With geopolitical instability at the forefront and an abundance of cost pressures emerging, what should investors take from the February reporting season?
Dion Hershan (Head of Australian Equities), Katie Hudson (Head of Australian Equities Research), and Joel Fleming (PM, Microcap Equities) discuss this and more in their earnings season wrap-up.
Large Cap Reporting Season Insights
For Dion Hershan, Head of Australian Equities, the enormous amount of monetary and fiscal stimulus cascading through to corporate Australia has underpinned a strong reporting period. But with markets over the past 10 years having been characterized by falling interest rates, which have boosted asset prices and profitability, it very much feels as though we are heading into a very different era.
Small Cap Reporting Season Insights
Corporate Australia has positively navigated recent challenges and the accompanying volatility extremely well, with Australia’s small cap sector meeting earnings expectations through reporting season. But for Portfolio Manager Katie Hudson, Australia is now entering a very different interest rate cycle than anything observed over the last 30 years, meaning owning quality franchises with strong balance sheets and cash flows has probably never been more important.
Micro Cap Reporting Season Insights
While the ASX 200 was up about 2% and small ordinary were flat through February, under the surface we observed continued selling of long duration cash flow businesses as cost base inflation moved sharply higher, most evidently in the technology sector. Portfolio Manager Joel Fleming believes this period of dislocation will bring some great opportunities for investors with strong track records backing the tomorrow’s market leaders.