Equitable Investors in Melbourne, Victoria, Australia | Consultation agency

Equitable Investors

Locality: Melbourne, Victoria, Australia

Phone: +61 3 9028 7104

Address: 55 Collins Street 3000 Melbourne, VIC, Australia

Website: http://www.equitableinvestors.com.au

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25.01.2022 A focus on the US to begin with and Yale's monthly surveying showing investor confidence that stocks won't crash has taken a beating this year; while on the other hand Bloomberg shows that US dollar weakness has correlated with strength in US equities. Taking a look at the disconnect between markets and the economy, ASI-Transmatch's rail traffic movements in the US have recovered significant ground but remain below pre-COVID-19 levels; while FactorInvestor shows the step-chan...ge in e-commerce penetration. Deutsche Bank's look at US market PEs in different inflation regimes is interesting. Moodys, meanwhile, shows corporate bond issuance surging in 2020. Turning to Australia, Evans & Partners sets out loan provisioning by Australian banks relative to gross loans and compares them to higher ratios reported by major international banks. Morningstar sets out just how strong momentum has been as a factor in the Australian market, which may explain Evans & Partners' chart of the historically high PE ratio on high growth ASX industrials. Fitch reminds us that Australia's immigration and population growth have dipped significantly in 2020. See more

25.01.2022 Focusing on drivers of stock valuation, we see corporate bond yields converge with equity yields in the US, as strategist Christophe Barraud highlighted. Verdad studies the impact on "terminal" valuation of long-term growth and discount rate assumptions (no surprises that low interest rates and optimistic growth rates boost "growth" stocks); while George Mason University identified significant sectorial shifts in beta (the measure of the extent to which a stocks moves magnify market moves). Listed private equity in the US is still recovering from the March 2020 sell-off, while Cannacord highlights ASX media sector positioning for COVID-19. Data from Yelp showed permanent business closures rising in the US as GDP plunges. Finally, in Australia we see Australian Treasury banking on a "V" shape recovery in the budget deficit.

25.01.2022 Starting with a sobering thought, businesses that have debt graded as speculative or that cant cover their interest bills - Interest Cover Ratios (ICRs) of less than 1 - are "almost 40 percent of total corporate debt in the economies we studied", the IMF noted (as reported by the Financial Times). On a more upbeat note, Bespoke tabulated how a 1% decline in the S&P 500 to start October has typically been followed by healthy returns; and the rise of software M&A was charted by PitchBook. One of our favourite themes - the far greater opportunity set in small and micro cap stocks - has been illustrated by Verdad Advisers. Finally, theres some big swings in the Australian job ads market, with a particularly sharp decline in New South Wales and in Construction, Design & Architecture.

25.01.2022 10k Words - June 2020 | Surge in activity from small traders on discount platforms; professionals holding most cash since 9/11; record ASX PE; median US stock flat for 23 years; valuation spreads & bond correlation; central banks & ETFs; consumer activity

25.01.2022 Stock performance is rarely linear with ebbs and flows through time. Equitable Investors is focused on the medium-to-longer term window and while very conscious of managing volatility, fully expects there to be good and bad interim windows for investment performance.

22.01.2022 A combination of hard work positioning the Fund in earlier times and hustle during the month earned a strong increase in NAV for October - the third double-digit percentage gain in the past four months.

21.01.2022 Lets start with Buy Now Pay Later (BNPL - and you can watch Equitable Investors' Martin Pretty and Cyan's Dean Fergie recent chat about BNPL here) - with Wilsons running the comps on the eight ASX listings in the space (how many do we need?). While the Robinhood investors remain in focus, data on US equities ownership shows those aged under 54 own less of the equity "pie" now than in past decades. If Deutsche Bank projections on COVID-19 immunity in wealthy nations prove correct, herd immunity is on its way in 2021. Morgan Stanley says global GDP will be back on trend in the next six months. And globally fund managers are positioned for a good time with cash weightings down to 4.1%, falling 1.8 percentage points in seven months, the fastest drop ever according to Bank of America's survey.

21.01.2022 Who would have thought that the global pandemic that started in China would lead to significant out-performance of Chinese equities against the rest of the world? Bespoke has illustrated that in terms of the China share of global market capitalisation. Analysts are scrambling to cut growth expectations. Goldman Sachs put out its view of various economies GDP relative to previous US recession periods. BAMLs monthly global survey of fund managers showed growth expectations plunging the most ever to a net 49% (23% brave investors forecasting stronger growth, 72% tipping weaker growth). Morningstar has had a crack at estimating the impact of the pandemic on global GDP. Finally, Evans & Partners reviews the history of intra-year declines in the S&P/ASX 200.

