ARC: Morningstar Year in Review 2020

--  |   11/01/2021 Text size  Decrease  Increase   |  
email_fwd
<p><strong>Emma Rapaport:</strong> Hi, I'm Emma Rapaport. Welcome to Morningstar's final video of the year. What a crazy year it's been to look back on.</p> <p>22 days, that's all it took for the S&amp;P 500 to drop 30 per cent, the fastest fall of this magnitude in history. And who could forget the toilet paper panic? For most of 2020, there really was no other story. But what will 2021 bring? We've reached out to analysts and to the Morningstar editorial team to get their reflections on 2020 and hear how 2021 might play out.</p> <p><strong>Jody Fitzgerald:</strong> 2020 will be known for the shortest bear market in history. Typically, a bear market, so a period of underperformance of the equity market, usually lasts for around a year. This one, when you actually look at the S&amp;P 500, lasted only 33 days. So, on the surface, markets have recovered, but the recovery is being far from uniform. So, one of the biggest names of 2020 will actually be the divergence in performance between asset classes, between countries and also between sectors.</p> <p><strong>Brian Han</strong>: I think the highlight from 2020 for the sector was the fact that I think COVID-19 really demonstrated how critical telecommunications infrastructure is empowering our digital economy these days. I mean, without it, none of these working from home, playing from home, everything else from home, none of that could have happened, and we'd all be twiddling our thumbs during this pandemic.</p> <p><strong>Christopher Franz:</strong> There's this whole section of the market that benefited from these conditions. Think about the stacks that were placed to work from home, something like a Zoom or these technology companies and even like the workout from home, like a Peloton. So, if you had global managers that were exposed to that trade, they had quite the year. Conversely, managers with exposure to more capital-intensive businesses, think maybe resources or energy, those directly affected by the pandemic, they tended to suffer in 2020. And while there has been a rebound, they haven't rebounded as well as their growth many peers.</p> <p><strong>Nathan Zaia:</strong> So, most of the highlights were pretty bad for the banks. The only one good thing I would call out is how well the regulators, banks and government worked together to try and buy people time, so we didn't have this avalanche of people defaulting on their loans and enduring hardship. And the real key thing for the banks in that are obviously the profits but they didn't have to go and raise huge amount of capital when their share prices were being smashed really. Cash rate cut to 0.1 per cent. That's really hurt the banks' earnings and deposit holders. And the regulators putting a cap on dividends at 50 per cent and even making the banks to defer their decisions for a while.</p> <p><strong>Johannes Faul:</strong> TP, toilet paper. I think that really sums it up what we've seen in the sector, and it's been incredible distortions in how consumers spend their money. But what we've seen is some retailers benefiting massively during the COVID period, during the lockdowns, and so are frankly. And that's really been the big surprise and an unexpected development in 2020 that I don't think anybody had foreseen in January.</p> <p><strong>Ksenia Zaychuk:</strong> So, I think the biggest takeaway for me was that not every asset that is labeled defensive will necessarily act as defensive and the events of 2020 prove that. For example, property and infrastructure are considered to be defensive assets and they have uncorrelated risk and return characteristics as well as they provide high quality and stable income. However, that was not the case in 2020.</p> <p><strong>Peter Warnes:</strong> So, when this market was compounding in March and hit a low on the 23rd of March, I think over 75 per cent of our recommendations went into the 4 or 5-Star zone telling our subscribers to buy. And I'd urge our clients to squirrel away cash and so we did have some option when things like March occurred. It elevated our long-term valuations and the reasons why they're there.</p> <p><strong>Adam Fleck:</strong> So, we thought there was a lot of value in the market. We called out the fact that we thought the market had really overreacted to the news, particularly considering the long-term impact from this pandemic which we see as relatively minimal. One of the many low lights was it was a very short window of opportunity. The market now looks nearly 15 per cent overvalued and there's far fewer 4 and 5-Star stocks, only about 20 per cent of our coverage. So, while there's still opportunity, it's far less than what we thought, and I think that makes it challenging for investors thinking longer term.</p> <p><strong>Lex Hall:</strong> I think the highlight for me was probably the story we did and the interview we did with NabTrade's Gemma Dale, in which she told us about the COVID itself and how retail investors reacted and how the story was that they piled into the market. They showed a lot more sophistication than people normally say they have. They bought at the right time. They profited from a historic sell-off. So, I think that was a really interesting development.