Mercer actuary David Knox says the data used to determine the old age dependency ratio is “totally out of date” and overstates the severity of the problem.
From their inception, SMSFs have always attracted more than their fair share of criticism. Now it’s an ageing membership that’s being used to restrict their numbers.
Reporting season winners and losers
And that’s a wrap. Reporting season is over. And to describe it in one word, the February 2021 reporting season was ‘pleasant.’ There weren’t too many surprises on the downside, winners exceeded losers, and the themes were as expected. However, prices moved well in advance of results. This meant that despite a significant number of results beating market expectations, share price reactions were broadly flat.
The good news was already priced-in. Results showed that the tough operating environment brought on by the pandemic is largely over and we are now at the beginning of an earnings recovery. In saying that though, the Australian market is running on high price/earnings (P/E) multiples, so there is a sense of caution and selective stock-picking going forward.
In total there were 304 companies that reported in February. What was truly spectacular was that only 11.2% of companies missed market-consensus expectations, one of the lowest readings on record. According to FN Arena, 48.0% (146) of companies beat expectations and 40.8% (124) were in-line with expectations. What is important is that it matters less as to whether a company posts a profit or a loss: much more important is ‘how well’ the company’s profit or loss fared against consensus forecasts. Whether the profit or loss was a “beat” or “miss” on consensus forecasts usually dictates the share price direction.
Winners – Here are the top 10 share prices rises on the day of report
As highlighted in my latest article here, the COVID losers quickly became winners. “COVID-19 winners” i.e. growth stocks that were beneficiaries of the pandemic that performed remarkably well over the last year, were sold-off during February. Despite posting better-than-expected or in-line-with-consensus forecasts results, these stocks underperformed, while “COVID-19 losers” outperformed. Prices had already moved well in advance of results, reflecting the good results. A good example is the Buy Now Pay Later sector, where Afterpay (ASX:APT) and Zip Co (ASX:Z1P) both released reasonably good results, but the shares were sold-off in favour of travel and leisure stocks.
The market seemingly has put last year’s pandemic behind it and is looking forward to the more positive future as border restrictions ease and vaccines roll-out globally. Growth stocks have had a spectacular run at the expense of value stocks given the low-interest-rate environment. But with bond yields rising, we’re seeing a rotation back to value on the back of earnings upgrades and better valuations. The winners from this reporting season were the COVID-19 losers – travel, financials and media companies.
Losers – Here are the top 10 stocks that exhibited share price falls on the day of their results
As expected, the losers of this reporting season were the COVID “winners,” most of which had exhibited astronomical share price rises over the last year. Some even saw a share price increase into results. The biggest falls were dominated by technology, BNPL, platform and e-commerce stocks. Share price reactions were far more lacklustre, which can also be attributed a rotation to value which prompted profit-taking in expensive COVID-19 winners.
According to Morgans research, “February returns were led by the pandemic losers: Banks (5.6%), Diversified Financials (3.9%), Energy (2.4%), Travel (13.7%), Consumer Services and Gaming (4.3%), Materials (7.3%). Despite decent results COVID-19 winners were used as funding sources for the reflationary exposures. Retailing (-7.6%), Technology (-8.9%), Online Classifieds (-5.1%).”
One of the more notable themes was dividends, but not as we know them. Dividends per share were revised up 4.6% over the month. Some 57% of companies that reported declared a dividend, up from 53% in August. But more importantly, 43% of those are paying a higher interim dividend than the full year in August. Morgans says its FY21 forecast yields are: Miners: BHP 5.1%, RIO 4.9% and FMG 12.5%. Banks: WBC 5.5%, ANZ 5.4%, NAB 4.9% and CBA 3.9%. A rising yield curve means the economic recovery on a global scale will continue to gather pace. This may result in a continued rotation out of growth into value. Could this year be one for value investors?
