FNArena’s Weekly Insights – August 4 2025
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In this week’s Weekly Insights: -Five Bellwethers For August By Rudi Filapek-Vandyck, Editor Five Bellwethers For August Looking back over the (more than) twenty years of closely monitoring corporate results seasons in Australia, one of the most commonly made mistakes by investors is assuming a share price that has already run hard leading into the result must by definition soon run out of oxygen. This year’s August season already presented us with the perfect example; global CPAP market leader ResMed ((RMD)). With the share price up some 29% over the past twelve months, and rallying 9% in the immediate lead-in to Friday’s Q4 result release, one could be inclined to assume the only logical outcome would be profit-taking or a sell-off from disappointment next, but the shares have added more gain and held their ground in an overall weaker market. In a time of fragile sentiment, with indices near all-time record highs, and constant erratic tariff policy moves coming out of the White House, one can never be too confident about what the immediate future looks like, but if analysts updated modeling and forecasts are anything to go by, this share price still has a lot of upside potential in front of it. FNArena’s consensus price target has improved to $47.46 from $46 prior to Friday’s update implying today’s share price below $43 could still add more than 10% over the year ahead, dividends not included. It is still early days, of course, but ResMed’s continued outperformance echoes my personal observations from the two decades past. It sends an apposite warning to investors ahead of the deluge in market updates forthcoming: don’t give up on your winners simply because they have performed well and don’t automatically assume that hiding in cheaper-priced market laggards is by default a winning strategy. Regarding the latter, two other companies also reported thus far and both market laggards –Champion Iron ((CIA)) and Rio Tinto ((RIO))– underwhelmed and saw their share price weaken post market update. Both share prices are now trading below price levels of this time last year. Share markets have become extremely polarised post the 2020 pandemic and the past three years in particular have kept a lid on cyclicals and smaller cap stocks in general. And while many a professional investor and market commentator has been predicting a broadening of the market’s positive momentum for quite a while, the all-important question remains whether August will provide enough triggers for such a broadening of the rally into those segments largely ignored and left behind? My personal view is August comes too early. Both the Federal Reserve and the RBA locally are still figuring out the possible effects from US import tariffs, as are, by the way, most CEOs and CFOs around the world. While the general expectation is that consumer spending and housing construction will be in better shape by this time next year, there’s still potential for disappointment and negative news in the shorter-term. Flight Centre ((FLT)) just issued its second profit warning in four months. Its share price is now back where it was during the April sell-off. Appen’s ((APX)) market update equally saw more selling orders kicking in. Gold miner Greatland Resources ((GGP)) has only been listed for six weeks on the local bourse but it is already facing scrutiny about its updated guidance on costs, effectively translating into a proifit warning this early in its public existence in Australia. Whereas many a market commentator is warning investors about a sizeable spike in volatility this season, the risks are not necessarily concentrated inside the 40% of ASX-listed companies that carried the index to a new record high three weeks ago. Momentum Favours Telcos Analysts have been busy mostly with reducing forecasts both during and after the school holidays in July. Consensus is now projecting the average earnings per share (EPS) to retreat by -1.7% from the year prior in FY25. It’ll mark the third year in a row of net negative earnings growth for corporate Australia. A lot has to do with the oversized importance of miners and energy companies, but also: the current consensus forecast for FY26 is a positive 4.8% average growth, albeit that number is now gradually sliding south (and probably will be lower by the end of this month). Outside of miners and energy companies, most sectors carry positive expectations, but extreme polarisation remains the key word, including inside sectors. This set-up works in both directions, of course. One sector caught my eye as it seems to stand out. Firstly, through positive share price performances. Secondly, through ongoing positive prospects. And thirdly, because of a lack of the extreme polarisation that still dominates most other market segments. That sector is the local telecommunication sector with all of Telstra ((TLS)), Aussie Broadband ((ABB)), Superloop ((SLC)), TPG Telecom ((TPG)) and Tuas ((TUA)) enjoying a stamp of approval from most analysts covering the sector. The few representatives from New Zealand have arguably gone through a tougher time, but even there market dynamics seem to be improving. If we stick to the five largest Aussie telcos on the ASX, all share prices are trading higher than in August last year and most share prices have caught positive momentum in recent weeks and months. No doubt, this is also the result of analysts gradually warming towards these companies and their (ongoing) potential for growth. When it comes to growth, one should keep things in perspective for local market leader Telstra. Recent price hikes and overall rational competition is translating into firmer confidence about higher dividends forthcoming. Add growing concerns about valuations inside the local banking sector and some doubts creeping in regarding the insurers and it should be no secret why Telstra is back in focus as a