The investment world mourns the loss of another titan: Jim Simons, a prizewinning mathematician who transitioned from a stellar academic career to finance — a field he initially knew little about — to become one of Wall Street's most successful investors.
Simons, who passed away at the age of 86, leaves behind a legacy marked by groundbreaking achievements in quantitative investing, significant contributions to mathematical research, and a remarkable commitment to philanthropy. Headlines in local financial news have recently featured stories of takeovers, mergers, and acquisitions. The beginning of this decade, marked by a significant downturn, has led to an economic cycle ripe with such activities. This bustling environment presents rich opportunities for unique non-blue-chip companies, especially those with smaller market caps.
Technology advancements, particularly in artificial intelligence (AI), have been pivotal in driving market dynamics recently, with notable companies like Nvidia (NASDAQ: NVDA), Meta (NASDAQ: META), and Alphabet (NASDAQ: GOOG) experiencing significant stock price surges of 210%, 102%, and 58% respectively over the past 12 months.
In our previous analysis, AI's Power Surge: Overlooked Opportunities of a Tech-Driven Future and Power Play: Investing in Energy for Innovation, we highlighted the critical role of AI, cryptocurrency mining, and clean technology manufacturing in pushing U.S. energy supplies to their limits, heralding the dawn of a Fourth Industrial Revolution. While flashy industries and businesses often capture the imagination of investors, it's the understated, "boring" businesses that often form the backbone of solid portfolios.
These companies may not make headlines, but their stable, predictable revenue streams and resilient business models, serve as the bedrock of many portfolios. Renowned investors, such as Warren Buffett and Peter Lynch, have often lauded the virtues of these unglamorous yet resilient enterprises. Few entities wield as much influence as tech behemoths Microsoft (NASDAQ: MSFT) and Alphabet (NASDAQ: GOOG).
These tech titans' quarterly performances serve as litmus tests for market sentiment and economic health. As stalwarts in their respective domains, Microsoft's innovative software solutions and Alphabet's pervasive online presence not only shape industry standards but also hold the power to sway investor confidence and dictate market trends. The quarterly results are eagerly awaited by analysts and investors alike, as their outcomes often reverberate far beyond their individual stock prices. Indeed, the ripple effects of Microsoft and Alphabet's performance can be felt across major indexes, with the S&P 500 and NASDAQ Composite often hanging in the balance of their success or failure. Predicting style and fashion trends is as challenging as forecasting Melbourne's weather or expertly timing the market. While style shifts rapidly, materials evolve more slowly. However, when a material proves cost-effective, appealing, comfortable, and accessible, it quickly becomes integral to fashion. Bamboo has emerged as such a material.
Innovators have spun its fibres into yarn as fine as silk, creating clothing that combines elegance and durability. Bamboo clothing, known for its lightness and breathability, captivated fashion enthusiasts worldwide. Its hypoallergenic and antibacterial properties offer a gentle touch while keeping wearers fresh. In the sustainable evolution of the clothing industry, bamboo has become a key player, transforming a combined approach to fashion and sustainability. Whether it be sport, business, investing or entertainment - we love a story of success in the face of adversity.
Take Leicester City Football Club's improbable Premier League title win in the 2015-2016 season as a prime example of winning against all odds. This week we put a spotlight on a company in the Global High Conviction Strategy at TAMIM Asset Management, led by Portfolio Manager Robert Swift. While it may not be the first company that springs to mind, it should need no introduction to most Australians (at least those over the age of 30): eBay (NASDAQ: EBAY).
The NBN/Connectivity market is high in competition and concentration.
According to the ACCC's latest NBN Wholesale Market Indicators Report, smaller providers such as Superloop (ASX: SLC), Aussie Broadband (ASX: ABB) and Vocus continue to acquire a greater share of the NBN wholesale services pie during the December 2023 quarter. Smaller providers now command a quarter of NBN wholesale services, steadily expanding their customer base while competing with larger retailers. Conversely, major providers like Telstra, TPG, and Optus experienced declines. This dynamic underscores the evolving landscape of NBN connectivity in Australia, with smaller players demonstrating resilience and competitiveness in the market. While international headlines have been dominated by the "magnificent seven," the ASX has previously harboured its own notable tech stocks encapsulated within the WAAAX acronym.
The Australian consumer has navigated a complex landscape over the past 12-18 months.
Grappling with the repercussions of a post-pandemic surge in inflation, the Reserve Bank of Australia has raised interest rates 13 times since May 2022 with the current cash rate target at 4.35%. Price hikes have placed considerable strain on households, triggering a cost-of-living crisis. As investors anticipated the worst, a large sell-off and re-rating of ASX consumer discretionary businesses during 2023. Microsoft is a business most readers will be familiar with. In fact, many will likely interact with products owned by the software giant daily. Office 365 programs such as Word and Teams are ubiquitous in workplaces, schools and homes. Professionals peruse LinkedIn for new jobs and connections, while Xbox and Minecraft are staples of gaming entertainment.
The final six months of 2023 presented a challenging backdrop with prevailing macroeconomic conditions and a sense of uncertainty.
