Investor Insights

The majority of companies on the ASX100 and ASX200 have now reported. Many have beaten estimates. And, reassuringly, guidance is less negative than most market watchers had expected. This brings hope that FY21 may not be so bad for equity investors after all. One pattern has emerged from this reporting season and we may have run theory to thank.

Reliance Worldwide (ASX:RWC), a global provider of water control systems and plumbing solutions, is a business we’re very happy to own. True to its name, the company’s latest earnings announcement was extremely positive, which led to a strong bounce in the share price.

COVID-19 has proved challenging for many investors, but the pandemic is also accelerating a long-term structural trend that presents significant investment opportunities – the digital transformation of enterprises. Flashback a few months and it’s easy to see how this unfolded. Almost overnight, entire workforces began working remotely and demand for digital collaboration tools skyrocketed.

As with everything else, there are two camps when it comes to investment conditions today. There are two camps regarding whether the market is expensive (it probably is), whether economic conditions are deteriorating or improving, whether governments and central banks can continue Keynesian intervention indefinitely, and there’s two schools of thought as to whether there’ll be a vaccine.

When it comes to investing, we’re not big fans of airlines.  But in the case of Alliance Aviation Services (ASX: AQZ), we’re happy to make an exception. You see, Alliance operates fly-in fly-out charter services for Australian mining companies, and its flights are in demand.

Shareholders in Australia’s largest bank, the Commonwealth Bank of Australia, would have been relieved to read that the bank has delivered a decent full-year result – with a 98 cent dividend to boot.   But the near term may not be so bright, with the bank pointing to earnings headwinds in the months ahead.

It is no secret that healthcare expenditure in the United States is an outlier compared to other similar countries. And, similar to much of the rest of the developed world, demand for healthcare in the US will only accelerate as the baby boomers continue to retire en masse.

Property advertising platform, REA Group (ASX:REA), was one of the first businesses to announce its results this reporting season. Given the COVID-related restrictions on real estate transactions, it was a strong performance.  And, pleasingly for investors, the company will be paying a dividend.

Since listing on the ASX in January 2019, the share price of broadband provider, Uniti Wireless (ASX:UWL) has enjoyed spectacular growth. From an IPO price of 25 cents, shares have rocketed to $1. 60, with the business growing via consolidation. The upcoming merger with OptiComm Limited (ASX:OPC) will make the business even stronger.

In 1976, US economist, Herbert Stein, famously stated that “If something cannot go on forever, it will stop. ” His observation could well be applied to the ballooning value of many technology companies, some of which have never made a profit, and possibly never will.

The world has changed drastically over recent months and our portfolios have also been updated to reflect the new realities we face today.  With the June quarter now behind us, that rounds out an extraordinarily turbulent 12 month period. In this video update, Andrew shares Montaka’s latest thinking.

In recent months, The Montgomery Fund has accumulated a significant position in Woolworths – it’s now one our largest positions. And we remain positive on the outlook for the company over the medium term, even after the recent rally in its share price.