Everybody Is Waiting…

Always an independent thinker, Rudi has not shied away from making big out-of-consensus predictions that proved accurate later on. When Rio Tinto shares surged above $120 he wrote investors should sell. In mid-2008 he warned investors not to hold on to equities in oil producers. In August 2008 he predicted the largest sell-off in commodities stocks was about to follow. In 2009 he suggested Australian banks were an excellent buy. Between 2011 and 2015 Rudi consistently maintained investors were better off avoiding exposure to commodities and to commodities stocks. Post GFC, he dedicated his research to finding All-Weather Performers. See also "All-Weather Performers" on this website, as well as the Special Reports section.

Rudi's View | Apr 18 2019

In this week's Weekly Insights:

-Everybody Is Waiting...
-No Weekly Insights Next Week
-CSL Challenge: Market Share & Margins

-Conviction Calls
-More Pain For Active Funds Managers
-Rudi On TV
-Rudi On Tour
-Rudi Talks

By Rudi Filapek-Vandyck, Editor FNArena

Everybody Is Waiting...

The concerns of the less-than-bullish investors and investment experts have been perfectly captured in the graphic below: global equities have de-coupled from underlying corporate earnings forecasts and the gap between rising share prices and tentatively recovering profit growth prospects has become quite large in 2019.

Australian investors have been equally enjoying the power of central bank support. Every time the RBA sends a signal it might be ready to lower the cash rate, Australian equities find more buyers lining up from the sidelines. As witnessed, again, on Tuesday when the minutes of the most recent RBA board gathering further fueled market speculation about an imminent rate cut.

Beyond the RBA again coming to the international central bank stimulus party, global equities remain supported by a general expectation that economic data in key regions, including Europe, China and the US, should soon start generating better looking trends of improvement. Further out, corporate profits in the US are still expected to bottom this quarter and next, and rise again in Q4.

Meanwhile, of course, many an institutional portfolio is holding an above average level of cash. So what happens when everyone is ready to jump in on the next sell down?

Yes, indeed, the market refuses to give in, instead making all the cash holders on the sidelines look foolish, and let them wait for longer than they thought feasible.

No Weekly Insights Next Week

Next week starts with an Easter holiday on the Monday (and, coincidentally, my birthday) so there will be no Weekly Insights. Next Edition is therefore scheduled for the final day of April, just before I leave for my next presentation in Melbourne.

CSL Challenge: Market Share & Margins

After having advocated for years that every investor with a long term outlook should have CSL shares in the portfolio, I launched the CSL Challenge at the beginning of calendar 2019. For more information: see the link at the bottom of this story.

ECP Asset Management, a long term shareholder in Australia's highest quality outperformer CSL ((CSL)), recently updated its thoughts and views on one of its substantial shareholdings as follows: "In CSL, we see a company that is organically growing the supply of plasma ahead of the industry, while in a supply constrained market.

"The company's sustainable competitive advantage is driven by its extensive suite of products that allows it to generate higher revenue per litre than its competitors, and is also the lowest cost producer, a powerful combination."

However, while such is an unquestionable positive assessment, it is also a longer term view and the share market doesn't do long term well, in particular not when something somewhere raises questions in the short term.

In the short term, market talk is all about "margin pressure" which first arose in late 2018, depressing the share price then, and it's now prominently present in the latest research reports, and subsequently (somewhat) depressing the share price this month. So how a serious issue is this "margin pressure" and should we, long term shareholders in the company, be worried?


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