20.01.2022 Our investment "funnel"

20.01.2022 "Analysts effectively stopped trying to adjust their forecasts about two months ago", concluded Bloomberg upon looking at Deutsche Banks S&P 500 earnings revision chart. Volatility, meanwhile, remains elevated despite equity market strength. In an Australian context, Bell Potter shows that retail buying has driven the market higher. In a US context, BAML highlights that the strongest fund flows have been into cash and gold in 2020. At the same time, global corporate debt is soaring, Janus Henderson notes, and based on Capital Economics debt spread data they are paying more for it. Capital Economics money supply chart shows theres plenty of money out there to lend (or buy equities). And if you are buying equities, Sentimentrader has a strategy for you - market timing using Trump tweets.

18.01.2022 The damage to the Australian retail sector is set out in The Australians store closure count and reinforced with an update on payments volumes from Tyro Payments (ASX code: TYR). Meanwhile, sell-side analysts have proven slow to respond to the impact of COVID-19 and social-distancing, as evidenced by UBS aggregatge numbers for the ASX - but they are starting to catch up. Markets threw the baby out with the bath water when the epidemic hit home but now businesses that arent... immediately hit are being looked at again, like The Citadel Group (ASX code: CGL), which sells software and consulting to the government and health sectors (as well as enterprise, disclosure Equitable Investors has interests in CGL). Who believes in a "V"-shaped recovery when the world emerges from this recession? Only 15% of fund managers, according to the latest Bank of America Merrill Lynch survey. http://blog.equitableinvestors.com.au//10k-words-april-202

17.01.2022 A strong end to the year for the portfolio - the Fund's NAV grew 7.87% in the month of December for a 10.57% return in calendar 2020. Meanwhile, possibly the most significant positive development from any of the Fund’s investments during the month had zero impact on NAV. The FDA called the authorisation of Ellume's at-home COVID-19 diagnostic a major milestone in diagnostic testing for COVID-19. But Ellume is unlisted and our investment is held at cost until we can assign a value that is independently verifiable.

17.01.2022 https://mailchi.mp//equitable-investors-march-quarter-upda In our COVID-19-tainted March 2020 quarterly, we report that disappointing returns continued in the absolute sense for Dragonfly Fund. Yet it still has done better than the most relevant index, the S&P/ASX Emerging Companies Index, over the month, quarter and financial year-to-date.

17.01.2022 DRAGONFLY FUND AUGUST 2020 COMMENTARY A wild ride of a month where massive surges in some of Dragonfly Funds positions looked like they were driving NAV towards a ~20% gain at some stages. On one hand it was great to see excitement around these holdings. On the other, the volatility serves as a reminder that flighty day-traders are often the marginal buyers and sellers in the current environment. https://mailchi.mp/100634f15708/dragonfly-fund-may-2180213

16.01.2022 "Stock Swap" - for the consideration of any wholesale-qualified investors who find themselves holding "orphans" in their portfolio that Equitable Investors may find attractive. Read more here: https://sites.google.com/equitableinvestors.co//stock-swap

15.01.2022 If you are a wholesale-qualified investor with an orphan stock or two - our Fund has the ability to "swap" shares in a company for Fund units - where we find the shares attractive and suitable investments - please reach out! https://mailchi.mp//stock-swap-were-looking-for-your-orpha

15.01.2022 Volatility has been on strike recently as demonstrated by Robecos JS Blokland and the % of days US equities have fallen more than one percent. But WSJs Jason Zweig illustrated how volatility is volatile, at least historically. In this low inflation environment, Antipodes has called out a "bubble in duration" arguing that equities are increasingly behaving like bonds. Yet, at the same time, Crescat Capital chimes in with a chart showing that US EPS growth is now falling behind the modest inflation levels. And finally, AQR sets out the case for "value" to return to favour, finding it to be "the cheapest its ever been" - "if the tech bubble isnt around the corner again".

