Buy Hold Sell, by Livewire Markets

Big shifts redefining small caps

The prospect of outsized returns in small caps is a calling card for investors. Returns above of 150% for the top quintile of small-cap stocks dwarfs the ~50% returns for the equivalent large-cap cohort, according to Refinitiv. The catch, however, is that the worst-performing small-cap stocks have more downside than their large-cap counterparts. 

 

In this thematic discussion, small-cap specialists Tobias Yao from Wilson Asset Management and Arden Jennings from Ausbil Investment Management discuss the significant shifts they're observing in small caps and the opportunities catching their attention. Increased volatility, a burgeoning tech sector and the value of strong balance sheets are three notable trends. Tune in for more detail and some of the stocks they're following closely this August.

Please visit Livewire Markets for the video and full transcript for this episode. Note: This interview was recorded on 29 July 2020.

 

 

Buy Hold Sell: 5 small caps riding structural growth tailwinds

If there's any sweet spot for a growth investor to be in, it's within an industry booming due to a structural shift in demand for a given product or service. However, a growth industry is just half the story; the other critical part, as legendary investor Warren Buffett puts it, is having "able and honest managers".

 

In this episode, Tobias Yao of Wilson Asset Management and Arden Jennings from Ausbil Investment Management discuss five ASX small caps that fit the bill on both fronts; talented management teams carving out niches within broader industries that are powering ahead. They include companies benefitting from the explosion in online shopping, soaring data consumption and the needs of an ageing population.

 

Visit Livewire Markets to access the podcast and edited transcript for the episode. Note: This episode was filmed on 29 July 2020.

Buy Hold Sell: 4 fundie favourites, and why CSL is a sell

Throughout Buy Hold Sell, fundies have generally agreed that the best businesses to own in the current environment are those offering highly scalable technology solutions; essential healthcare products; defensive dividend yields and commodities.

 

In this episode we cover a delectable cross-section of these companies: two of which are Blake Henricks from Firetrail Investments' favourites: Newcrest Mining, the gold giant whose outlook is underappreciated; and Telstra, offering a 4.5% dividend yield that he says will increase.

 

For Jun Bei Liu of Tribeca, the counter is Zip Co, which is giving Afterpay a red-hot run for its money, and Domain, a digital company springing into growth. Despite bringing their favourites,

 

Blake and Jun Bei don’t necessarily agree with each other’s choices. But they do settle on one thing: selling CSL, Livewire readers’ most-tipped big cap for 2020.

 

Visit Livewire Markets to access the video and podcast for this episode: Note: This episode was recorded on 15 July 2020.

Predicting the winners and losers of earnings season

With August results season around the corner, investors will finally get a clear picture of COVID-19’s impact on corporate Australia. We know it’s going to be bad, but how much is already in the price?

 

When Jun Bei Liu of Tribeca Investment Partners considers that question, she’s upbeat about the month ahead. “… it’s important to work out which analysts have been too conservative on what sectors and possibly, you have quite a lot of upside for those companies," she says.

 

For Blake Henricks from Firetrail Investments, the big things to watch are how companies protect balance sheets and whether the market buys management narratives around structural changes in response to the pandemic.

 

They expand on their views in this interview, answer whether they’re bullish or bearish on banks, resources, healthcare, technology and energy stocks, and call out where the re-rating opportunities are.

 

Visit Livewire Markets for the video and edited transcript. Note: This episode was filmed on 15 July 2020.

Buy Hold Sell: 5 of the best performing growth stocks

Amid a pandemic ripping through equity markets, there are a set of stocks which quickly developed herd immunity and eliminated the virus from their growth trajectory to become the top-performing ASX 200 companies.

These five superstars, with an average market cap of $9 billion, emerged from March with a scorching vengeance to round-off financial year 2020 with a total return of 125% on an equally-weighted basis. Meanwhile, the S&P/ASX 200 lost 7.68% over that same period.

But has this WAAAX-filled, biotech-laden and gold-plated monster of a group gone too far, considering their PE ratios range from -454x to +72x this year's earnings?

In this episode, James Marlay is joined by Eleanor Swanson of Firetrail Investments and Jun Bei Liu of Tribeca Investment Partners for a high-energy, no-fence-sitting debate on whether Australia's growth miracles can keep on keeping on.

Access the video, performance breakdown for the 5 companies discussed and edited transcript on Livewire Markets.

Note: This episode was recorded on 15 July 2020.

