Investor Insights

  In this week’s video insight Roger discusses cloud computing and a small cap opportunity in the space. We currently believe companies within this sector will see a long runway for growth. One company delivering the framework on which this innovation cycle is being built is Macquarie Telecom. The Montgomery Small Companies Fund  owns shares in Macquarie Telecom.

Just last week, the Federal Government decided to loosen lending requirements for Australian banks – a move that’s completely at odds with the recommendations of the Commissioner, Kenneth Haynes.   Sure, investors seemed to like the decision, pushing bank stocks higher. But will this all end badly, once again?

  In this week’s video insight Roger discusses how to position for the possibility of a vaccine and reopening. When the global economy reopens further, there will likely be many more sectors returning to growth. We are looking for companies that are winners in sectors that have had their outlooks impacted.

Since the market bottom of the Global Financial Crisis in March 2009, the Russell 1000 Growth Index (R1G) has outperformed the Russell 1000 Value Index (R1V) by over 300 per cent cumulatively.

Globally, investors have hitherto been blissfully optimistic about the end of hard lockdowns, the development of a potential vaccine and broad economic re-openings. But all that may be about to change. The share price of cruise line operators such as Carnival Cruises is perhaps one of the better indicators of how realistic such optimistic sentiment is. Figure 1.

Digital transformation is accelerating due to COVID-19, presenting investors with compelling investment opportunities. In part two of our whitepaper series, we discuss why the very best businesses are often undervalued by public equity markets and what this means for investors. For example, in 2006, Salesforce was trading at 104 times earnings, which many thought was far too expensive.

One of the thematics from the last few months has been the material change in retail spending. With COVID-19 related lockdowns and restrictions on population movement and activity, the ability to spend on services such as out of home entertainment and activities has been significantly curtailed.

With so many economies and businesses on their knees, numerous market commentators are pessimistic about the near-term future of global share markets.   But Macquarie Bank’s Chief Economist and Global Head of Macro Strategy, Ric Deverell, is not one of them. He’s just released a chart pack that offers three reasons to be optimistic.

When we started the Montgomery Small Companies Fund 12 months ago, data centre operator NEXTDC (ASX:NXT) was one of the first businesses we bought.  On our analysis, the shares were cheap.   One year on and the share price has almost doubled.

The digital transformation of the enterprise is a long-term trend which is now accelerating as a direct consequence of the COVID-19 pandemic. Privileged business models operating with the benefit of this structural tailwind, therefore, should be considered carefully for an investment opportunity.

The share price of Reece (ASX:REH) – Australia’s biggest supplier of plumbing and bathroom products – has outperformed the broader market for many years. Encouragingly, the company recently reported healthy trading during the COVID-19 period. With renovation activity forecast to rise over the next 12 months, I think this is definitely a business that investors should be watching.

In December 2019, my colleague Gary Rollo, wrote “Is PointsBet Holdings worth a bet? ” and the answer to this question was well and truly put to bed last Friday.