Electrical products distributor and services provider, IPD Group Ltd (ASX: IPG) was listed in December 2021 and is an ASX rarity: the company has seen sustained share price growth since its IPO despite the market turmoil of 2022, especially in small caps.
Last week our head of Australian Equities, Ron Shamgar held an investor briefing where he discussed IPD, below we share our write up and the video of his views on the business and its outlook over the next 12 months.
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According to the International Energy Agency (IEA), electric vehicles (EVs) account for only 9% of new cars sold today. This is expected to rise dramatically over the coming years, with a fleet of over 300 million anticipated by 2030, totalling 60% of new car sales. Governments around the world are putting in place both incentives and restrictions to accelerate adoption – even in Germany, which agreed to new restrictions on internal combustion engine (ICE) vehicles with the European Union by 2035 just this past week.
Investing in small-cap stocks can be a rollercoaster ride.
Aside from their ability to generate outsized returns, Micro and small caps tend to be more volatile, experience larger downturns, and have lower liquidity than their larger counterparts. And it is times like now when the markets are unpredictable, that can reveal an investor's true risk tolerance. One of the biggest advantages of investing part of your portfolio in the global equity markets is the ability to gain exposure to industries and specialty companies that are not as prominent in Australia. This includes the likes of luxury brands in Europe (e.g., LVMH, Ferrari), software in Canada (e.g., Constellation Software, Shopify), consumer goods in the United Kingdom (e.g., Unilever, Diageo), and in the United States, technology and insurance.
The age-old investing wisdom was always to maintain a portfolio consisting of 60% equities and 40% bonds (commonly referred to as the “60/40 portfolio”). Bonds have been out of favour since the Global Financial Crisis though, as TINA (“there is no alternative”) took over and investors piled into more risky assets.
One of the advantages of investing in smaller companies is that their share prices typically move less in line with the overall share market (i.e. they are less correlated). Instead, their performance is more driven by the individual company’s operations. Smaller companies also often have bigger share price movements when they report their earnings results, which for most companies in Australia, happens in February and August. Two such companies that had strong (negative) share price reactions in their previous earnings reports in August 2022, but have since generated solid results and may be on the verge of a rebound, are Aussie Broadband and DGL Group.
While the S&P/ASX 200 is only around 3.5% shy of its all-time high back in August 2021, the last 18 months have been a bumpy ride for most investors. The effects of tighter monetary policy (including a 10th consecutive interest rate rise by the RBA), waning of the pandemic-induced boom in retail trading, and a weaker macroeconomic environment have taken their toll.
While the past year has seen stock price corrections across the electric vehicle (EV) sector, 2023 looks to be a transition year for the underlying businesses themselves. EVs are going mainstream as manufacturers across the globe are ramping up production. For the keen growth investor, the sector is made up of more than just manufacturers: microchips, artificial intelligence and autonomous vehicle systems can also be considered part of the EV industry.
Australia’s big four banks recently released their financial results for the first half of the 2023 financial year (second half of the 2022 calendar year). While the share prices of ANZ, NAB and Westpac are largely unchanged from a few years ago (and CBA has shown a healthy increase), operationally it’s been a tumultuous period given the effects of the pandemic and dramatic changes in the housing market.
Australian small-cap shares aren’t normally household names and don’t get the same media attention as the big banks and miners that dominate the ASX 200.
However, keen investors can find opportunities in these smaller companies for better returns than blue-chip regulars like BHP (ASX: BHP) and Commonwealth Bank (ASX: CBA). Global equity markets began the year with a wave of optimism. The MSCI World Index added 7.1% during the month, while the S&P/500 added 6.3%. Inflation appears to be abating, allowing central banks to taper interest rate hikes soon. China’s emergence from a three-year global hiatus is positive for global growth, particularly with Europe and the United States potentially heading into some level of downturn.
We continue sticking to the insurance thematic this week by looking at the other giant in the Australian market: IAG. We will continue using the same template as last week in assessing this business and its reports. The simple/straightforward equation: Profit = Earned Premium + Investment Income - Incurred Loss - Underwriting Expense.
With the RBA lifting rates another 25 bps this week, we look to a business that has steadily benefitted from the current rate environment. Suncorp. A company that seems to be in the midst of a long-awaited turnaround.
For most investors, 2022 was a tough year. For CY2022, the Australian Small Ords was down -18.40%, the S&P500 was down -19.40%, and the Nasdaq was down -33.10%. Our Australian All Caps fund did not fare better as we, in particular, experienced tough stock-specific declines, particularly due to de-rating multiples in small caps. However, investing is a long game and the law of mean reversion will likely come to the forefront again in 2023.
We have been attracted to Japanese equities for some time due to their robust balance sheets and notable improvements in governance. More recently, Japanese companies have weathered the economic headwinds to outperform global peers significantly. This is despite the Japanese Yen falling relative to the US dollar and in our opinion, becoming ludicrously undervalued.
Today we will be sharing three companies that have one common trait which is that they are ‘old’ businesses, with the youngest incorporated 96 years ago. Age alone doesn’t indicate a sound investment, but it does demonstrate that the company has been able to weather multiple economic cycles and emerge on the other side. This will be especially important in 2023 as we enter a more uncertain environment for economies and subsequently companies.
This pair of stocks may benefit from Australia's tight labour market and M&A possibilities.
Whilst big blue chip names fill the portfolios of self-directed investors looking to have income in their retirement phase, there should be some effort towards looking at the smaller end of town. Following the conclusion of the TAMIM webinar series earlier this week, we discuss the investment case for three top-performing holdings in the TAMIM Global High Conviction unit class. All three represent our broader investment view of 'needs not wants' and touch on aspects of our 5D's framework. Each business provides non-discretionary services to its customers, which will help shield earnings in what is likely to be a more challenging economic environment in 2023.
REITs: Have you considered an allocation? REITs provide an easy way to get exposure to property. We discuss how this investment thematic works, and two ASX listed REITs we see good potential in going forward...
Eye catching results stateside provides an intriguing story of how companies are fairing in the current economic climate. This week we look at two securities owned in our Global Equities portfolio; Regions Financial (NYSE: RF) and Verizon (NYSE: VZ).
While the market attempts to navigate harsh conditions, we look into three ASX small caps that appear to be diamonds in the rough...
With our 5 D's series at an end, here are four securities that fit the framework. The securities are; ExxonMobil (XOM.NYSE), Enbridge (ENB.TSE), Advantest (6857.TYO) and Rio Tinto (RIO.ASX).
With much attention being paid to market-wide drawdowns, it is understandable to be nervous about stock prices. One way to help settle those nerves is to ask yourself: am I an owner of businesses, or am I a short-term paper shuffler who constantly buys and sells securities?
With August at an end, eye-catching results reveal a fascinating story of the future ahead... Check out our 4 takeaways from reporting season below...
August reporting season continues to move full steam ahead with eye-catching results from both PeopleIn Ltd (PPE.ASX) and Resimac Group Ltd (RMC.ASX)...
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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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