COVID vaccine so far in the US
  • Chinese exports see more than expected growth in December
  • Shipping rates rise slowing parts of global economy, countering Asia’s trade-led recovery 
  • Japan’s machinery orders rise unexpectedly in November, 2nd straight monthly increase

The ASX VIX (volatility index) continues to remain just under 15.

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

Purchase entries for members are at the bottom of this update.

On to the latest CEO insights.

CEO Insights by Sector

Travel & Leisure

“The number of cars out on the road, and the congestion, has come back real quick” 

Darryl Abotomey, CEO, Bapcor Ltd

“I think the China market is the biggest global opportunity in the entire [mountain resort] industry and all the moves that we make for the company strategically are oriented around making sure that we can get benefit from that trend” 

“I think we’re seeing very strong demand for resort properties and a lot of transactions, in many ways probably the strongest demand we’ve seen since 2008 or 2007 and I think, people are looking for opportunities to be critically outside of many of the big cities because of COVID”

Rob Katz, CEO, Vail Resorts Inc

Aviation

“It’s going to be super competitive [in the market] because we’re all rebuilding the market [after COVID-19]. It will never have been cheaper to travel in this country” 

Jane Hrdlicka, CEO, Virgin Australia Airlines

Automotive

“We’re seeing rising steel prices in the U.S. and EMEA due to supply and demand imbalance. This has been caused by faster auto production recovery than anticipated and supply stock replenishment, which is currently outpacing industry steel supply levels as blast furnaces restart” 

Peter Watson, CEO, Greif Inc [multinational industrial packaging company]

Technology

“The way we work will never be the same again and it’s great to see how the PC [personal computer] has experienced a tremendous revival as the computing workhorse…paper to digital transformation is only accelerating, and every business process is going digital because every business is now a digital business” 

Shantanu Narayen, CEO, Adobe Inc

“I almost feel bad saying, maybe it [COVID] helped ultimately because many of our customers have realized the importance of using technology to deal with their customers, their employees, and their suppliers” 

Safra Catz, CEO, Oracle Corporation

Healthcare

“Even regulated industries that have traditionally been slower to embrace digital have certainly picked up the pace this year. We have industries like healthcare that are transforming, whether it’s through personalised medicine, telehealth and new ways, frankly, to engage patients” 

Shantanu Narayen, CEO, Adobe Inc

“I think this horrible COVID thing will shrink to insignificance in a year. They will get vaccines out so fast it will make your head spin. I watched the death of polio to vaccines too” 

Charlie Munger, Vice Chairman, Berkshire Hathaway

Media & Advertising

“Ooh [Media Ltd] is well positioned to leverage the ongoing recovery in audience growth and advertiser sentiment which is becoming increasingly evident” 

Brendon Cook, CEO, Ooh Media Ltd

“The media agency market spend, as measured by SMI [Standard Media Index], reached a low point for the year in May 2020 and has improved considerably since that time with November data showing a return to growth after 26 months” 

Market Announcement, WPP AU NZ Ltd

Retail

“With the inflections that we’ve seen this year through COVID with guests [our customers] living a more active, healthy life and looking for more versatility in their apparel clothing, I think that all bodes well for the addressable market”

 Calvin McDonald, CEO, lululemon athletica inc.

“I still think brick-and-mortar is not going to go away” 

Craig Jelinek, CEO, Costco Corporation

Global Economy

“We’re in a global recession, that will most likely for the most part continue in 2021” 

Mark Schneider, CEO, Nestlé S. A.

Equity & Financial Markets

“We are mindful that very low interest rates result in further asset appreciation; however, in the near term the risk of not stimulating the economy is greater” 

Shemara Wikramanayake, CEO, Macquarie Group Ltd

“There’s a lot of retail participation in a bunch of these IPOs. I do think we’re at a moment in time where there’s a lot of euphoria. I personally am concerned about that. I don’t think in the long run that’s healthy” 

David Solomon, CEO, Goldman Sachs Inc

“Financial markets are telling us that the growth and inflation outlook is benign, which supports governments’ capacity to acquire more debt for the foreseeable future, as long as interest rates are lower than trend growth, the cost of servicing the debt will fall as a proportion of GDP, and the debt burden will fall as growth picks up” 

Peter King, CEO, Westpac Banking Corporation

Commercial & Industrial Property

“There’s no comeback on warehouses. There’s been record activity level in them throughout the COVID period for the most part. Same with data centres, they are super strong” 

“You’ll see lots of people returning to the office. We think 80%-plus of that occupancy, if not more, will come back”

Bob Sulentic, CEO, CBRE Group

Residential Property

“This recovery in housing prices looks set to continue into 2021, so it will be important for housing supply to resume a steady pace given expectation of borders reopening and migration steadily resuming in the next one to two years. Imbalances in supply/demand will exacerbate house prices, resulting in affordability pressures potentially becoming a widespread issue again in the not too distant future” 

Susan Lloyd-Hurwitz, CEO, Mirvac Group

“We are currently posting record lending volumes through our network” 

James Symond, CEO, Aussie Home Loans

January – Week 1 update

The XJO (ASX200) didn’t quite get to 7,000 in December 2020. In fact we haven’t broken 6800 yet.