</p> <p><strong>Graham Hand:</strong> We've had a discussion on whether superannuation should go from 9.5 per cent up to the 10 per cent legislated next year with a serious debate about whether that money would be better in people's hands in the current day, particularly for people to be able to buy a house because we realise how important owning your own home in retirement is, perhaps more important than having a higher superannuation balance.</p> <p><strong>Grant Kennaway:</strong> So, I think it's really a coming of age for ESG investing this year, and I really feel like that that has been a highlight and it's being driven by bottom-up demand from retail investors. It's not top-down regulatory change. It really is just engagement from retail investors with wanting to align their investments with their values and that for me is the real highlight of the year.</p> <p><strong>Peter Warnes</strong>: The other highlight was that I survived and hopefully most of our subscribers did as well.</p> <p><strong>Christopher Franz:</strong> So, hopefully, in 2021 you see the retreat of COVID-19, and with that the question remains the rebound that we've seen in global markets thus far in 2020, is that pulling forward future growth as a result of monetary policy and stimulus? Or is that perhaps a sign of a new decade to come, maybe a new roaring 20s?</p> <p><strong>Graham Hand:</strong> Normally, when you have a party and you go out and get drunk and have a good time, you get a headache later. There's a time you have to pay for all of this economic stimulus that the government has provided. So, I'd be looking in 2021 not just for this sort of recovery phase, but when the payback happens.</p> <p><strong>Johannes Faul:</strong> Looking forward to the next year we believe a lot of that momentum is going to go away and sales growth might turn negative for quite a few categories over a few months.</p> <p><strong>Brian Han:</strong> I think that may be the theme for 2021 in terms of how can telecommunications operators gain more margin out of all that data usage and all that capacity usage. These telco operators don't get any more margin out of servicing these higher capacity and data usage. So, I think that will be one of the key things.</p> <p><strong>Nathan Zaia:</strong> Some hard numbers around what the banks can do to their cost base is one thing we're looking for. We think the peak is probably past us in terms of how higher loan impairment expenses will be. So, that will be another positive to support an earnings rebound. These banks have pretty big capital buffers now. So, I think the dividend deferrals and suspensions can be pretty much &ndash; they'll be behind us, I think.</p> <p><strong>Jody Fitzgerald:</strong> So, what we actually anticipate is that 2021 will be a really good year to be a value investor and to be holding cyclical positions that should benefit from an improvement in economic activity.</p> <p><strong>Lex Hall:</strong> I think we will be writing about the search for income. The rotation into different stocks will be a priority. Tech stocks, too frothy. I think we'll be writing a lot about that. We may be writing more about cryptocurrency, because we could see a lift in both Bitcoin and other currencies such as Ripple. So, that could be something to watch.</p> <p><strong>Adam Fleck:</strong> We're likely to see pretty heavy growth rates, particularly as we lap some of the challenging periods in the calendar second quarter of 2020, and there's going to be, I think, a lot of pent-up demand in some sectors. But I think we as investors need to be very careful about what sector we're thinking about and how that looks on a month-to-month basis. Some sectors like the consumer defensive space, particularly say grocery and that retail area, they are going to face some challenging comparisons. Many of us were at home. We were cooking more. The grocery stores did very well. That's going to be tough to grow off of that very strong period.</p> <p><strong>Peter Warnes:</strong> The theme for 2021, this is not a walk in the park. Caution and volatility will still be prevalent and therefore prudence and care around the money that you have been able to save, now, in the investing time, be careful.</p>

Video Archive...

These aren't the Bitcoin ETFs you're looking for
19/10/2021  These new US-listed exchange-traded funds will invest in bitcoin futures, not bitcoin itself.
ESG funds don't underperform - but nor do they outperform
15/10/2021  The ESG outperformance narrative is flawed, new research shows.
Building investment portfolios in a low interest rate environment
06/10/2021  Investors may need to hold more growth assets over the coming years, says Morningstar's Jody Fitzgerald.
Covid impacts still being felt in real estate and tech: Reporting season roundup
01/10/2021  And how G8 Education and Link Administration are positioned for long-term success.
Look to Credit Corp for a leading indicator of economic health: Reporting season roundup
30/09/2021  What Reporting Season August 2021 told investors about the health of the financials sector.
Cause for optimism at a2 Milk and Invocare: Reporting season roundup
28/09/2021  a2 milk is an opportunity to be greedy when others are fearful.
Post-covid normalisation is underway in healthcare: Reporting season roundup
23/09/2021  Covid's winners and losers are returning to their prior trajectories. 
One of the most underappreciated dangers of investing
21/09/2021  Sequence-of-returns risk matters for both retirees and savers. Here's why. 
