Hits and misses aplenty in first half 2020 - Part 2 |
Tweet | ![]() |
<p><strong>Glenn Freeman</strong>: Peter, in terms of fair value upgrades, the top three that we saw were Breville, which was up 43%, Charter Hall up 20% and WorleyParsons was up 19%.</p>
<p><strong>Peter Warnes</strong>: Those three companies are a bit diverse. Breville again, I would suspect that that was a company who had an IMR of nearly 27%. In other words, the initial market reaction was a positive 27%. I think that there's probably – one, it was a very, very good result, very strong result basically driven by offshore America and their penetration into Europe now. But it hasn't got a wide coverage in the investment community. And therefore, without the wide coverage, you can get bumps along the road, positively or negatively. But this is a very, very well managed company. There's no doubt we're off the pace on stock. I think we've got it about right now.</p>
<p>But the thing is, with Breville, Solly Lew is the major shareholder there or the most significant shareholder there. He knows retail backwards. He knows what products sell, et cetera, et cetera, et cetera. Worley surprised us in terms of – they're putting together that big acquisition that they made, and the synergy benefits coming out of that, again, will be a little bit higher than we anticipated. And they're still getting very, very significant new work in the energy space, which is quite interesting. The other stock…</p>
<p><strong>Freeman</strong>: We got Charter Hall.</p>
<p><strong>Warnes</strong>: Charter Hall, in the REIT space, it has made major inroads in terms of its funds management operation. It's a bit a second division, if you like, from Goodman. Goodman is the class act in this space about it. But it's in a different space. It's in industrial. Charter Hall is office – A1 office space, a little bit of industrial but the funds management business, it exploded basically in terms of assets under management and that was one of the reasons why it performed well and we increased our fair value because of the annuity style income stream that's going to there, very sticky.</p>
<p><strong>Freeman</strong>: How did the healthcare sector perform given it's regarded as a more defensive sector?</p>
<p><strong>Warnes</strong>: Overall, again, pretty well, and you would expect that. It's defensive and what have you. But the big three global players, CSL, Cochlear warned on coronavirus early and said it would impact their second half results, and the shock came back a little bit on that. But generally speaking, the results were okay. And ResMed was fine as well. So, the big three performed, you know, strongly in terms of reporting good solid results from their global operations Ramsay Health Care surprised us a little in terms of a fair bit of margin pressure in their Australian operations which shouldn't surprise and we trim them the fair value on Ramsay. Elsewhere, Ansell was a good result. Sonic Healthcare was a good result. Invacare was a very strong result and surprised on the upside.</p>
<p><strong>Freeman</strong>: And just finally, just turning to some of the downgrades in our fair value, what are some of the biggest falls there?</p>
<p><strong>Warnes</strong>: Well, the two that stood out and they're only smaller companies, they were bigger companies a year ago, was Seven West Media and main pharma. We know what's happening in the media space. Advertising is on the slide. Seven West are probably exposed more than others with their operations. They've got print and they've got magazines and they've got obviously Seven TV and it's been a very, very difficult road. On the other hand, Nine Entertainment who was a very, very solid result and it was one of the positive, if you like, IMRs. In terms of market reaction. So, in all sectors, it seems that there's one standout and other one you know just drops off a bit. Now, I guess in that in that television space, the big market shares, they do move around a little bit. Mayne Pharma they've been under the whip for quite a while. Their generic drug business in the U.S. is very competitive and they've just been, if you like, smacked on margin.</p>
<p><strong>Freeman</strong>: All right. Well, then – our subscribers can view the full earning season insights on morningstar.com.au. Thanks very much for your time today, Peter.</p>
<p><strong>Warnes</strong>: Pleasure, Glenn.</p>
<p><strong>Freeman</strong>: Pleasure, Glenn. We will be back again directly.</p>

05/08/2022 Morningstar believes travel will be back in 2024.