Buy Hold Sell: 5 ASX and international growth stocks

In the previous video, Roger Montgomery of Montgomery Investment Management and Ben Clark from TMS Capital stressed the importance of not overpaying for growth businesses to avoid being caught in the crossfire of high earnings expectations and an underwhelming reality.

In this episode, the duo scour stocks in the domestic and international markets offering the best growth opportunities at a reasonable price.

They include: 1) An Australian payments company at the top of Ben's list and whose share price has recently pulled back, 2) A WAAAX stock receiving unfair media coverage, 3) An ASX healthcare giant trying to find its feet, 4) A FAANG pick trading on 23x earnings; US$60 billion cash and tremendous growth optionality and 5) An iconic European brand riding the digital media boom.

Visit Livewire Markets to access the video and edited transcript for this episode.

Note: This episode was filmed on 1 July 2020.

Is it time you loaded up on growth stocks?

Have Australian investors mistaken their strategy all these years? As markets emerge from the “Corona Crash”, it’s evident that high growth stocks continue to be the best performers. For those expecting a great rotation whereby cheap, dividend-paying businesses would finally be prized for their cashflow generation in an uncertain economy; that theory never materialised.

To quantify this point, a recent study found that software stocks worldwide gained 21.41% from 14 February to 12 June. Meanwhile, capital-heavy banks, commodities, and industrial businesses – the backbone of domestic portfolios – are down ~25% (see below chart). That’s an outperformance gap of over 40%. This begs the question: should investors change tack and load up on the Afterpays and Altiums of the world?

Here, Ben Clark of TMS Capital and Roger Montgomery from Montgomery Investment Management discuss this topic and share their approach to growth investing as well as 7 stock ideas offering growth at a reasonable price.

Visit Livewire Markets to access the podcast and edited transcript for this episode.

Note: This episode was filmed on 1 July 2020.

Buy Hold Sell: 6 of the most Googled stocks

An investor’s best friend… Google. We all use it, we all love it. Google processes approximately 70,000 search queries per second, meaning 5.8 billion searches per day. So we had to wonder, what are the most googled ASX stocks?

Here, Ben Clark from TMS Capital and Roger Montgomery from Montgomery Investment Management discuss the six most googled Australian stocks. Join them as they talk about: 1) A household name with a very uncertain future; 2) One of Australia's most successful global stars; 3) A business spitting out cash amid high commodity prices; 4) A conglomerate riding the Work From Home boom; 5) A company that's fallen ~75% in 22 years; 6) A much-loved national icon facing the wrath of COVID-19. They may be the most popular on Google, but will they get the tick of approval from these fundies?

Notes: This episode was filmed on 1 July 2020. Access the edited and transcript and video here.

Buy Hold Sell: 6 small cap dividends stocks with big yields

Investors in traditional ASX 200 dividend stocks are expected to receive chump change over the next 12 months as companies "deny, defer or diminish" payments, as Nikko AM alludes in this recent wire. The fall in income expectations, combined with a spike in share prices, has seen yields compress across the broader market towards 3%.

But this situation provides investors an opportunity to fish for income in the world of small caps, where select companies offer a perfect mix of good income, durable business models and attractive valuations.

Here, Simon Conn or Investors Mutual and Dean Fremder of Perpetual Investments discuss 6 stocks with yields from 3.5%-6.5% (fully franked in most cases), with Dean pointing to one business growing earnings at over 10% annually, trading on a forward P/E of only 9x and the scope to boost its yield to ~11% given its surplus franking credits balance.

Please note: This episode was filmed on 17 June 2020. Access the full transcript and podcast for this episode here.

Where is the value in small caps?

The S&P/ASX Small Ordinaries Index has staged an extraordinary comeback, lifting 50% in value since the 23 March COVID trough. For Simon Conn of Investors Mutual and Dean Fremder of Perpetual Investments, the surge in prices means the sector is fully valued. The strategy now is all about finding hidden gems that have been left behind, and luckily for investors there's plenty where that came from.

As Fremder says: "There's lots of profitable companies out there that are probably under the radar because everyone's really focused right now on the sexy, conceptual tech companies and whatnot." In this extended interview, they expand on their views on valuations and what they're looking for in companies in this environment. Dean and Simon also share their secret "fishing spots" for value and three small caps they like right now.

Note: This episode was filmed on 17 June 2020. Access the transcript and podcast for this episode here.