Anticipations for the earnings season until the end of December were initially subdued. Despite this, the period delivered results that exceeded expectations, particularly for several companies within the TAMIM portfolio. In general, we had a strong reporting period. Companies looking to cut costs are now starting to show the results of those measures. Consumer spending has remained resilient while labour shortages are beginning to alleviate. The prospect of rising interest rates continues to recede and inflationary pressures show signs of easing. It’s been almost impossible to avoid the hype around NVIDIA (NASDAQ: NVDA) in the financial media in recent times. It’s been pinned as the poster child for the AI revolution–a title its shareholders must be loving. The NVDA share price has risen a staggering 19 times over the past 5 years (despite a more than 60% decline in 2022), including adding a record US$277 billion in market capitalisation after its most recent financial results release last week. It has been nothing short of a nightmare for short-sellers attacking the company’s meteoric rise, with Bloomberg reporting a whopping US$3 billion in (short selling) losses following just the last quarterly earnings. With NVIDIA on everyone’s lips, what’s the state of play?
In a market captivated by megacaps like Nvidia (NASDAQ: NVDA) and the allure of AI, our focus remains steadfast on the fruitful terrain of ASX small and mid caps. Two recurring themes have emerged in our portfolio: unearthing small-to-mid-sized businesses with improving fundamentals that have either been overlooked or remain unrecognised, and identifying potential takeover targets within this group.
While these ASX small caps are a drop in the ocean compared to the earnings anticipation of global behemoth NVIDIA Corporation (NASDAQ: NVDA) the below-mentioned companies continue to produce exceptional results in the face of challenging environments.
This report examines three notable companies within the TAMIM Australia Small Cap Income portfolio that have recently reported strong results. In today's fast-paced world, the demand for instant gratification has permeated almost every aspect of life, including investing. The allure of quick gains often overshadows the virtues of patience and long-term thinking.
As markets surge, with the S&P 500 reaching new heights, it's easy to get caught up in the short-term frenzy. As company earnings reports roll in, investors will see multiple examples of why it pays to be an optimist and to ignore apocalyptic forecasts. For much of late 2022 and 2023, the media was fixated on rising interest rates and the potential of a damaging recession. As a result, while some retailers had seen share prices recover strongly as the world emerged from the pandemic, the momentum reversed as increased costs and slowing sales emerged.
The gaming sector, having navigated the turbulence of the COVID-19 pandemic, is on the brink of resurgence.
Firstly, the pandemic-induced restrictions significantly curtailed the operations of casinos, gaming venues, and related establishments, causing a temporary dip in revenue for many gaming companies. Yet, as the world steadily emerges from these constraints, an anticipated surge in consumer engagement with gaming activities is expected to fuel sector recovery. Global equity markets finished the year on a tear as investors gained confidence that inflation had abated and interest rate hikes were in the rear vision mirror. There was a clear bifurcation however, with the bounce led by a small number of suspects (we’re looking at you big tech) while 70% of companies in the S&P500 underperformed the index in 2023.
As we highlighted in our previous article back in November, the so-called “Magnificent 7” contributed a substantial proportion of the S&P 500 gains during 2023. Come the beginning of 2024, it was time to see whether these blockbuster share price performances were justified. Nvidia (NASDAQ: NVDA) is the only one of the 7 yet to report, with this scheduled for 21 February (there shouldn’t be a need to mark your calendar as there will likely be considerable media coverage). The remaining six (Alphabet, Amazon, Apple, Meta, Microsoft and Tesla) each reported their earnings for the October to December period in the last week. Often viewed as a group, their performance was, in fact, quite varied. Let’s start with the good and take it from there.
Note: All figures are quoted in U.S. Dollars. EML Payments Ltd (ASX: EML) has indeed charted a tumultuous course over the last five years, captivating investors with its roller-coaster share price and stirring the investment community with its complex structure and bold acquisitions. Peaking at an enviable high of over $5 in April 2021, the company's valuation has since experienced a significant recalibration, prompting diverse perspectives and intense scrutiny.
Volpara Health Technologies (ASX: VHT) shares rocketed 41% on last Thursday to $1.10 following a takeover offer from Lunit Inc for $1.15 per share.
The advent of transformative technologies often begins inconspicuously, much like the early days of motorised carts and airplanes. Initially, the investigation of horseless carriages in 1886, now known as cars, was seen not as a consumer product but as a military tool for transporting heavy ordinance. It wasn't until Henry Ford's innovations and the Model T Ford in 1908 that their consumer potential was fully realised. Similarly, the airplane, at its inception, was not immediately recognised for its capacity to transport people. It took over a decade before its use in mass transportation became apparent.
Small businesses remain the lifeblood of daily life and the backbone of every economy. Despite the dominance of tech giants like Google (NASDAQ: GOOG), Microsoft (NASDAQ: MSFT), and Amazon (NASDAQ: AMZN), millions of everyday transactions still occur outside their reach. Consider the simple acts of buying a coffee or a beer - the ubiquitous tap of a phone or card is a testament to the ongoing digital revolution in payments.
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TAMIM Asset Management provides general information to help you understand our investment approach. Any financial information we provide is not advice, has not considered your personal circumstances and may not be suitable for you.
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