29/07/2022 The latest update management told investors what they wanted to hear—cost cutting, lowering credit risk and a commitment to reduce cash burn.

27/07/2022 Momentum for the consumer discretionary sector is going backwards and spells trouble for earnings.

21/07/2022 Suncorp shareholders are selling at a premium while ANZ gets an easy way to scale up home and SME lending.

07/07/2022 Bond exposure growing as the portfolio prepares to get defensive.

04/07/2022 Rebalancing, tax-loss selling, and buying on the dip are among the productive moves to consider.

04/07/2022 Growth jitters and the possiblity of reduced iron ore demand in China have swiped the heavyweight banking and resources sectors.

01/07/2022 Morningstar equity analyst Jon Mills explains royalty rate hikes and how the changes impact Australian miners.

29/06/2022 Firetrail's head of investment strategy talks through his global equity picks in the sustainable space.

28/06/2022 While the benefits of the current model are modest, a demerger won't deliver shareholders an automatic win, says Morningstar equity analyst Nathan Zaia.

24/06/2022 "I think over the next sort of, three, six, nine months, we're going to see some pretty good opportunities emerge, and I think investors who are well prepared will be able to take advantage of that."

23/06/2022 Policy will continue to fuel short-term price movements but the long-term fundamentals for Australia's biggest export look shaky.

17/06/2022 The founder of Investors Mutual is cool on Australia's banking giants.

15/06/2022 Faster interest rate hikes from the Reserve Bank have markets worried about bad debts, says Morningstar banking analyst Nathan Zaia.

14/06/2022 Highly likely investors are on the cusp of an era of permanently higher rates that should favour "real-world companies", says Andrew Clifford, co-chief investment officer at Platinum Asset Management.

14/06/2022 Build cash and prepare for opportunistic nibbles at companies such as Aurizon, Wesfarmers and James Hardie, says Morningstar's head of equity research.

10/06/2022 We haven't seen the bottom of the bear market yet, says Morningstar's head of equity research.

01/06/2022 Earnings growth remains market leading for wide moat stocks like Alphabet, Meta Platforms and Amazon.

30/05/2022 Labor looks set to proceed incrementally and existing producers such as Whitehaven Coal could even benefit should more radical policy be proposed.

25/05/2022 The Nobel prize winner who cameo'd alongside Selena Gomez in Hollywood hit The Big Short discusses the latest developments in behavioural economics.

19/05/2022 Local investors were spooked after US retail giants Target and Walmart plummeted overnight as rising prices hit margins and inventory.

19/05/2022 On his recent visit to Australia, Morningstar's global chief investment officer Dan Kemp talks investing narratives, confronting the growing list of reasons to be concerned about markets and sustainable investing.

19/05/2022 Worries about inflation’s toll on earnings sparks Wednesday’s 4% plunge, but stocks are now far undervalued.

18/05/2022 One of the big themes of the year has been the value comeback. What is behind this resurgence after a pretty dismal period, and should your portfolio be tilting in its direction?

11/05/2022 Here's what investors who are worried about a recession should consider today.

11/05/2022 Morningstar analysts have identified TPG telecom as the most undervalued telecom stocks in the ASX 200 detailing multiple catalysts for earnings recovery and growth.

29/04/2022 Exclusive: Hermitage Capital Management CEO Bill Browder talks Putin, Russia, and the next six months for Ukraine

28/04/2022 Inflation, rising interest rates, geopolitical risks, and other things to keep your eye on.

27/04/2022 Morningstar's analyst talks about the Buffett's recent deals, what the stock is worth, and whether Berkshire will pay a dividend any time soon.

31/03/2022 Supply disruptions following Russia's invasion of Ukraine are forcing analysts to consider the possibility elevated prices persist.

30/03/2022 Rising interest rates, strong economic growth and cheaper valuations are driving banking stocks ahead of the broader market.

28/03/2022 Where are entertainment and streaming services headed?

24/03/2022 Problems in global supply chains are an opportunity for WiseTech as its logistics company customers move to replace old software.

