The Regulator Strikes Back

Hugh Dive

Over the course of 2018, the Royal Commission into Financial Services has provided numerous examples of the conflicts of interest inherent to the vertically integrated model of financial advice. In this model, the financial adviser is often incentivised to direct their client's savings onto an investment platform and then invest... Show More

IPO Watch: Coles

Hugh Dive

In March Wesfarmers announced their intention to demerge Coles into a new separately listed company, with the new company expected to list on the ASX next Wednesday. Existing Wesfarmers shareholders will receive 1 share of Coles for every Wesfarmers share they own and the parent company will retain a 15%... Show More

See 2 more comments

Big versus Small Company Investing

Hugh Dive

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

Key takeouts from NAB's result

Hugh Dive

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

Hugh Dive

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

Who wins in the Coles demerger?

Hugh Dive

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

What should you sell in a volatile market?

Hugh Dive

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

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

On Losing money overseas -

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

On One Big Lesson from the Big Un Debacle -

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

On Does QBE have the capital for their buy-back? -

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 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

On Bad and Fake Buy-backs -

Thanks Dylan. PTM are yet to buy back a share since the buy-back was announced Sept 13th 2016

On Bad and Fake Buy-backs -