The start of 2021 so far seems to have 6,700 as a key level.

There is a touch of certainty again right now in global markets, amidst:

  • Some protests in the US around Presidential election confirmation
  • Private acknowledgement from Trump that he has lost and formal results to be certified next week
  • Vaccine rollouts with mixed success
  • Talks for further stimulus and infrastructure spending

The ASX VIX (volatility index) is slightly up from the 13s to 14.

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.

Watchlist and portfolio updates for members are at the bottom of this update.

On to the latest CEO insights.

CEO Insights by Sector

Media, Advertising & Entertainment

“I think that the demand [for gaming consoles] has been unbelievable…and we don’t see any end of that in sight. So certainly, these are fabulous pieces of technology. The demand is terrific for it” 

George Sherman, CEO, GameStop Corp [world’s largest video game/entertainment software retailer]

“The global footprint for mobile [gamers] is vast. You’re talking about 2.5 billion gamers and growing, with some of the fastest growth happening in Asia and emerging markets” 

Frank Gibeau, CEO, Zynga Inc [NASDAQ listed social/mobile game developer]

“We do not believe it [the streaming market] is a winner-takes-all market. We believe there’s a place for a number of streaming services to be successful” 

Bob Bakish, CEO, ViacomCBS Inc [multinational film, TV & media conglomerate]

Food & Beverage

“We do expect, and I think retailers would agree that a sustained view of in-home eating, whether that is because people are more slowly returning to normal life or the fact that more people are going to be working from home or this dynamic of more in-home socialisation which has been driving certain segments of snacking at a very aggressive rate” 

Mark Clouse, CEO, Campbell Soup Company

“I think some of those changes to consumer behaviour are as a result of cooking more meals at home. There are still a lot of people, even with restrictions lifted, working from home, which means lunches and breakfasts and other meals are made at home and it is likely to carry on” 

Jeff Adams, CEO, Metcash Ltd

Travel & Leisure

“Consumers are dying to travel, their banking points, [credit card] attrition is at an all-time low” 

“We’re seeing an increase in our consumer travel bookings, not necessarily in our corporate bookings”

Steve Squeri, CEO, American Express Company

“I can’t stress highly enough the demand for business travel. Now that borders have reopened, we’ve had a number of clients calling to say ‘we’ve got a lot of work to do before Christmas, seeing customers, seeing suppliers” 

Jamie Pherous, CEO, Corporate Travel Management Ltd

“In a sense, you could say the near-term has gotten a little bit worse because the virus statistics have gotten worse, but the medium and long-term has gotten a little bit better because the optimism around a vaccine is that much stronger” 

Arne Sorenson, CEO, Marriott International

Property

“While the rate of return to CBD offices in Sydney has stepped up, it is still less than half. Melbourne is starting its journey out of lockdown, while the return in other CBDs has stalled well below their pre-COVID levels” 

Ken Morrison, CEO, Property Council of Australia

Payments & Lending

“It is really pleasing to see the vast majority of our customers who accessed the banking relief package resuming repayments” 

George Frazis, CEO, Bank of Queensland Ltd

“Every single factor we use to set [loan loss] reserves has gotten better this quarter [versus] last quarter” 

Brian Moynihan, CEO, Bank of America Merrill Lynch

“There’s no question that things are better than people thought a few months ago”

Jamie Dimon, CEO, JP Morgan Chase & Co

Financial Markets

“We’re definitely seeing clients rethinking strategic asset allocation to satisfy return targets. We’re clearly seeing a search for yield with increasing allocations to both private markets and high-risk fixed income assets” 

“We are definitely seeing an increased awareness and incorporating ESG [environmental, social & governance] resilience can have a material financial impact on portfolios, and I think we’re really at the beginning stages of a long-term reallocation of existing capital into sustainable strategies. But more importantly, real growth coming from new capital into these strategies”

Gary Shedlin, CFO, BlackRock Inc [world’s largest asset manager]

Energy & Resources

“We believe that natural gas will continue to play an important role in providing energy and thereby supporting the further development of lower carbon, but intermittent renewable energy generation” 

Scott Wyatt, CEO, Viva Energy Group Ltd

Miscellaneous

“Our customers with new pets [puppies & kittens] are up nearly 40% on a year over year comparative basis. That is huge” 

Sumit Singh, CEO, Chewy Inc [world’s largest online pet retailer]

“While the pandemic has been a challenge for many small businesses, it’s also spurred what The Economist Magazine calls a once-in-a-generation surge in start-ups. We expect that small businesses will lead the recovery just as they did after the Great Recession in 2009” 

Kirk Simpson, CEO, Wave Accounting [subsidiary of H&R Block Inc]

Industrials

“I think we’re really kind of at an inflection point right now where we’re seeing demand move [for equipment & machinery]. We would say there’s still a long runway of replacement demand as you look at the age of the fleet and those sorts of things, so we think we’re a ways off mid-cycle let alone peak” 

Jahmy Hindman, CTO, John Deere & Co

Top

Someone from Sydney (AU) bought a yearly subscription 13 days ago