23/03/2022 Markets focused on floods and bushfires are missing how insurers are cutting costs, doing more digitally and are looking down the barrel of a lift in investment income.

17/03/2022 Morningstar Investment Management's global CIO Dan Kemp explains why well-intentioned investors desperate for peace in Europe are making dangerous market calls

15/03/2022 Knowledge of the local market, strong branding and a growing subscription service should see the undervalued retailer retain market share in the rapidly growing online sales category, says Roy Van Keulen.

08/03/2022 Higher inflation, rising interest rates and booming commodity markets are driving a major rotation away from the post-pandemic winners, says Tim Murphy, Morningstar director of manager selection.

03/03/2022 Regulators are likely to be less lenient now the buy-now-pay-later sector is part of the fabric of Australian payments.

23/02/2022 Strong commodity prices, cheap valuations and a head start on interest rate hikes means emerging markets are set for strength, says Dr. Joseph Lai of Ox Capital.

23/02/2022 A belligerent speech from a president signalled the start of the latest phase of Russian agression last night, causing markets to wobble and investors to wonder.

15/02/2022 In an extended interview, Morningstar's Peter Warnes discusses the bear market in US technology stocks, interest rates and growth and his approach to investing outside the US and Australia.

13/02/2022 Morningstar equity analyst Shaun Ler explains why he see valuation upside high for MFG even as shares lose steam.

31/01/2022 The Chinese lunar year is almost over, and what a ride it's been. Morningstar speaks to JPMorgan Asset Management strategist Mike Bell about what's ahead.

23/01/2022 Christine Benz discusses how investors should handle the turmoil, whatever the life stage.

18/01/2022 Empty shelves will negatively impact supermarkets in the second half of fiscal 2022 but the impact on long-term earnings is minimal, says Morningstar analyst Johannes Faul.

17/01/2022 Bank earnings, house prices and China risk: Our experts and analysts discuss what they've got their eyes on in 2022.

24/12/2021 Our experts and analysts weigh in on what mattered for investors last year.

21/12/2021 New products, lower fees and a portfolio of undervalued stocks set to help the fund manager right the ship.

10/12/2021 And how does it match up against gold?

10/12/2021 Australian miners to be among the last standing as coal use fades.

08/12/2021 Rebalancing your portfolio is one of those beneficial habits that’s easy to let slide. But year-end is an ideal time to check how your portfolio is tracking against your target asset allocation.

03/12/2021 The gold-rated fund manager shares three ideas with long-term potential.

01/12/2021 Long-term investor sees opportunities where businesses are moving towards a zero-carbon future faster than governments.

30/11/2021 To understand your fund, get to know its underlying index.

29/11/2021 These companies are set to profit from the move to clean energy, says Lazard.

24/11/2021 The results of the COP26 climate summit suggest coal demand is likely to persist for longer than expected.

17/11/2021 And how investors can protect their portfolios.

08/11/2021 Morningstar thinks these moaty companies will remain resilient in the face of inflation and ongoing supply chain challenges.

05/11/2021 Morningstar maintains fair value despite a fall in margins and slower progress on cost reductions.

19/10/2021 These new US-listed exchange-traded funds will invest in bitcoin futures, not bitcoin itself.

15/10/2021 The ESG outperformance narrative is flawed, new research shows.

06/10/2021 Investors may need to hold more growth assets over the coming years, says Morningstar's Jody Fitzgerald.

01/10/2021 And how G8 Education and Link Administration are positioned for long-term success.

30/09/2021 What Reporting Season August 2021 told investors about the health of the financials sector.

28/09/2021 a2 milk is an opportunity to be greedy when others are fearful.

23/09/2021 Covid's winners and losers are returning to their prior trajectories.

21/09/2021 Sequence-of-returns risk matters for both retirees and savers. Here's why.

20/09/2021 Analysts expect the sector to recover to pre-Covid trading levels once borders reopen.

