Craig's Column - A Penny For Your Thoughts
With the Australian equity markets showing signs of life, after essentially treading water for the past four years – up approximately 8.58% (annualised compound growth to January 1st 2024), it’ll be very interesting to see what material news event can carry the Australian All Ordinaries over the elusive 8 000 barrier.
We still believe investors need to be particularly selective in where they invest scarce capital going forward. Seat-of-the-pants-centric mining investments have certainly captured the attention of the media and nimble investors in recent months, however, for long term investors aiming to build intergenerational wealth, it’ll be the constituents of the ASX200 which will warrant special attention in the upcoming earnings season.
With the half yearly December reporting season about to commence in earnest we have identified 15 well led Australian founder companies that will outperform and 7 that will underperform, our sample respectively …
Outperformers
Altium (ALU) $48.28;
Resmed Inc. (RMD) $26.80;
Seven Group Holdings Limited (SVW). $35.00
Wisetech (WTC) $74.90
Underperformers
Domino’s Pizza (DMP) $57.30
Reece Ltd (REH) $22.27
The list above may raise a few eyebrows, i.e. in that it’s a collection of solid A grade names, however, I’m not in the mood to buy the proverbial ‘worst house in the best street’ (eg. cheap and cheerful stocks) at this point in the economic cycle.
Earnings season aside – the eventual total return posted for this calendar year and on, until further notice, rests at the feet of the world’s Central Banks, and moreso that of the USA.
Looking back over the past three years in particular, sans nostalgia, its pretty clear that issues such as (i) money printing, (ii) absolute levels of debt, (iii) global trade subsidies stifling free trade, (iv) interest rate manipulation for what good that brought I’m yet to discern. (v) price controls, and (vi) big brother regulation, have shown who’s actually in charge of managing the year-on-year growth of risk assets.
The good news ?
Central Banks know full well that it’s up to them to drive 6%+ compound asset price growth across a business cycle which keeps the burghers in the suburbs – the middle class, from coming over the hill collectively with their fire sticks.
Just like as kids we all learnt that the only way to win at Monopoly is by buying everything you land on, and then sit back and collect the rent.
The real world ain’t no different. Try not to let the noise deter you from holding quality founder led companies through the rough and tumble of the cycle – Central Banks tend to have our back. They may not come to the rescue when the markets cry wolf every time – but rest assured they can hear ‘em.
Wishing everyone a happy new year and an even more successful reporting season in the coming weeks ahead.