Two trends with lasting implications

Matthew Fist

Firetrail Investments

Two interesting trends have emerged from the pandemic. Australians are having more babies and they are swapping out their city lifestyle for the beach and bush. 

In contrast to short term phenomena such as the hoarding of toilet paper, these shifts have potentially long-lasting implications for the economy and listed companies. In this article, we discuss these two trends and the opportunities they have created for companies in the Firetrail Australian Small Companies Fund.

COVID baby bump or boom?

When large mortality events occur including diseases, earthquakes and wars, birth rates decline and on average, reach a trough some nine months later. As shown in Figure 1 below, this pattern holds for events such as both World Wars and the influenza outbreaks of 1918. Following an initial drop, fertility tends to rebound. Birth rates begin to recover ~11 months after an epidemic and then increase in the subsequent 1-5 years.

Figure 1. Following an initial drop, fertility tends to rebound ~11 months after an epidemic

Source: Institute for Family Studies, September 2021

The end of World War II sparked one of the biggest baby booms of the 20th century. Could we be at the start of a post-COVID generation? Estimates by academics regarding the post-COVID birth recovery vary widely. The Institute for Family Studies notes that COVID has the potential to boost births over the next four years by anywhere from 0.3% to 40%. We admit this is a wide range to draw a conclusion from just yet. However, recent trends in birth rates and anecdotal evidence provide reason for optimism:

  • The number of babies born in NSW public hospitals during the June quarter was the largest on record. A total of 19,113 births were reported, an increase of 9% on the prior year. This is a significant upswing compared with the declining fertility rate over the last 10 years.
  • Prior to the pandemic IVF volumes had been increasing gradually over time. But in FY21, 98,290 IVF cycles were recorded, up 29.3% compared to FY20 and the highest figure on record. 

Figure 2. Fertility rates in Australia have been gradually declining for a decade

Source: ABS, Firetrail, September 2021

Figure 3. A small decline in IVF volumes in FY20 was followed by a sharp increase in FY21

Source: MBS, Firetrail, September 2021

The increase in IVF volumes has benefited the portfolio holding Monash IVF (ASX:MVF). During FY21, Monash recorded a 40% increase in new patient stimulated cycles and there are no signs of a slowdown. New patient registrations in 2H21 were up 8% compared to 1H21, and up 35% on 2H20. ~70% of patient registrations are converted into patient treatments within ~3-6 months.

COVID-19 has sparked a behavioural shift amongst Australians. Restrictions on travel and a greater focus on family, health and wellbeing is resulting in a re-direction of priorities. While it is still early days to call it a baby boom, recent birth rates and trends IVF trends indicate we are at the onset of a baby bump.

Looking beyond the headline impacts of escaping the city

For decades the lack of job opportunities in regional areas has seen many Australians relocate to capital cities. Then the pandemic hit. The sudden shift to working from home has made a tree change or sea change possible and more attractive for many Australians. ABS data shows net migration to regional Australia is the highest since records began two decades ago. In the 12 months to March 2021, net migration to regional areas increased 87.1% year-on-year. The impact of demand for housing on prices in regional towns has been widely publicised. Digging beneath the headlines, second-order impacts are more interesting and perhaps even more important.

Figure 4. Net migration to regional Australia is the highest since records began two decades ago

Source: ABS, September 2021

Demand for products and services across some industries increase as more people move to regional areas. Regional houses are larger and hence require more bricks to build and more lights to illuminate. For listed companies with strong brands, regionalisation has created an avenue to expand store footprints, increase sales, and grow market share. Portfolio holding Beacon Lighting is capitalising on this opportunity. It plans to open three additional regional stores this year including Ellenbrook (WA), Butler (WA) and Melton (VIC). The City of Melton, where Beacon Lighting (ASX:BLX) is expected to open a new store in FY22, is one of the fastest-growing areas of Australia. 11 new suburbs have been proposed to be added to it! In 2020, the city recorded a population increase of 4.6%, more than double the increase for Greater Melbourne which grew at 1.6%.

Increased sales in regional areas often come hand-in-hand with supercharged margins. This is a direct result of limited competition and lower costs of doing business. A key cost line for many retail companies is rental expense. Bendigo is over 150km away from Melbourne CBD. Looking at recent advertised rents, it is ~50% cheaper to rent a large retail space in Bendigo than it is in areas close to the Melbourne CBD like Southbank. Going regional also comes with less competition from smaller niche retailers that often compete on price. Regionalisation has created an opportunity for companies like Beacon Lighting to increase sales, grow market share and generate better returns on a per-store basis.


There are many interesting phenomena that have emerged from the pandemic, many with direct and lasting implications for listed companies. Restrictions on travel and a refocus on family has contributed to a spike in birth rates and IVF volumes. The sudden shift to working from home has driven many Australians away from the cities to regional areas. The baby bump (or potential boom?) and regionalisation trends have created an opportunity for many companies in the Firetrail Australian Small Companies Fund.

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Firetrail Investments Pty Limited ABN 98 622 377 913 (‘Firetrail’), Corporate Authorised Representative (No. 1261372) of Pinnacle Investment Management Limited ABN 66 109 659 109 AFSL 322140. Any opinions or forecasts reflect the judgment and assumptions of Firetrail and its representatives on the basis of information at the date of publication and may later change without notice. Any projections contained in this article are estimates only and may not be realised in the future. The information is not intended as a securities recommendation or statement of opinion intended to influence a person or persons in making a decision in relation to investment. This communication is for general information only. It has been prepared without taking account of any person’s objectives, financial situation or needs. Any persons relying on this information should obtain professional advice relevant to their particular circumstances, needs and investment objectives. Past performance is not a reliable indicator of future performance. Interests in the Firetrail Absolute Return Fund (ARSN 624 135 879) and Firetrail Australian High Conviction Fund (ARSN 624 136 045) (‘Funds’) are issued by Pinnacle Fund Services Limited ABN 29 082 494 362 AFSL 238371. Pinnacle Fund Services Limited is not licensed to provide financial product advice. A copy of the most recent Product Disclosure Statement (‘PDS’) of the Funds can be located at You should consider the current PDS in its entirety and consult your financial adviser before making an investment decision. Pinnacle Fund Services Limited and Firetrail believe the information contained in this communication is reliable, however its accuracy, reliability or completeness is not guaranteed and persons relying on this information do so at their own risk. Subject to any liability which cannot be excluded under the relevant laws, Firetrail and Pinnacle Fund Services Limited disclaim all liability to any person relying on the information contained in this communication in respect of any loss or damage (including consequential loss or damage), however caused, which may be suffered or arise directly or indirectly in respect of such information.

1 fund mentioned

Matthew Fist
Portfolio Manager
Firetrail Investments

Matthew is a Portfolio Manager at Firetrail Investments for the Firetrail Absolute Return Fund. Matthew’s primary sector responsibility is Australian and Global Small Companies. 9+ years relevant industry experience.

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