CBA: Much, much better than expected
Normally the semi-annual profit results from the Commonwealth Bank are fairly staid affairs, with the bank delivering consistent profits with few surprises. However, this reporting season the CBA result will face a far greater degree of scrutiny after the annus horribilis of 2018. Show More
Big versus Small Company Investing
Over the past twelve months small companies (as measured by the ASX’s Small Ordinaries) have returned 22%, outperforming large caps (ASX Top 100) by almost 10%. This has led to numerous articles in the financial press claiming that small is beautiful and that investors should look beyond large Australian companies... Show More
5 key considerations for FY19
At the start of every year, most fund managers will sit down and try to identify the key considerations or issues that their portfolio will likely face over the coming twelve months. Below are what Atlas see as the five key considerations for equity investors for the 2019 financial year. Show More
Losing money overseas
In the travel sections of newspapers there frequently appear articles with titles such as Top 7 Overseas Travel Scams (and How to Avoid Them). However, Atlas see the biggest cause of Australians losing money overseas is not pickpockets, dodgy taxi drivers, or pre-damaged rental jet skis, but rather ill-conceived offshore... Show More
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The most (and the least) profitable companies on the ASX200
In early May the major Australian banks collectively reported profits for their last six months of A$15.3 billion dollars. This resulted in some media commentary about banks being too profitable, especially as three of the banks reported in the middle of the Royal Commission into the financial services industry, which... Show More
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Hard to fault Westpac's result
Today marked the conclusion of the May profit reporting season, with Westpac finishing the season well with a strong result that was well-received by the market. May has been a kinder month for shareholders in the major Australian banks than March and April, with three of the four major banks... Show More
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Key takeouts from NAB's result
NAB's first-half results on Thursday marked the second stop in the banks' results season. This is giving management teams the platform to address the issues raised at the Royal Commission and give a boost to their sagging share prices by showing how their businesses are performing. NAB's results, similar to... Show More
ANZ: Solid result despite the Royal Commission
The last month has been tough for shareholders in the major Australian financial services companies, who have seen their share prices drift lower throughout March and April. Evidence of misconduct presented at the Royal Commission on Financial Services has fed market fears that bank profitability will be diminished in the... Show More
Sticky fingers in many pies
The business of wealth management has been put under the microscope over the past month with the Royal Commission into the financial services industry. In March, the Commission focused on misdeeds in consumer lending and for the next two weeks in April it will be concerned with transgressions around financial... Show More
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Who wins in the Coles demerger?
On Friday morning, Wesfarmers announced that they are looking to demerge its Coles division to create a new ASX top 30 company, with leading positions in supermarkets and liquor. This move was very well received by the market, with Wesfarmers stock finishing up $2.60, or +6.3%, on Friday. Over the... Show More
Highs and Lows from Reporting Season
Last week saw the end of reporting season for 180 of the S&P/ASX200 companies and around 2,000 of the companies listed on the ASX. Over the past month, these companies revealed their profit results for the six months ending December 2017 and provided guidance as to how they expect their... Show More
What should you sell in a volatile market?
The first two months of 2018 have been a wild ride for Australian shares, with big falls and then big recoveries. However, from looking at the headlines in the financial press most investors would be surprised to find out that the ASX 200 index actually finished February exactly where it... Show More
Does QBE have the capital for their buy-back?
There is an esteemed group of companies on the ASX, such as CSL and Macquarie, where investors give management the benefit of the doubt. They trust that short-term issues can be overcome, and that future earnings guidance will not only be met, but may even be exceeded. Once upon a... Show More
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Avoiding the portfolio ‘torpedoes’
I have had the “fortunate” experience of having observed both the GFC in 2007-08 and the Tech Wreck in 2001 from the vantage points of helping to manage conservative value-style funds. During these periods the portfolios were populated with companies paying dividends from stable recurring earnings such as TransCanada Pipelines... Show More
Where in the mining cycle are we today?
