Author: Clarity

Global markets continue in a period of uncertainty riding on US elections, second and third wave of COVID risks and realistic timelines around an effective vaccine becoming available. Markets tend to do better with certainty and as these factors reach clarity we should see strong trends on the ASX.

The ASX 200 tested 6,200 points following the federal budget measures and then followed the US markets sell off, heading back down towards the 6,000 level.

Folio and company updates for members are at the end of this post.

On to the latest CEO insights.

CEO Insights

Healthcare

“I have some discussions with some people in different hospitals around the world. I mean, when the lockdown came and people postpone surgeries, etc, what actually happened is that a lot of those hospitals were then empty. So, they didn’t have anything to do. So they acted, but maybe they acted a bit too harsh at that point in time.…and I don’t think that we will have a situation that we will lock down the hospitals that quickly [again]” 

Thomas Schinecker, CEO, Roche Diagnostics

Food & Beverage

“The reality is it’s just more expensive to operate in the coronavirus world that we’re living in now” 

Richard Allison, CEO, Domino’s Pizza Inc

“We think this will be the biggest Christmas ever by far, given the circumstances” 

Steve Cain, CEO, Coles Group Ltd

“I think as an industry we have been supply constrained [in addressing online shoppers] for at least the last two years, and what happened, the e-commerce was increasing demand and in this case ourselves and many of our competitors all responded with an increasing supply and that is what has really led to acceleration” 

Brad Banducci, CEO, Woolworths Group Ltd

“The agriculture sector and food…it’s an area of natural advantage for us as a country [to export] and I think that the COVID situation probably only amplifies that. We’ve always had the opportunity to do a lot more and continue to grow” 

Alison Watkins, CEO, Coca-Cola Amatil Ltd

Automotive

“The automotive aftermarket is a resilient industry and historically has performed strongly in difficult economic circumstances. Recent trading is another example of its resilience assisted by the increase in sales of second-hand cars, reduction in use of public and shared transport modes as well as government stimulus” 

Darryl Abotomey, CEO, Bapcor Ltd

“I look at the market for self-driving and the progress that we’ve seen there I have to say that it’s disappointing. I think there are two things playing a role here. First is the complexity of self-driving technology, and I think that has been underestimated…The second one is the justification of the system cost; the total bill of materials for self-driving seems to be higher than originally anticipated” 

Harold Goddijn, CEO, TomTom N.V.

“We do not see retail momentum for RVs [recreational vehicle] and boats slowing anytime soon” 

Michael Happe, CEO, Winnebago Industries Inc

“A lot of the automobile guys and the battery guys are talking to us about nickel [a key input in electric vehicle batteries]” 

Ivan Glasenberg, CEO, Glencore plc

Retail

“It’s not category specific – e-commerce is becoming mainstream. In the first years it was price hunters and early adopters. Now we’re seeing the convenience customer coming online – the convenience customer is a big part of what’s driving ecommerce” 

Ruslan Kogan, CEO, Kogan.com

“We believe the premium audio [product market] uptick is sustainable for a number of reasons. First the entire industry has seen a gain. COVID certainly impacted sales to the upside and it seems consumers have rediscovered quality audio and not just for listening to a stereo system but for movies where we’ve seen growth in home theatre and high-end sound bars but also home gyms, outdoor, gaming” 

Patrick Lavelle, CEO, Voxx International Corp [global consumer electronics company]

“The outdoor apparel [once in a lifetime] moment, we absolutely see…There is a trend towards outdoors and people’s desire to get outside linked to health and wellness” 

Steve Rendle, CEO, V.F. Corporation [footwear & outdoor/action sports apparel conglomerate]

“Demand [for hand sanitiser] has subsequently dissipated and the supply base for such products has become much more competitive, resulting in excess quantities of hand sanitiser inventory” 

Market Announcement, McPherson’s Ltd

Defence

“Many Australians don’t see the significant investment that is being made by the government and industry in the development of world-leading defence technologies. This investment is both supporting the security of the nation and is a catalyst for economic growth” 

Gabby Costigan, CEO, BAE Systems Australia [multinational defence, security & aerospace company]