REITs recover pandemic losses: Reporting season roundup
20/09/2021  Analysts expect the sector to recover to pre-Covid trading levels once borders reopen.
Australian banks face margin pressure amid low rates: Reporting season roundup
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.
Greenwashing explained
14/09/2021  Morningstar's Hortense Bioy on how to spot greenwashing and how to avoid it.
Earnings down as private money circles infrastructure: Reporting season roundup
13/09/2021  Utilities and infrastructure names battle the impact of covid as private equity and pension funds circle. 
Frenzy of mergers in energy: Reporting season roundup
10/09/2021  Hydrocarbons poised for a comeback.
TPG tipped to recover as mobile competition eases: Reporting season roundup
09/09/2021  Providers have lifted prices after years of a debilitating chase for subscribers at all costs , says Morningstar's Brian Han.
Short-sellers bet against ARK Innovation ETF
08/09/2021  What shorting ETFs means for long-term investors.
Surging lumber prices were no match for Brambles: Reporting season roundup
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.
Miners soar thanks to iron ore: Reporting season roundup
03/09/2021  Miners bask in the glow of iron ore prices while bargains remain in coal.
BHP-Woodside merger is mutually beneficial
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.
Investors are getting serious about sustainability
16/08/2021  But the sector lacks uniformity, says Morningstar's Christopher Franz. 
Long term outlook for AGL is positive
11/08/2021  Higher wholesale electricity prices bode well for AGL, according to Morningstar senior equities analyst Adrian Atkins.
How you can hedge your portfolio against inflation
11/08/2021  Morningstar FundInvestor editor Russ Kinnel describes some direct and indirect hedges for inflation protection.
The iron ore party can't last: Morningstar
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.
What the Afterpay acquisition means for investors: Morningstar Minute
05/08/2021  We believe the transaction has a high chance of succeeding.
Cannabis' federal legal status is not a total buzzkill
03/08/2021  The industry still has significant growth potential.
Stock of the week: Toyota
03/08/2021  Is one of the biggest sponsors of the Olympics positioned for an all-electric future?
2 listed microcap names to consider
23/07/2021  Morningstar's Lex Hall talks micro-cap stock picks with Carlos Gil, chief investment officer at Microequities Asset Management.
Big returns, big risks: Making money with microcaps
22/07/2021  Mornngstar's Lex Hall catches up with Carlos Gil, chief investment officer at Microequities Asset Management.
3 small-caps with Dawn Kanelleas
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.
Forecast 2021–2022: A correction could be around the corner
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.
'Overvalued' warnings grow as ASX 200 hits new high
12/07/2021  Morningstar equity analysts warn that equities remain overvalued despite Australia's strong economic recovery.
What to know about private equity
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.
Lazard's 3 top picks for the global covid recovery
08/07/2021  Warryn Robertson is looking at French infrastructure, retail pharmacy and tax services.
Aussie banks $34bn surplus points to more shareholder dividends, buybacks
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.
Weighing up the PEXA IPO
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.
Can the iron ore price keep rising?
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.
2 new stocks to watch
28/06/2021  Morningstar has recently initiated coverage of a food delivery app and a consumer finance product. 
'Strongest earnings season I've ever seen'
24/06/2021  Meeting the deluge of demand is the biggest task for US companies, says Bell Asset Management's Ned Bell.
Biotech beyond covid
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
Alibaba is still deeply undervalued
21/06/2021  Morningstar's director of Asia equity research is confident the e-commerce giant will bounce back.
Weighing up the Endeavour IPO
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.
'Then we got hit with the equivalent of a war'
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.
Understanding Magellan's active ETF strategy
11/06/2021  Magellan's Craig Wright tells Emma Rapaport why it is leading the charge in the active ETF arena and how its global equity product works.
3 off-the-radar small caps
10/06/2021  Callum Burns of ICE Investors explains his conviction in pharmaceutical distributor Ebos, PSC Insurance Group, and elite sports analytics provider Catapult.
Small cap gems and how to find them
09/06/2021  Callum Burns explains how ICE Investors identifies companies with original products and sticky customer bases.
Stock of the Week: Salesforce.com
08/06/2021  They’re building an empire.
3 oil stocks we still like
07/06/2021  A year ago the oil price went negative. How have oil giants handled the past 12 months and what's the outlook from here? Morningstar analyst Allen Good explains.