Unlike industrial companies such as Amcor or Transurban, profits for mining companies are inherently cyclical. The earnings from mining companies are subject to booms and busts, largely outside the control of their management teams. This occurs as ultimately any company producing a commodity is a “price taker” not a “price... Show More
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Dogs of the ASX …. Woof Woof!
In this week’s piece written from snowy Norway, we are going to look at the “dogs” of the ASX, focusing on large capitalisation Australian companies with falling share prices. Additionally, we are going to sift through the trash of 2017 to try to discern any fallen angels with potential to... Show More
Croquettes and Duck Confit for Westfield
This morning European property company Unibail-Rodamco announced that it had entered into an agreement to acquire Westfield (WFD) to create a global developer and operator of flagship shopping centres in the US, UK, the Netherland and France. This deal values WFD at A$33 billion, or at a price earning multiple... Show More
Earnings Chicanery - Part Two on how companies "dress up" their results
Last week in part one of Atlas’ surprisingly popular series on financial statement trickery - Earnings Chicanery, we looked at the three financial statements and some measures a company can take to “dress up” their financial results. In part two we are going to build on this and take a... Show More
Earnings Chicanery - how companies "dress up" their results
In part one of a two-piece series on financial statement trickery, we are going to look at some measures a company can take to “dress up” their financial results to create an unclear picture of their financial health. Show More
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Banks Report Card - Handing out the grades
Looking at the common themes emerging from the November reporting season, differentiate between the different banks and hand out our reporting season awards to the financial intermediaries that grease the wheels of Australian capitalism. Show More
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Douglas, A2M has been very successful offshore in focusing on a particular niche where the company has some form of comparative advantage namely a) A2 beta-casein protein and b) "clean" Australia/New Zealand manufacturing which has been a big asset selling product into China. This suite of IP and organic growth is very different from Fosters simply opening up the chequebook to buy stakes in breweries in Shanghai, Guangdong and Tianjin. Hugh
I appreciate the positive feedback. I like ROCE as it looks at how efficiently a company uses the capital given to it by shareholders and banks/bondholders. One of the weaknesses of ROE as a measure is that highly geared companies can appear very efficient using ROE as the business is primarily financed by debt. Changes to business or capital market conditions can render such companies vulnerable. Hugh
On The most (and the least) profitable companies on the ASX200 -
Great note Steve. Earlier this week we were looking to do a piece combing through BIG's Appendix 4Cs and to over the last year to try find some obvious signs for retail investors that they should have concerns, without much success. The quarterly cash flows appeared strong and the only sign we could find was the categorisation of operating cash flows as "Receipts from customers and other sources" - not really massive warning sign when these accounts were examined in mid 2017. Hugh
Kui, Great question, if you apply the $409M proceeds against debt the gearing only comes down to 36%, outside the target range of 25-35%. So QBE require organic capital generation to fund the buy-back. Whilst new management have made some positive moves, it is probably premature in February to assume that QBE will have a smooth year without any major cat events, especially prior to the Atlantic hurricane season (June to November). Hugh
Great article Jason, especially point 1. Small cap valuations and the hunt for growth at any price is very similar to what i saw as a small cap analyst in 2006 and 2007.
Thanks Rod but often the presentation of these statements also deceive professional investors with decades of experience, financial education and 12 plus hours a day to analyse a company.
On Earnings Chicanery - how companies "dress up" their results -
Mark, The beta's that you are getting from Commsec don't look right. What we use is a 5 year beta with observations taken weekly. From experience shorter periods (which Commsec may be using) tend to throw up some weird numbers. Email me on inquiries@atlasfunds.com.au if you want to discuss further Hugh
On High Priced Shares -
Jaiprakash, GMA's buy-back is clearly supporting the share price, though one may question the long term rationale behind reducing a mortgage insurers prescribed capital rating at a time when GMA's metrics are deteriorating sharply. Hugh
Thanks Dylan. PTM are yet to buy back a share since the buy-back was announced Sept 13th 2016
Great piece Andrew, sensible advice for small cap investors
Great piece Nick, solid analysis