Rate cut still on the cards: Sebastian Evans, NAOS

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Rate cut still on the cards: Sebastian Evans, NAOS. Domestic equity markets have seen strong demand for companies providing predictable tax effective income streams through dividends. Overall, it is becoming harder to find quality businesses and acquire equity in them at reasonable valuations. For this reason we are running with a 20-25% cash allocation at present. However, we believe the next interest rate move domestically may well be to the downside. This scenario would likely continue to drive demand for equities such as CBA, TLS and WOW. With the persistence of such low interest rates we are positioning our portfolio (just 11 long positions) towards companies which are rewarded by this theme. These include companies with: leverage to a pick-up in domestic demand, a recovery in building, the ability to grow dividends and companies that can utilise low debt costs and high equity valuations to selectively acquire complementary private businesses.

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