Active Stock Portfolio Updates - May 2019
Intelligent Investor Equity Growth Portfolio
Although Australian property prices appear to be stabilising in the major markets of Sydney and Melbourne, high debt levels will continue to weigh on economic activity. Earnings estimates are mostly falling, so we’re hunting sensibly priced businesses that can add value without relying on strong credit growth. As you’ll read below, our preference for entrepreneurial, founder-led businesses shows our CEOs are energetically planting the seeds of future success even though it often doesn’t show up instantly as higher earnings.
Intelligent Investor Equity Income Portfolio
While the market is currently infatuated with a small group of technology companies and large dividend payers, we’re finding value in high quality businesses that have been battle tested through many economic environments and that trade at safer valuations. We also continue to invest in undiscovered emerging leaders. As Audinate’s success in our Growth portfolios shows (and what we hope to repeat with stocks like 360 Capital), the returns for uncovering tomorrow’s heroes and holding patiently until the market catches on are huge.
InvestSMART Australian Equity Income Fund (Managed Fund) (ASX:INIF)
Backing founder-led businesses that can compound your money at high rates for a very long time is what continually excites us about helping you grow your wealth in addition to owning a core group of reliable dividend payers.
InvestSMART Australian Small Companies Fund
Stock markets are very good at taking sensible ideas and butchering them in the extreme. In a logical process of creative destruction, obsolete businesses are replaced by companies offering better or cheaper goods and services. The stock market becomes the butcher when valuations are pushed to extremes. While the profitability of today’s tech stars contrasts with 1999, when businesses were valued on the number of eyeballs they attracted, the stock market has his butcher’s apron on and is reaching for the knife.
InvestSMART Hybrid Income Portfolio
The 18 May Federal election result saw a relief rally, as the fear relating to ALP’s proposal to scrap surplus franking credit rebates diminished, and investors bought hybrids. This certainty over franking credits saw buying occur across the curve and across different financial issuers.
Frequently Asked Questions about this Article…
The Intelligent Investor Equity Growth Portfolio focuses on finding sensibly priced businesses that can add value without relying on strong credit growth. It emphasizes entrepreneurial, founder-led businesses where CEOs are actively working towards future success, even if it doesn't immediately reflect in higher earnings.
The Intelligent Investor Equity Income Portfolio differs from current market trends by finding value in high-quality businesses that have been tested through various economic environments and trade at safer valuations, rather than focusing on a small group of technology companies and large dividend payers.
InvestSMART is excited about founder-led businesses because they have the potential to compound money at high rates over a long period, helping investors grow their wealth alongside a core group of reliable dividend payers.
The strategy of the InvestSMART Australian Small Companies Fund involves navigating the stock market's tendency to push valuations to extremes. It focuses on the logical process of creative destruction, where obsolete businesses are replaced by those offering better or cheaper goods and services.
The 18 May Federal election result led to a relief rally in the InvestSMART Hybrid Income Portfolio, as the fear of the ALP's proposal to scrap surplus franking credit rebates diminished. This certainty over franking credits prompted buying across the curve and different financial issuers.
Patient investing is important because it allows investors to uncover tomorrow's heroes, like Audinate, and hold them until the market recognizes their value, potentially leading to significant returns.
Creative destruction plays a role in the stock market by replacing obsolete businesses with those offering better or cheaper goods and services. However, the market can sometimes push valuations to extremes, acting as a 'butcher' in this process.
The InvestSMART Australian Equity Income Fund approaches wealth growth by backing founder-led businesses that can compound money at high rates over time, in addition to owning a core group of reliable dividend payers.
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