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Morningstar runs the numbers

Lex Hall  |  20 Apr 2020Text size  Decrease  Increase  |  
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We take a numerical look through this week's Morningstar research. Plus, our most popular articles and videos for the week ended 17 April.

$50 million

The share purchase plan offered by Cochlear. Rights issues—packages of shares companies offer at special prices to existing shareholders—are growing in number amid the coronavirus slowdown. As part of the Cochlear plan, the hearing implant maker is offering retail shareholders the opportunity to buy up to $30,000 worth of shares. It has raised $880 million from institutions and shares are being offered for $140 compared to a market price of $194 as of 17 April—a discount of around 30 per cent to Morningstar's $129 fair value estimate.

10

That’s the number of companies under Morningstar coverage with “fortress balance sheets”, writes Emma Rapoport. In a three-part series, Rapaport examines how investors can identify a company in financial distress. Morningstar analysts provided Rapoport with stocks from their respective sectors that have sturdy financial foundations—balance sheets that can withstand financial shocks—and that are undervalued according to our metrics. One such company is casino giant Crown Resorts. Morningstar’s Brian Han says the net debt/trailing normalised EBITDA of 0.5 is likely enough to weather the current storm and help Crown realise his fair value estimate longer term.

48.28 per cent

That's the Maximum Drawdown rate for the S&P/ASX All Ordinaries TR index in November 2007. Emma Raport looked at how far Morningstar rated funds fell at the worst—and how long it took them to recover. To do this she looked at a measure called “Maximum Drawdown”, which indicates the biggest trough in a fund’s performance over a period—in this case from 1 January 2001 until 29 February 2020. According to Morningstar Direct data, 23 Morningstar rated AU equity funds had a maximum drawdown less than 48.28 per cent—more than half. Most of those came in the November of 2007, as the index tumbled.

More than 40

That's the number of countries packaging giant Amcor operates in. "Amcor's plastic packaging volumes are tied intimately to the consumption of household staples, meaning its volumes will soften only marginally," says Morningstar equity analyst Grant Slade. He's slightly reduced his projected earnings over the next two financial years to reflect this slight fall in volumes, but his long-term outlook remains positive.

11

The amount of bear markets or “black turkeys” there have been in the past 64 years, according to Paul Kaplan, director of research for Morningstar Canada. Though not evenly spread out, that averages out to an event every six years or so. The event with the highest level of pain was between 1928 and 1936 known to most as the Great Depression, a period of drastically reduced global economic demand and low commodity prices. Sound familiar?

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is content editor for Morningstar Australia

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