Travel & Leisure

“Brisbane is currently the busiest airport in the nation due to strong intrastate travel and an increase in domestic tourism”

 James Goodwin, CEO, Australian Airports Association

“We are seeing signs of life” 

Geoff Culbert, CEO, Sydney Airport Holdings

“Yes, I’m fairly confident the worst is over. You do see people are traveling, just nowhere near the rate they were traveling last year” 

Glenn Fogel, CEO, Booking Holdings Inc [conglomerate of online travel agencies]

“It’s really hard to say when a recovery is going to be. This situation we are in now, it’s not sustainable. It’s really bad. You’ve got a lot of pressure on cash flow, and you can only do so much with eliminating expenses and cutting people. You still need revenues” 

David Kong, CEO, Best Western Hotels & Resorts

Transport & Logistics

“Australia is experiencing substantial disruption to the importing of goods through the Asia shipping lane. This is due to several macro factors that are impacting shipping capacity with demand being greater than supply. These international delays have been further exacerbated by delays at Australian ports” 

Andre Reich, CEO, The Reject Shop

“We are planning for a Christmas like no other. Our growth in parcels from July to September was more than the growth for the entire year just two years ago” 

Christine Holgate, CEO, Australia Post

Energy & Resources

“Renewables can’t be sustained unless you firm it [turning a variable energy source into a guaranteed & consistent supply] so we’re heavily investing into firming. There’s no magic answer. Unless you’ve got firming on scale all the renewables in the world can’t be sustained” 

Paul Broad, CEO, Snowy Hydro

“The energy market structure is also difficult at the moment when we’ve got all that variable renewable energy coming in…There are some market structure issues that have to be dealt with” 

Rob Wheals, CEO, APA Group ltd

“I see solar becoming the new king of the world’s electricity markets. COVID-19 has catalysed a structural fall in global coal demand” 

Faith Birol, Executive Director, International Energy Agency

“When it comes to the observed rebound in global aluminium demand, China is leading the way. Though the restart of the Chinese economy from COVID has been faster than other regions, we are [also] seeing improvements across the globe” 

Roy Harvey, CEO, Alcoa Corporation [global aluminium producer]

“The [gold] sector needs to shrink to greatness by producing less gold at a higher margin and being a better investment opportunity” 

Jake Klein, CEO, Evolution Mining Ltd

Telecommunications

“COVID has proven that change can be made and embraced quickly. It has also proven that digitisation of the economy is central to the recovery” 

Andy Penn, CEO, Telstra Corporation Ltd

“Until now, most people have taken a wait-and-see approach to 5G. They’ve been waiting for 5G to get real…Well, today, with [the new] iPhone, the wait is over. 5G just got real” 

Hans Vestberg, CEO, Verizon Communications

“4G drove the consumer app economy and China, the U.S. and the Nordics, they were the first countries to roll out 4G, and that allowed entrepreneurs in those regions actually to innovate on top of the network, building what has become the app economy. So it’s no surprise that we see the, call it, the consumer app economy today dominated by Chinese and American companies” 

Börje Ekholm, CEO, Ericsson

“Much has been made of the technology transitions that have been accelerating by more per month. With these transitions, we believe many of the activities that are now virtual will remain virtual. And as such, this represents a significant change in the way people conduct their lives” 

Patrick Lo, CEO, NETGEAR Inc

Banking & Lending

“Fintech innovation is changing banking in important ways and our new digital banking platform is part of our long-term strategy to support this trend and better respond to changing customer needs” 

Peter King, CEO, Westpac Banking Corporation

“I think we are seeing a secular shift in getting more younger investors engaged in the market and I think that could create a more sustainably higher trading environment than what we saw in the 2017, 2018, 2019 timeframe” 

Adena Friedman, CEO, Nasdaq Inc

Residential Property

“There’s an opinion it’s [current strong sales] a stimulus driven sugar hit…but what we’re seeing is strong growth in other markets internationally where there haven’t been the same levels of stimulus, which speaks of a structural shift in spending” 

Blaine Callard, CEO, Freedom Furniture

“Customer feedback suggests orders for new homes remain robust into early 2021” 