15/09/2021 Rising customer deposits and access to cheap funding helped Australia's banks stave off net interest margin pressure, but analysts see warning signs.

14/09/2021 Morningstar's Hortense Bioy on how to spot greenwashing and how to avoid it.

13/09/2021 Utilities and infrastructure names battle the impact of covid as private equity and pension funds circle.

10/09/2021 Hydrocarbons poised for a comeback.

09/09/2021 Providers have lifted prices after years of a debilitating chase for subscribers at all costs , says Morningstar's Brian Han.

08/09/2021 What shorting ETFs means for long-term investors.

07/09/2021 Morningstar senior analyst Grant Slade says Brambles secular growth trend is intact despite nearterm headwinds. He discusses results from the building and construction materials sector.

03/09/2021 Miners bask in the glow of iron ore prices while bargains remain in coal.

23/08/2021 Post-merger Woodside would be well positioned to deliver on the value we've seen for a long time, say Morningstar analysts.

16/08/2021 But the sector lacks uniformity, says Morningstar's Christopher Franz.

11/08/2021 Higher wholesale electricity prices bode well for AGL, according to Morningstar senior equities analyst Adrian Atkins.

11/08/2021 Morningstar FundInvestor editor Russ Kinnel describes some direct and indirect hedges for inflation protection.

10/08/2021 Copper and iron ore have benefited materially from China’s stimulus and the developed world recovery. But Morningstar analyst Mat Hodge see these benefit as transitory.

05/08/2021 We believe the transaction has a high chance of succeeding.

03/08/2021 The industry still has significant growth potential.

03/08/2021 Is one of the biggest sponsors of the Olympics positioned for an all-electric future?

23/07/2021 Morningstar's Lex Hall talks micro-cap stock picks with Carlos Gil, chief investment officer at Microequities Asset Management.

22/07/2021 Mornngstar's Lex Hall catches up with Carlos Gil, chief investment officer at Microequities Asset Management.

21/07/2021 The head of Australian small and mid-cap stocks at First Sentier Investors has her eye on ARB, Breville and IDP Education.

20/07/2021 The strong performances of global stock markets in 2020–21 are unlikely to be repeated in the coming year says Morningstar's Peter Warnes.

12/07/2021 Morningstar equity analysts warn that equities remain overvalued despite Australia's strong economic recovery.

08/07/2021 Private equity is an exciting area for investors, with lots of hotly-tipped stocks. But there are risks to be aware of, says Pitchbook analyst Dylan Cox.

08/07/2021 Warryn Robertson is looking at French infrastructure, retail pharmacy and tax services.

06/07/2021 Australia's largest banks have excess capital because they cut dividends, were more conservative on lending, divested assets and raised equity last year. Morningstar's Nathan Zaia thinks most of it should be returned to shareholders.

02/07/2021 PEXA burst onto the ASX this week in the biggest float since 2019. Morningstar's Gareth James gives his take on the company's future growth prospects.

30/06/2021 Iron ore prices have been on a tear, boosting the profits of Australia's top miners. How did we get here and is the only way up? Lex Hall sits down with Morningstar's Mat Hodge.

28/06/2021 Morningstar has recently initiated coverage of a food delivery app and a consumer finance product.

24/06/2021 Meeting the deluge of demand is the biggest task for US companies, says Bell Asset Management's Ned Bell.

22/06/2021 Are there still opportunities in the biotech sector now the covid-19 vaccine roll out is underway? We ask International Biotechnology Trust manager Ailsa Craig

21/06/2021 Morningstar's director of Asia equity research is confident the e-commerce giant will bounce back.

18/06/2021 A wide moat and attractive dividend potential are among the key takeaways of Woolworth's decision to demerge from the liquor and hospitality group.

15/06/2021 Lazard Asset Management's Warryn Robertson explains how companies in the Global Equity Franchise fund have adjusted to covid, and assesses the threat of rising inflation.