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Value & the eye of the beholder

In early May the once highly popular ASX-listed funds manager Janus Henderson (JHG) released a rather underwhelming March quarter financial performance report. Among the key performance metrics that stood out was a -21% fall in earnings per share versus a year earlier, a sizable fall in operating margin to 34.4%, net... Show More

Hi Mark, not exactly sure if I am included in your targeted critique (I think I don't deserve to be), but irrespective I respectfully disagree with your assessment below about the bull market. The correct way to look at the share market is by including dividends paid out and on this measure the share market passed its pre-GFC peak many moons ago. In addition, I have been arguing for years now that these broad indices no longer represent "the market" in the same manner as they once did. There may not have been a bull market in banks and large parts of the old economy segments of the ASX, there has been nothing less than a raging bull market in other parts of the market, and I have written extensively about this. It's merely a case of does one actually want to see it, and adjust to the changing environment, or not?

On Equities look increasingly like a bear market -

To Ricky: your comments are certainly valid. It's plain dangerous to simply follow the market's lead. Some of the largest black holes had been preceded by a rallying share price. I, on the other hand, focus on quality companies and here I observe too many experts and commentators have been calling share prices for the likes of CSL, Aristocrat, etc as too expensive to buy, yet those calls have been painfully incorrect and I still think there is no bubble in sight. But to your point: not every stock that has performed over the past few years will continue performing...

On Is 'Value' Investing Now Dead? -

Hi All! Lovely to see how my market analysis attracts such a variety in responses. I agree with all comments thus far, except that when a certain stock hasn't moved for a whole decade it almost certainly indicates things are not well inside, and that is putting it mildly. This is exactly the point I am making. Those who have performed are in excellent shape. Those who haven't are not. There is more to successful investing than simply looking at PEs and making a valuation call - and indeed, that works in both directions.

On Is 'Value' Investing Now Dead? -

To Alan: Thnx. This is what my personal research is all about; working out what effectively works in the share market over an extended period of time, not copying what everybody says should work

On Have You Been Paying Attention? -

To Nan Shi: as an investor one has to rely on forecasts and weigh up risk. If you doubt whether every single industrial company might grow over the next three years you cannot own any company other than for short term trading purposes. I personally have been quite successful in identifying sustainable growth, and so have others. To illustrate this with one extreme example: people have doubted CSL in every single year since listing, yet it still is, and remains, a superb growth story in Australia. This is what investing is all about; identifying which companies will do well over an extended number of years, and enjoying the wealth benefits as a result of it

On Have You Been Paying Attention? -

To Graeme: don't just rely on broad indices to form a view, or draw conclusions. The Small Ords is heavily populated with micro resources companies, which should be taken into account

On Have You Been Paying Attention? -

Hi Aaron, thanks for your message. I can but refer to the story I published since, titled Have You Been Paying Attention? I'd be interested in the "excellent MSCI research papers" you refer to. Can you direct me?

On The Battlelines Are Drawn -

Dear Naheed (and everybody reading this), while I do not disagree with your underlying thesis (growth is paramount for smaller cap stocks), the charts you display are full of noise. I suspect the Growth section is heavily impacted by small cap resources and mining services. You should exclude those to get a more accurate picture. I myself invest in non-cyclical growth, including smaller cap companies, and my return doesn't look anything like the charts you have included. Smaller cap growth stocks have outperformed the broader market since late 2012, but they had a tough time in late 2016. They have significantly outperformed since February 2017. I think this is worth highlighting. All the best.

On Growth vs Value in Australian Small Caps -

Interesting observation, in particular the break in trend performance since 2012. I think the answer lies within the fact the share market since has been guided by macro forces such as gradual derating for banks, five-year long downward slide for commodities prices, a fall-of-the-cliff for crude oil, significant shift towards small caps away from large caps, then the reflation trade in 2016, then came bonds movements (& fear), not to mention FX and geopolitical, and, of course, the general derating of bricks and mortar retailers. None of such macro considerations form part of stockbroking analysts' individual stock assessments. Oh, did I mention the period of Expensive Defensives? I think, Tim, if your observation/analysis shows one thing it is that the Australian share market has been in the grip of such broad macro themes since 2012 and that makes individual stock recommendations less reliable.

On How should you read a broker report? -

Disappointment of Q1 is one thing. Disappointment in the composition is another. Now Q2 numbers are being scaled back too. That's the real story behind the Q1 disappointment

On Ignore the US GDP numbers -

Hi Jordan, I get a bit tired of hearing that gold is such a great protection against inflation. History shows this is way too simplistic as a statement. I agree that gold's fortunes are determined by many factors and we both probably agree on the fact that many statements about gold are too simplistic. No harm intended. As a matter of fact I am amongst those who advocate investors should always consider having some exposure, in line with how comfortable/uncomfortable one feels about the world. Anyway... gold... it can be the subject of hours of long debates and discussion...

On If its obvious, its obviously wrong, is one of my favourite sayings when it comes to markets. On that score, perhaps nothing is more pertinent to the gold... -

Fiercely disagree with your view. Gold is a rather unreliable protector against inflation - was there inflation in the nineties? Yes, there was!- but history shows, like the 1970s, that gold jumps to the fore during times of high inflation. High inflation is not just inflation. This whole gold=inflation protector is not supported by historical evidence. It's a mass-delusion, though oft repeated (but that still doesn't make it correct)

On If its obvious, its obviously wrong, is one of my favourite sayings when it comes to markets. On that score, perhaps nothing is more pertinent to the gold... -

James, The highest cash balance was at 26% in Sep 2011. Over the past 1.5 years the cash portion has remained between 18-20%. Unfortunately, we do not have references pre-GFC (as we only started this survey in 2011) but I am confident cash levels would have been a lot lower in those days. I still think 20% cash is a lot and probably reflective of the cautious mindset of investors post-GFC. We haven't seen this lower than 18% as yet, and that's a telling stat too, in my opinion.

On They say equities are currently climbing the wall of worry -

James, the market is 100% CERTAIN that BC Iron will be forced to cut its dividend next year. Just goes to show, drawing up tables at face value can make for some nice value traps

On No stabilisation in sight as yet -

James, that's because, unlike smaller pure plays, BHP and RIO offer capital management options plus div support

On No stabilisation in sight as yet -