Theresa Mlikota, CFO, Adbri Ltd

“The housing market overall has been an area that has surprised us on the upside…Overall, housing volumes – in terms of applications and listings coming on the market – are much stronger than you’d expect, or certainly what we had expected. There is some cause for optimism compared to what we were expecting just a month or two ago” 

Matt Comyn, Chief Executive, Commonwealth Bank of Australia Ltd

“The housing stimulus packages from both Federal and State Governments continue to have a positive impact on new house sales and will underpin some recovery in the residential building market” 

Market Announcement, Capral Ltd [Australia’s largest manufacturer & distributor of aluminium products]

Employment & Workforce

“Some people will work from home, but really, the majority will come back to offices. You can’t run a business with people working from home”

 Harry Triguboff, CEO, Meriton

“[Post the initial COVID downturn] we already even now are feeling that same structural scarcity in tech jobs, in educational jobs and in healthcare jobs” 

Jacques van den Broek, CEO, Randstad NV [world’s largest staffing/recruitment company]

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Members only updates follow below.

Global markets are entering a period of uncertainty riding on US elections, second and third wave of COVID risks and realistic timelines around an effective vaccine becoming available. Markets tend to do better with certainty and as these factors reach clarity we should see strong trends on the ASX.

Watchlist and company updates for members are at the end of this post.

On to the latest CEO insights.

CEO Insights

Automotive

“Countries such as the USA, Norway and China have all invested in a strong charging network and offered monetary incentives to both commercial and private buyers of plug-in hybrid or fully electric vehicles, leading to high uptake across the board in these markets, however the cost benefit of electrified vehicles is just one of the challenges facing uptake in Australia” 

Vikram Pawah, CEO, BMW Group Australia

“The Board believes a substantial proportion of the recent growth can be attributed to satisfying pent up demand created during the lockdown period. In addition, an increased trend towards local touring in several countries has been helpful and government support has provided spending stimulus to people and businesses” 

Market Announcement, ARB Corporation Ltd

Retail

“Through the pandemic, what we’ve seen is an acceleration of the trend towards casualisation globally and we obviously are set up to capitalise on that, so while the total apparel category has declined during the pandemic, denim’s share of total apparel is unchanged” 

Charles Bergh, CEO, Levi Strauss & Co

Industrials

“We see solid growth in the [DIY] consumer segment for the balance of this year, and we think it will be on a new base that’s higher than what any of us could have achieved on our own. I think [it’s] one of the very few positive consequences of this pandemic. The flip side is supply chains across all industries and certainly in DIY have been disrupted mightily” 

Frank Sullivan, CEO, RPM International Inc [multinational paints/coating company]

Travel & Leisure

“What we have seen during periods of public health restrictions is that there was an increase in sales in products for the home with a reduction in travel related categories, such as car seats and prams, etc. Outside of significant restrictions, these trends have reversed, and we have seen sales in our travel related categories rebound strongly” 

Matt Spencer, CEO, Baby Bunting Ltd

“We know there’s huge pent-up demand for air travel and we’ve seen families travelling to new places during the [September] school holidays because they weren’t able to get to their traditional holiday destinations” 

Andrew David, Domestic CEO, Qantas Airways Ltd

Transport & Logistics

“If you look historically at the demand for this business, the service that we provide has steadily grown in line with global GDP and the global trade which is a multiplier of global GDP, so it’s always been very steady. It’s the supply side that’s messed up the market. This time around it’s absolutely the supply side that looks very healthy [and the demand side doesn’t]” 

Niels Stolt-Nielsen, CEO, Stolt-Neilsen Ltd [multinational chemical storage & transport company]

Energy & Resources

“We need to be realistic about the extreme structural challenges that are facing the asset up at Lytton [Ampol’s oil refinery in QLD]” 

Matt Halliday, CEO Ampol Ltd

Farming & Agriculture

“We’ve gone through some tough times as a farming industry but we’ve had a fairly good run of seasons and some good pricing [of late] and so I think we’re in a good position at the moment” 

Simon Stead, CEO, CBH Group [Australia’s largest grain exporter]

