FNArena’s Weekly Insights – July 28 2020
In this week’s Weekly Insights:
-Coming Soon: The August Reporting Season
-A Deeply Frustrated Fund Manager
Coming Soon: The August Reporting Season
By Rudi Filapek-Vandyck, Editor FNArena
On many accounts, the August reporting season that is about to be unleashed upon investors in Australia will mark a new low post GFC, which ended 11 years ago.
This does not by default imply the Australian share market is ready for a big sell-off in the weeks to come.
Investors are being reminded markets do not compare in absolute numbers or values. It’s all about matching what is forecast, what is priced in and what can ultimately be achieved.
Reporting seasons are mostly about what changes to forecasts (and perceptions) rather than what companies have achieved.
Within this framework it remains an open question as to what conclusions exactly can be drawn from company financials and updates when macro developments remain all-important, and unpredictability of events and outcomes high.
We are less than 3.5 months away from the US presidential election, to name but one of the obvious obstacles to make far reaching predictions with any sense of conviction.
Companies will be reluctant to provide concrete guidance, but those who can/do will be rewarded for it.
Analysis of the five months since the pandemic spread teaches us that concrete guidance will be rewarded with share price outperformance.
Makes a lot of sense, if you think about it, as long as that guidance doesn’t need to be withdrawn later.
Bad news is not necessarily the equivalent of a fatal blow, as also shown by energy producers and shopping mall owners pre-season. Large write-downs of assets had investors merely shrugging their shoulders: tell us something new!
We saw those write-downs coming from many miles away.