Research Insights
Morningstar Australia Prospects - February 2023
In our February 2023 edition, we present a list of 22 strategies that we believe are worth investors' consideration. Since our last edition, we have added one strategy and have seen two strategies graduate into full coverage for our 2023 review cycle.
Research Insights
Income Isn't Fixed
The momentous rise in government-bond yields since the second half of 2021 has had one unexpected effect: shrinking income distributions. This may be particularly surprising given bond managers have been able to reinvest at progressively higher yields, and presumably they are able to distribute more income.
Research Insights
Australia and New Zealand Best Stock Ideas - August 2022
Morningstar's monthly Best Stock Ideas highlights high-quality Australian and New Zealand companies, which are currently trading at discounts to our assessed fair values. The ideas, chosen from our coverage of nearly 200 companies, are intended to have broad application in a variety of equity strategies, but individuals should consider their personal investment goals and positioning before investing.
Research Insights
Global Equities Style and Manager Performance in Sell-off. Leaving the Goldilocks Zone
Market conditions have shifted dramatically in 2022, driven by an outbreak of global inflation to the level not seen in four decades. The easy monetary policy era appears to be over, and markets are adjusting to the reality that central banks may not be prepared, or able, to step in and support asset values with stimulatory settings. Against this backdrop, the selloff in global equities has been sharp, but it is noteworthy that there has been a large dispersion in manager performance particularly when differentiated by style.Research Insights
Aged Care to Survive, Ryman to Thrive
Shares in Ryman Healthcare are 40% below our NZD 15.20 fair value estimate, with shareholders penalised for transient issues, or industry problems not shared by Ryman. Rivals struggle with old facilities and declining occupancy, and one third of Australia's care homes lose money. The industry is consolidating and Australian providers exiting, despite demographic tailwinds. Meanwhile, Ryman's demand is underpinned by the ageing population, its brand, and track record of care.
Research Insights
Picking Fund Managers: Focus on the Data, Ignore the Noise
The recent stock market sell-off sees the shares of all of the listed ANZ asset managers we cover trading at substantial discounts. With such fertile hunting ground, we think the market is underestimating the key investment strategies of these asset managers, and their ability to deliver positive alpha and attract money. We think the outlook for asset managers is better than what's currently being priced in. Recent market declines suggest future investment returns will likely improve. Their strong fundamentals, such as having solid operating cash flows and relatively low capital intensity support our conviction.
Research Insights
10 franked income-stock ideas for Australian investors
We've identified 10 franked income stock ideas from our Australian and New Zealand coverage list of 189 stocks. The additional income from franking credits highlights several companies with 3-star ratings which appear more valuable when the value of franking credits is incorporated into our analysis.
Research Insights
What if you missed the dip? Chart of the week
The mantra “buy the dip” started as a chorus to the gyrations of Bitcoin’s price. Since then, it has cemented a place in the investor’s glossary thanks to an age-old fear: trying to time the market. Investors can be especially prone to this kind of fear and regret. Whether buying Bitcoin in 2015 or mortgaging the house to buy stocks in late March 2020, it’s easy to lose sleep over market timing.
Research Insights
10 stocks too hot to handle
These names have shone but as bubble warnings grow louder their frothy valuations and lack of competitive advantage may concern. When warnings of a stock market bubble emerge it may pay to heed them. And that's especially the case when such warnings emanate from heavyweight investing veterans. Last week two members of that esteemed club, Jeremy Grantham and Carl Icahn, warned that a speculative bubble is swelling.
Research Insights
How the Morningstar 11 Wide Moat Stocks did in 2020
It was a rough year for some of Australia’s biggest companies as covid a toll and low rates inflated asset prices. For the year 2020 only two of Morningstar's 11 wide moat stocks posted positive returns. At the end of the year Australia’s top stocks were in general back to square one, with the benchmark S&P ASX 200 posting a return of -0.36 per cent.
Research Insights
No moat, no bargain: nine overvalued stocks
Netwealth, Afterpay and Fortescue Metals Group are among the most overvalued no-moat names under Morningstar coverage. A Morningstar stock screener that filtered for no-moat stocks that are significantly overvalued according to their price/fair value ratios revealed nine names. More than half the list comprises names from the Consumer Cyclical sector.
Research Insights
Australian Energy Stocks Are Cheap
The COVID-19 outbreak has created a large dent in near-term oil demand and triggered spiralling energy prices. However, local oil & gas producers are some of the best placed to weather the COVID-19 meltdown and emerge comparatively stronger. In this article, we dive deeply and explore the four major Australian E&P companies which have 5-star recommendations.
Research Insights
Australia and New Zealand Best Stock Ideas for August 2020
Morningstar's monthly Best Stock Ideas highlights high-quality Australian and New Zealand companies, which are currently trading at discounts to our assessed fair values. The ideas, chosen from our coverage of nearly 200 companies, are intended to have broad application in a variety of equity strategies.
Research Insights
Why rebalancing (almost always) pays off
This year’s turbulent market was yet another reminder of the power of portfolio rebalancing for risk reduction. In this article, I’ll look at how different rebalancing frequencies have paid off in 2020’s turbulent market, as well as during other market drawdowns. In a nutshell, any rebalancing strategy works far better than none at all, especially when it comes to risk control.
Research Insights
Post-covid economy calls for humility, patience and preservation of capital
One should never say never, but I have never nor will I probably ever again experience the level of uncertainty that currently exists. Everywhere one looks, uncertainty abounds. How can anyone predict the outcome of something that has never been experienced? Risk escalates. No one knows what the future holds and personal biases only muddy the waters. Objectivity should be key, intellectual humility its companion.
Research Insights
Coronavirus: Market Temperature Check
It has been difficult to keep on top of the rapidly shifting environment, but collectively we find more opportunities to buy than sell shares at the current level. There are a number of moaty names that investors should consider adding to their portfolios as well as heavily sold-down stocks that could see a good post-virus bounce.
Research Insights
Debt-ridden companies face contamination as virus saps supply chains, cash flows
From an economic viewpoint, the coronavirus is and will have far reaching global implications. The market should be focused on the extent of the disruption to the global supply chain and the impact on cash flows of companies, rather than deaths or making comparisons with earlier viral outbreaks.