13.01.2022 The big have been getting bigger as momentum continues for passive, market-cap weighted index investing, as Morgan Stanley has set out for the US market (S&P 500); at the same time US stocks with negative tangible assets have outperformed the market according to Bloomberg. There once was a time when revenue multiples were hardly ever referred to but theses days they are all the rage - and Equitable Investors shows they have increased across high and low percentiles. Then retu...rning to Price-to-Earnings (PE) multiples, Morgan Stanley shows that Australian "value" stocks are trading at a discount to "growth" stocks that is well below the average. The ASX 200 is trading at a record PE multiple level as Evans & Partners shows, while in contrast JP Morgan has the US S&P 500 pinned within one standard deviation of the long-term average P/E - and perhaps more importantly highlights negative correlation between PE multiples and subsequent five-year returns. Still, Macquarie points out that if you are going to look at PE multiples, the gap between the US and the rest of the world has widened. Back on the ASX, Equitable Investors has updated its analysis of five year total returns (ex resources, REITS, investment companies and bioetch) and found 63% of stocks delivered positive returns with ~50% meeting or exceeding the estimated cost of equity. Turning to the Australian economy for two more charts, it appears the housing industry is up and about (but it remains to be seen what impact the tragic bush fires have). Australia stood out in 2019 as one of the greatest disappointments relative to consensus GDP expectations, according to Goldman Sachs. See more

13.01.2022 We had to give you something on coronavirus - so it is the most complex infographic weve seen, from DannyDorling.org, then its over to US bonds, where yields are so low, Bloomberg highlights they imply some belief that the Federal Reserve will move to negative rates. Citi sets out the unprededented wave of central bank liquidity and the impact on the risk-free rate, making bond rates relatively more attractive. From government bonds we move to high-yield (or junk) where rate...s have surged and Goldman Sachs forecasts a spike in defaults. What happens in equities when the spread on high yield bonds expands? Verdad Capital shows US small cap value starts to perform and charts the significant valuation spread between the cheapest and most expensive.Citi Research warns that the huge wave of liquidity is flooding into a market already highly indebted. Finally, Macquarie maps out the decline in Australian EPS growth we explored last month. See more

11.01.2022 Were in the midst of one of the larger pull-backs in global equiies for some time (on Monday the S&P 500 Index plunged the most since February 2018 according to Bloomberg) so well get straight to the matter at hand - alphaarchitect sets out for us how often the equities market falls 10% in a year (~70% of the time for the Australian equities benchmark) and how often a 5% sell-off snowballs to 20% (~13% in Australia). Moodys puts forward a case that higher default rates on ...high yield corporate debt would be a signal for an equities "purge". With coronavirus or COVID-19 dominating market fears, Morgans shows short interest in the ASXs travel sector has scaled up. And while COVID-19 has brought fears of an economic slowdown to the fore, CBREs survey of real estate investors showed the economy was already perceived to be the greatest challenge for 2020. We then sink our teeth into the impact of "FANG" stocks on US market valuation and the relative re-rating of growth and quality stocks compared to those labelled as "value" (all labels we dont necessarily agree with - why cant a stock be good quality and good value because off its growth?), thanks to Yardeni Research, Gavekal and SG. See more

10.01.2022 Valuation is at the fore this month, starting with the simplistic view of the forward P/E multiple on the S&P 500 being right up at "dot com" boom levels, via The Felder Report. FactorInvestor shows the composition of the S&P 500 has shifted such that the top five "Tech Titans" are a larger part of the index now than they were in that boom twenty years ago. Apples market cap is now greater than the national aggregate of stocks in countries like Germany - something unimaginab...le 10 years earlier - but now Apple, Microsoft and Amazon all have market caps greater than Australias market aggregate. And despite these huge numbers for tech, it can still be argued, as per the chart from TS Lombard, that the rest of the S&P 500 is also expensive. On the other hand, @jsblokland looks at valuation relative to liquidity and illustrates that the market P/E multiple could be much higher! Finally, shifting to smaller companies, Verdad did some work on the impact of passive investment vehicles on small company valuations and showed that Blackrock ownership impacted on the EV/sales valuation metric for low-volume small cap stocks. See more

10.01.2022 Aussie equities havent been in vogue judging by the EPFR Global measurement of cross-border fund flows. Yet the Australian equity risk premium is adjudged to be on-par with the US by valuation guru Aswath Damodaran. Are bonds in a bubble? Investors doubled their money in a couple of years, as BGC Partners highlighted, by buying 100-year Austrian government bonds with a coupon of 2.1% that has since traded up in price to a 0.66% yield. Looking at valuations, high growth Softw...are-as-a-Service (SaaS) stocks have recently pulled back from peak valuations, as illustrated by tomtunguz.com, while PZENA Investment Management shows that essentially all the expansion in the Price/Earnings multiple of the US market occurred in the most expensive quartile of stocks. Back home in Australia, UBS suggests the discount in small caps may imply it is time to overweight. And what does it mean if valuations remain high relative to historical measures but CEOs (in the US) are not as confident as set out by Crescat Capital? Finally, dont believe the noise about the superiority of private equity returns over public market returns as academic Erik Staffords work shows. See more

