Challenger rallying on budget expectations?

Shane Fitzgerald

Monash Investors

Over the last week, the Challenger share price has risen strongly, although to be fair it had been drifting lower over the preceding few months. The only major piece of news flow over the last week was a management presentation at the Macquarie conference. 

That provided a great summary of the retirement saving market and the tremendous growth apparent in this market (it is worth the time to read).

In a previous wire, we highlighted the market’s tendency of not seeing “the forest for the trees” on this company. From time to time, the share price has periods of weakness when one of the bear arguments gets a run, only to see the market calm down and remember the strong outlook for the business. 

Growth drivers are structural and 'baked in'

The Macquarie conference presentation certainly achieved this highlighting the strong tailwinds influencing Challenger's business. The presentation highlighted that the retirement market is, without doubt, one of the fastest growing markets in the economy.  

Critically this growth is not cyclical, but rather “baked in” from the natural development of the superannuation system and demographics. In retirement, the needs of customers switch to requiring a regular and constant income and ensuring that their money lasts as long as they do.  Both of these requirements play straight into Challenger product offering.

Two upcoming catalysts

Over the near-term, two factors are likely to be supportive of the Challenger share price. 

Firstly, the Federal Budget is upon us and there is every chance that we will see some announcements from the Government to the various reviews in this space. As with any changes to Government policy, there will be swings and roundabouts. However, it is obvious that it is in the Government’s best interest to encourage the retirement savings market. Ultimately this will benefit Challenger as it launches new products and modifies existing products to whatever regime the Government puts into place.    

Secondly, following the revelations from the Banking Royal Commission, it is already clear that some form of regulatory action will be forthcoming and this will hang over the outlooks for the Banks/AMP.  As such, the other financial stocks will be looking relatively attractive and few have as favourable an outlook as Challenger. 


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Shane Fitzgerald
Fund Manager
Monash Investors

Combining over 25 years’ experience to offer compelling early stage insights on pre-ipo and microcap companies mispriced and misunderstood by the market. We maintain a long/short absolute return focus, with strict stock selection criteria.

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