Considering crypto? Here's what to think about
04/06/2021  As the investment world goes crazy for crypto, Morningstar Investment Management's Dan Kemp explains what to consider before putting it in your portfolio
Why we like Wizz Air
03/06/2021  The airline sector is set to recover as international travel resumes. Morningstar analysts think Wizz Air offer the best opportunity among low-cost carriers.
3 global infrastructure picks
28/05/2021  4D Infrastructure's Sarah Shaw outlines the investment case for Spanish multinationals Cellnex, and Iberdrola, and the potential of Mexican airports.
Are crypto ETFs coming?
28/05/2021  The SEC continues to sort out its regulatory concerns.
Stock of the Week: Apple
27/05/2021  We’re raising our fair value as sales hit new highs—but investors need to put it in perspective, says Andrew Willis.
Opportunities in global infrastructure
25/05/2021  Covid-19 has enhanced rather than impeded the future for global infrastructure, says Sarah Shaw of 4D Infrastructure.
Tribeca's eye for Domain
24/05/2021  Tribeca's Jun Bei Liu also explains why she sees opportunity in sleep apnea specialist ResMed as well as Treasury Wine Estates.
Stocks for emerging markets
19/05/2021  American Century Investment's Patricia Ribeiro sees growth in Chinese battery technology, biologics, and building materials in Latin America.
2 stocks for the rise of the robots
18/05/2021  Robotics is a fast-growing area of tech, creating opportunities in medical, logistics and life sciences sectors and much more.
Square: Stock of the week
18/05/2021  Square's Bitcoin purchase is more marketing than operations
Tesla: Stock of the week
10/05/2021  If Elon Musk ends up delivering, we might need to raise our fair value to US$1500 a share.
Why Tribeca's so upbeat on stocks
07/05/2021  Banks and resources are poised to deliver dividends, and Treasury Wine Estates and BNPL are worth a look, says Jun Bei Liu of Tribeca's Alpha Plus long/short fund.
Looking for value in emerging markets
05/05/2021  Digital banking, ecommerce and 5G are among the key trends set for rapid growth, says Patricia Ribeiro of American Century Investments.
Cash slashed, Aussie equities up: Why Morningstar updates Model ETF portfolios
04/05/2021  Analysts have made changes to the fixed interest, property, cash and equity allocations of Morningstar's Model ETF Portfolios to take advantage of the current market environment. They've also refreshed some of the funds in the portfolio.
Investing basics: Explaining the disconnect between the stock market and the economy
30/04/2021  The stock market and the economy are not the same. Here's why.
Why deforestation matters for investors
23/04/2021  EARTH DAY 2021: Why should investors care about deforestation and how can it can be taken into account within an investment portfolio? 
The silent killer: How to prepare your portfolio for inflation
21/04/2021  Do investors need to worry about inflation, and how do you prep your portfolio to protect you from it? Morningstar Investment Management's Dan Kemp explains.
ESG investing is about more than feeling good: Morningstar equity research
20/04/2021  Values-based investing is ultimately up to the investor.
2 US wide-moat stocks to buy on a dip
16/04/2021  Amazon.com and ServiceNow are looking increasingly attractive.
Fidelity's Kate Howitt names her 3 top stocks for 2021
15/04/2021  Investment tips from Australian equities fund manager Kate Howitt.
Back to basics: What is income investing?
14/04/2021  What is income investing, why is it important and which investors should focus on it? Morningstar Investment Management's Dan Kemp has the answers.
Hunting for pockets of value in an overheated market: Morningstar
13/04/2021  Morningstar equity strategist Gareth James discusses the great value rotation, why he believes the Australian share market is overvalued and where opportunities still lie for hungry investors.
Vaccine rollout drives energy's rise
12/04/2021  But the sector's current tailwinds are likely unsustainable, so investors should prioritise high-quality businesses with stable balance sheets, says Morningstar's Dave Meats.
Finding value with Kate Howitt
08/04/2021  Kate Howitt oversees Fidelity’s Australian Opportunities fund. She discusses her investing approach, the outlook and where she sees value.
Investing for millennials
07/04/2021  Goldman Sachs's Laura Destribats talks about the millennial investment trend, and why tech and experiences are so important to this generation.
What if I want to buy Bitcoin?
06/04/2021  Remember that the returns on speculative assets like Bitcoin are high risk
EGG, SGF, ZBRA: Foraging for the unloved gems
01/04/2021  Steve Johnson explains why Forager Funds Management has bought and held Enero, SG Fleet and Zebra Technologies and why they're poised for further growth.
