The Match Out: ASX up for the week, Lessons from a legendary investor

The daily Match Out with James Gerrish from Market Matters for Friday May 12.
James Gerrish

Market Matters

With so much negative rhetoric doing the rounds, the market has remained incredibly resilient and today was no different. Commodities were hit overnight on growing recessionary fears, however by the close, early weakness was bought into and the ASX200 finished higher on the day with 65% of stocks closing in the green despite BHP taking about 8 index points from the broader market.

  • The ASX 200 finished up +4pts/ +0.07% at 7256
  • The Healthcare sector was best on ground (+1.23%) while IT (+0.98%) & Consumer Discretionary (+0.63%) were also strong.
  • Materials (-0.54%) and Energy (-0.54%) the only two sectors to close lower
  • Copper stocks were hit today on recessionary fears with Sandfire Resources (ASX: SFR) -5.54% the weakest link, it’s back testing ~$6 having been at $7 less than a month ago.
  • While we are bullish Copper medium term, the short term looks more challenging.
  • Lithium stocks were strong led by Lake Resources (LKE) +13.04% & Core Lithium (CXO) +4.95%.
  • Gold stocks struggled on a weaker bullion price, a theme we think could continue in the short term given a higher $US – Newcrest (ASX: NCM) fell -2.22%, Evolution (ASX: EVN) -2.58% while St Barbara (ASX: SBM) fell -6.67%
  • We’ve released performance reports for Market Matters Invest, our new digital investment platform enabling direct investment into Market Matters Portfolios.
  • The Active High Conviction Portfolio returned 2.63% in April and is up 17.74% pa over 3 years – Further information including the full monthly performance report available here
  • The Active Income Portfolio returned 2.16% in April and is up 16.74% pa over 3 years – Further Information including the full monthly performance report available here
  • If you would like to sign up for our free monthly performance reports – click here
  • QBE Insurance (ASX: QBE-3.63% struggled today after downgrading Combined Operating Ratio guidance to 94%. Gross Writing Premium (GWP) growth was strong in Q1 however claims were higher than expected.
  • Bowen Coking Coal (ASX: BCB) +7.32% received confirmation that their new Isaac River mine will be approved. There’s a bit of work to get through still but it is positive for long term production targets.
  • REA Group (ASX: REA) +0.25% marginally higher on a mixed 3Q update. Property volumes remain light and have started this quarter -24% on April 22, however they are managing to put through price rises and they reduced opex growth guidance. This is a 2024 story, and despite our concern leading into this quarterly, we were pleased with the result.
  • Iron Ore was ~1% lower in Asia today weighting on Fortescue (ASX: FMG) -0.59% & Rio Tinto (ASX: RIO-0.96%
  • Gold was up down another $US6 in Asia today, settling at $US2008 at our close.
  • Asian stocks were mixed Hong Kong down -0.54%, Japan +1.06% while China was off -1%
  • US Futures are all up, around +0.10%  

ASX 200 Chart

Stanley Druckenmiller, a legend we have followed for decades

The markets are truly fascinating, and if you’re reading this, you probably love the market as much as we do. This week the Sohn Investment Conference in the US was held, and one of the investors we really respect was the headline act – Stanley Druckenmiller. For those that read our morning missive today, you’ll be across this with some action items that came out of his interview, for others, here’s are the high notes:

Stanley Druckenmiller, originally from Soros Funds Management and now the chairman and CEO of Duquesne Family Office, headlined. He’s supposedly returned 30% a year for 30 years and made billions of dollars doing it. Listening to his ‘fireside chat’ this week had us thinking about Druckenmiller and how he approaches markets. There is considerable overlap in how Market Matters thinks about investing which is important for subscribers to understand, particularly given the inflow of new users on our platform.

First up today we wanted to share the key lessens we’ve learnt from Druckenmiller over the years and how they’ve helped to shape our approach to markets:

  • Stay in sync with the market but never think that you are smarter than the market.
    → Don’t fight the Fed → Listen to the Bond market → Understand other trader’s perspectives and in particular, when all positioned on the same side → Consider macroeconomic trends.
  • Maintain flexibility in one’s thinking in order to identify unexpected opportunities.
    → Be willing to admit you’re wrong → Have the capacity to change your mind → Be open to possible future outcomes
  • Understand the importance of continuous learning, read and be curious.
    → Consider the viewpoint of others → Gather information from a wide range of sources
  • Analyse situations through multiple lenses to improve the chance of making good decisions.
    → Investing is all about making good decisions consistently
  • Minimising downside and don’t permanently lose capital.
    → Concentrate investments → understand what you own and what will drive the returns in those investments.
  • Understand the value of positioning, you can buy the right stock, but it can still be a mistake if it is at the wrong time.
    → Timing is everything → Early is wrong, late is wrong

Sectors This Week

Stocks This Week

Broker Moves

  • Allkem Cut to Hold at Morgans Financial Limited; PT A$14.40

Major Movers Today

Make informed investment decisions

At Market Matters, we write a straight-talking, concise, twice-daily note about our experiences, the stocks we like, the stocks we don’t, the themes that you should be across and the risks as we see them. Click here for your free trial.

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James Gerrish
Portfolio Manager
Market Matters

James is Portfolio Manager & Primary Author at Market Matters, a daily investment report with over 2500 subscribers that offers real market insight. He is also Senior Portfolio Manager within Shaw and Partners heading up a team that manages...

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