09.01.2022 Citi strategist Matt King summarises the legacy of 2020 across divisions in politics and the economy then Bloomberg shows US treasury yields hitting 1% for the first time since March. Bespoke debunks the view that it is bad for US equities for Democrats to have full control of federal politics. Market frothiness is on display in Factset's chart of SPAC (Special Purpose Acquisition Company or blank check) IPOs. UK fund Fasanara Capital shows that monthly variations in market...s have been expanding, while US quantitative fund AQR argues with one chart that the prospects for a standard balanced portfolio are low and the opportunity to buy "value" is clear. Forward PEs - even looking two years out - are high relative to historical levels around the world according to Evans & Partners. In Australia, Equitable Investors has mapped out the distribution of CY2020 returns for its "FIT" universe of micro-to-mid caps. Finally, ANZ has mapped out for us the changing shares in global GDP over time. See more

09.01.2022 Some sage words on how to ensure the health of your business while dealing with potential business consequences of the spreading effects of the coronavirus.

09.01.2022 In our October 2019 commentary, we highlight mergers and acquisitions as a value catalyst following an announced merger between two of Dragonfly Funds core investments and review the strong positive newsflow from MedAdvisor. https://mailchi.mp//dragonfly-fund-october-2019-double-edg

09.01.2022 The median return on an IPO turns negative for those who hold their investment for more than 150 days (according to ASICs analysis of mining IPOs).

08.01.2022 The Cyclically Adjusted Price-to-Earnings (CAPE) ratio, also known as the Shiller P/E, is a valuation measure often used to assess the current value of the equity market and prospects for mid-to-long term future returns. It is calculated by dividing the index level or price by the average of ten years of earnings, adjusted for inflation. Higher-than-average CAPE ratios are said by practitioners to imply lower than average future returns. Equitable Investors assessed the effe...ctiveness of this ratio using the data provided by Professor Schiller and Yale. Specifically, we have focused on the total return data for the S&P 500. We reviewed CAPE ratios against subsequent five year returns and concluded that: * Future five year returns were higher, on average, for the lowest 20% of CAPE Ratios and lower for the top 10%; * The top 10% of CAPE ratios were followed by a five year period of negative returns with far greater regularity than any other decile; * But in between the bottom 20% of and top 10% of CAPE ratios, the trend between price and returns was very loose.

08.01.2022 https://sites.google.com/equitableinvestors.co//stock-swap

07.01.2022 Equitable Investors Dragonfly Fund returned 4.19% after fees in the month of September 2019. Were pleased to share our commentary here: equitable.net.au/itx

07.01.2022 Historical precedents indicate that epidemics may cause short-term market volatility but recent examples have had limited sustained impact.

03.01.2022 https://equitable.net.au/8b170 Global confidence in growth firmed in the December quarter, driving equities, but in Australia the approach was more cautious with the RBA once again trimming the official interest rate and standing ready to take further action.

02.01.2022 With another calendar year coming to a close and interest rates remaining "lower for longer", there are plenty of measures by which large-cap equities look to be priced highly. In Australia, the market PE multiple has continued to expand to record levels despite earnings expectations softening, as Morgan Stanley sets out. Australian consumer confidence, by the way, is at its lowest point for several years, according to the ANZ-Roy Morgan survey (but the implication for stocks... is unclear). Looking globally, here are some of the ways by which stocks can be measured as over-priced or fully-priced: we have a high S&P 500 PEG ratio from Lohman Econometrics; Lazard Asset Management highlights most market-wide PE multiples are above average and in the US above the 90th percentile; and @HondoTomasz illustrates the relationship between valuation and future returns (high current valuation leading to lower future returns). Still, in the short-term, December has typically been a good month for stocks; while in the long run dividend growth is a greater driver of returns than valuation changes according to Man Institute. See more

02.01.2022 OK day on ASX except for the smallest of stocks as per our FIT Indices https://sites.google.com/equitableinvestors.com//fit-index?

01.01.2022 Our analysis indicates that August was a month of extremes on the ASX with a renewed focus on price at one end of the spectrum but also a strong element of speculation at the other. This is probably a good environment for micro caps - some of whom have been lowly priced compared to metrics for larger businesses in their sectors; and others that are at an early stage and require "animal spirits" to drive their share prices.