reliable, defensive, growing dividend payer. Added feature: nil exposure to US import tariffs. That latter characteristic equally applies to the three fast-growing challengers of Aussie Broadband and Superloop in Australia and Tuas in Singapore, as well as former market darling TPG Telecom, which is now a corporate turnaround story. Apart from rational competition, recent pricing changes by the National Broadband Network (NBN) favoured the wholesalers over retail and this, analysts suspect, could facilitate added margin increases for the likes of Aussie Broadband and Superloop. High levels of cash generation and asset sales (TPG) open up the prospect of share buybacks. We will have to wait and see how increased expectations compare with actual results this month, but at face value it looks like Aussie telecom could be one of the eye-catching stand outs this season. Five Bellwethers For August Analysts at Morgan Stanley believe five stocks have the ability to shape trends and investor sentiment this month: -CSL ((CSL)) After five years of notable underperformance, the analysts believe CSL is now arguably the most topical stock inside the local Top 20, with investors “highly focused on several catalysts that could reinforce or challenge an improved outlook”. With internal cost discipline and capital management emerging as important levers for sustaining long-term growth, Morgan Stanley believes the company’s ability to navigate external pressures such as tariffs and vaccine sentiment will be at the core of how this month’s market update will be received. I mentioned creeping doubts about whether favourable dynamics for insurers can last for longer. Morgan Stanley believes investors will be scrutinising IAG’s result for signs of (potentially) peaking industry conditions. Shares in Woolworths have now underperformed major competitor Coles Group ((COL)) for more than 18 months. Historically, this is almost unheard of. But is Woolworths ready to close the gap and regain its former premium? Morgan Stanley sees Woolworths’ result as a litmus test for portfolio positioning in staples. Stockland should be an early indicator of improvement in housing-linked conditions. Its market update might well function as the bellwether for housing sentiment generally. In case you missed it, analysts at Morgan Stanley point out, Telstra shares are up by 23% since its interim result release in February. No discussion, the positive turnaround in on the ground momentum has not gone unnoticed. But market positioning “feels crowded”, say the analysts. This, however, doesn’t mean the road ahead can only result in disappointment for Australia’s largest telco. There’s ongoing optionality in further asset sales (InfraCo) and a generous bull case scenario would see the telco meaningfully lift its dividends, well above current market forecasts. All shall be revealed over the four weeks ahead. **** FNArena’s Corporate Results Monitor will soon start updating daily on corporate results: https://fnarena.com/index.php/reporting_season/ **** In preparation of August: https://fnarena.com/index.php/2025/07/31/rudis-view-consumer-stocks-insurers-telcos-more/ https://fnarena.com/index.php/2025/07/23/rudis-view-extreme-bifurcation-ahead-of-august/ https://fnarena.com/index.php/2025/07/16/rudis-view-navigating-covid-legacies/ A Nasty Surprise From Boss Energy Whether it be through Paladin Energy ((PDN)) or via Boss Energy ((BOE)), investing in the anticipated revival of nuclear energy around the globe has been a rather challenging exercise. My response to some of the questions received of late: Alas, the news is not that great. A large dose of uncertainty now overhangs Boss Energy’s key operation. If, as seems to be the case, the company will have to scale back the maximum capacity at which it can ever operate at Honeymoon, this will have a big impact on the company’s valuation. The good news is: the share price has fallen too deeply. You can also see this from Stock Analysis on the website. Now comes the difficult part: when will the market be keen enough to fill the gap between share price and more reasonable valuations? That remains the multi-million dollar question. Short-term: I wouldn’t hold out for any kinds of miracles. I think current shareholders have to take some time and think this over. Some changes to curated lists Anyone who visited the All-Weathers section on the FNArena website lately would have noticed some changes have taken place, in particular regarding sub-selections around defensives and high-yielding dividend payers. I wasn’t happy with the prior set-up and inclusions but feel a lot more comfortable now. Check it out at: https://fnarena.com/index.php/analysis-data/all-weather-stocks/ FNArena Talks A replay of last weeks online Q&A is available: https://youtu.be/d30WGsiGWs0 Or simply visit the dedicated section on the website: https://fnarena.com/index.php/analysis-data/fnarena-talks/ Model Portfolios, Best Buys & Conviction Calls This section appears from now on every Thursday morning in a separate update on the website. See Rudi’s Views for the archive going back to 2006 (not a typo). FNArena Subscription A subscription to FNArena (6 or 12 months) comes with an archive of Special Reports (21 since 2006); examples below. (This story was written on Monday, 4th August 2025. It was published on the day in the form of an email to paying subscribers, and again on Wednesday as a story on the website). (Do note that, in line with all my analyses, appearances and presentations, all of the above names and calculations are provided for educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views are mine and not by association FNArena’s see disclaimer on the website. In addition, since FNArena runs a Model Portfolio based upon my research on All-Weather Performers it is more than likely that stocks mentioned are included in this Model Portfolio. For all questions about this: contact us via the direct messaging system on the website). |
