Rudi’s View: Investment Themes In Australia

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 | Oct 15 2020

In this week’s Weekly Insights:

-Investment Themes In Australia
-Conviction Calls
-That Dreadful ASX Website (But Exciting News Ahead for FNArena)
-Rudi Talks

Investment Themes In Australia

By Rudi Filapek-Vandyck, Editor FNArena

As per tradition, one of the popular themes that dominated the local share market post Canberra-budget has been: which companies and sectors are the winners and losers?

The obvious answer, judging by the price action over the week past is: the banks are major beneficiaries.

Firstly, a relaxed framework around responsible lending almost by definition means more credit shall be provided both to small businesses and aspiring property owners.

Already sales teams inside the major banks have been busy contacting bank customers, making sure everyone understands the government wants small businesses to invest, and there are now instant tax benefits available.

In addition, putting more money in people’s pockets while propping up infrastructure and construction in general lowers the lingering risks for the Australian economy, and thus for the banks.

In the end, what is good for Australia, economy-wise, can only be good for the banks. Add cheap looking valuations and investors quickly read the message.


It goes without saying, investing in the share market beyond the immediate outlook is seldom guided by one such straightforward theme only, and this time is no different.

I couldn’t help but noticing, for instance, local representatives of the technology & disruption-theme, Altium ((ALU)), Appen ((APX)), NextDC ((NXT)) and Xero ((XRO)), equally all have had a jolly good time in October thus far.

Message to ourselves: those tectonic changes will remain around us for a lot longer, as will low bond yields, low inflation, and massive stimulus and liquidity injections from central bankers; all factors supportive of share prices carried by cloud, SaaS, wireless, blockchain and other modern-day adoptions across the masses.


Without answering any questions about potential implications from the upcoming election in the US, strategists at UBS this week lined up their most favourite themes that should dominate investor strategies and portfolios for the months ahead.

The identified major themes are:

-Defensive growth
-Yield & income
-Offshore earners
-Mining services
-China’s recovery
-Specific exposures to NSW and/or Victoria
-demand boosts from covid-19
-demand shock from covid-19
-structurally more demand from covid-19
-structurally less demand from covid-19

I think most labels speak for themselves and none should represent a major surprise.

As plenty of risks and uncertainties continue to lay ahead, the attraction of defensive growth speaks for itself.

Low bond yields and many dividend cuts this year will keep retirees’ focus on finding assets that can be relied upon for income without sudden negative surprises.

And if the US dollar weakens, and the Aussie strengthens accordingly, this will have a soothing impact on the share price potential of gold producers and foreign earners.

Any positive impact on the housing market, both in terms of prices and construction activity, has much farther reach beyond the big four banks.

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