Why the 'covid spending economy' will flourish
30/03/2021  Forager's Steve Johnson explains why he's bullish on consumer spending, enterprise software companies, and why he has cashed in on big names like Uber.
Proteomics set for growth, says Kardinia
29/03/2021  Kristiaan Rehder explains why the West Australian biotech is among the top performers in the Bennelong Kardinia Capital Absolute Return Fund.
Should you be worried about inflation?
26/03/2021  And how to make inflation "personal."
Crypto what?
25/03/2021  The how, what, and why of cryptocurrency.
The long and short of an absolute return fund
24/03/2021  An absolute return fund aims to seek returns in all weather. Kristiaan Rehder from Bennelong Kardinia Capital explains how.
3 dividend-paying real estate stocks for your watchlist
23/03/2021  Diversified portfolios, strong balance sheets and healthy payouts. Grant Berry singles out three big contributors to the SG Hiscock Property Income Fund.
AREITs in the time of covid
22/03/2021  SG Hiscock's Grant Berry explains how real estate was affected by the pandemic, how property stocks coped, and the chase for income in an evolving retail landscape.
Have we reached peak video gaming?
19/03/2021  Video gaming has soared under lockdown, can this sector keep growing post-covid? Morningstar analyst Neil Macker takes a look.
Myer: five stars and poised for the rebound
18/03/2021  The retail giant's strong balance sheet will help it navigate the shift to online shopping and capitalise on the return to normal life, says Morningstar's Johannes Faul.
Deliveroo IPO: what you need to know
10/03/2021  Ahead of Deliveroo's IPO, Morningstar analyst Ioannis Pontikis looks at the outlook for the business, its valuation and concerns about gig workers.
2 stocks for the e-learning boom
08/03/2021  E-learning has become the norm for young students and university-goers across the world. Morningstar analyst Michael Field looks at whether the trend is here to stay. 
February Reporting Season Wrap Up with Peter Warnes: Webinar
04/03/2021  Special guest Peter Warnes, our head of equities research, joins the Morningstar Foundations of Investing Webinar series to give his unique take on February Reporting Season and answer subscriber questions.
One year after the market crash, through the ETF lens
03/03/2021  The growth and adoption of exchange-traded funds has only accelerated as a result of the latest market crisis.
Brighter picture for big four banks
01/03/2021  Morningstar's Nathan Zaia on the outlook for the banks, dividend payouts and the move by the Bank of Queensland to acquire ME Bank.
One year on: lessons learned from the 2020 bear market
25/02/2021  The biggest takeaway from that period is not to panic when the market tumbles.
What if...I want to buy a gold ETF?
23/02/2021  From ETFs backed by bullion to miners with more upside potential - here's how to get yourself some gold.
'Full return to normal in 2021'
23/02/2021  If the US is to stage a recovery by mid-year, it will need the consumer services sector to fire, says Morningstar's head of economic research Preston Caldwell.
Google, Facebook versus Aussie news stocks
19/02/2021  Morningstar's Brian Han weighs up News Corp's deal with Google and examines the effect of Facebook's decision to block content from Australian media outlets.
Global real estate as a store of value
18/02/2021  Quay Global Investors' Chris Bedingfield explains how self-storage, data centres and industrial property can offer diversification and growth.
Spotting the 'covid winners'
16/02/2021  Uniti Group and Nextdc are among the companies that SG Hiscock's Hamish Tadgell says have flourished during the pandemic.
The transition from hope to growth
15/02/2021  Hamish Tadgell of SG Hiscock explains the portfolio changes he’s made in a bid to capitalise on the shift.
The future of the US economy
10/02/2021  Which pandemic-related trends have already passed, and which ones might be around the corner?
GameStop frenzy is history repeating
05/02/2021  The battle between the Reddit army and hedge funds is nothing new—the question is will regulators be willing to step in, says Morningstar's John Rekenthaler.
Who are the fast fashion winners?
03/02/2021  Competition is fierce for fast fashion retailers such as Asos, H&M, Zalando and Inditex. Morningstar analyst Jelena Sokolova takes a look at the sector.
Can your portfolio withstand volatile times?
01/02/2021  Volatility can be around any corner, says Morningstar director of personal finance Christine Benz.
How much equity exposure is too much in retirement?
28/01/2021  Retirees require stocks' growth potential, but they need a cash and bond buffer, too.
Key trends for China investors
27/01/2021  Rebecca Jiang, manager of the JPMorgan China Growth & Income Trust, looks at why Chinese stocks soared in 2020 and whether the trend can continue.