Federal Budget

“It can’t be understated just how much this will provide a shot in the arm to employment, youth job creation, consumer confidence and spending” 

Solomon Lew, Chairman, Premier Investments Ltd

“We have seen in the past how effective some programs have been, such as the instant asset write-off, and that features again in this budget” 

Shayne Elliot, CEO, ANZ Banking Group Ltd

“The HomeBuilder extension is really going to be critical if you want to get growth in housing in that period with low population growth” 

Mark Steinert, CEO, Stockland

“It may have taken a global pandemic to provide the impetus for a course correction, but the government’s gas fired recovery deserves the support of all of us who care about this nation’s economic recovery and future prosperity”

Jeanne Johns, CEO, Incitec Pivot Ltd

Banking & Lending

“We have seen a very significant increase in people making additional repayments to their mortgages over the last 12 months and primarily over the last eight months” 

Bernadette Inglis, CEO, Newcastle Permanent [Australia’s second largest mutual bank]

“While we are seeing encouraging signs that many customers are able to restart repayments on deferred loans, we know that others will continue to need our support for some time to come” 

Matt Comyn, CEO, Commonwealth Bank of Australia Ltd

Residential Property

“Australia’s residential property sector generates over $100bn annually for our economy and creating new homes and apartments is one of the most important job multipliers in the country, with the Australian Bureau of Statistics establishing that every dollar spent on residential construction generates a $3 impact in the broader economy” 

Andrew Whitson, CEO, Stockland Communities

“Lately, we see a lot of interest in beautification. A lot of people are taking the opportunity to update their homes”

 Jesper Brodin, CEO, Ikea Group

Environmental

“Our experience has been that it is extremely difficult to purchase carbon offsets from projects located in Australia. This is something that needs to be addressed because what it says is that there are not enough projects contributing to a reduction in greenhouse emissions” 

Andy Penn, CEO, Telstra Corporation Ltd

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Members only updates follow below.

The last 3 months of 2020 begin. Six cases in Victoria. Case numbers need to trend down for further restrictions to be relaxed.

Our portfolio took a decent dip this week on the back of a probable company milestone being delayed. We are a touch under $200,000 market value as of today.

Watchlist and company updates for members are at the end of this post.

The market has continued its sideways trend this month, just breakng over 6000 points after 4 weeks or so.

Trump’s tweets sent the markets into meltdowns and rallies. He also grabbed headlines with his quick entry and exit from the hospital due to contracting COVID. Twitter posted misinformation warnings on Trump tweets overnight as he compared the coronavirus to the flu. He is back in the White House. Democrats are expected to use the mishandling of the pandemic as leverage running into the election.

Locally, the most recent budget was revealed. A good rundown is available on the Guardian. For members, we highlight our take on the impacts to sectors and our portfolio companies below.

On to the latest CEO insights.

CEO Insights

Australian Economy

“Australian CEOs do seem a little more optimistic than their global counterparts” 

“In general, bigger businesses have weathered this OK, I think it’s smaller businesses who are struggling and have been hit harder than bigger business. The fact we’ve had less insolvencies than 12 months ago doesn’t seem right…there will be a time of reckoning, it’s a question of whether the government can somehow smooth that to assist as many as possible to the other side”

Gary Wingrove, CEO, KPMG Australia

Education

“We expect digital education programs to be an essential part of classroom instruction long after the pandemic is behind us” 

Dick Robinson, CEO, Scholastic Corporation

Technology

“Smartphone, auto, and consumer end markets have started to recover, and we see further demand improvements ahead” 

Sanjay Mehrotra, CEO, Micron Technology [global manufacturer of computer memory/storage]

“We’ve always maintained that there’s room for multiple technologies here [Australia]. They’ll suit different customers at different stages in their life cycles, or based on their situation” 

Kelly Bayer Rosmarin, CEO, Optus

Manufacturing

“We are confident measures like this [the $1.5bn manufacturing sector stimulus] will ensure Australian manufacturing will become an enticing investment for the private sector” 

Robert Giles, CEO, SPC Foods

“Australia should focus resources on sectors where we are strong or have a natural advantage. Australia is too small to be everything to everyone. Other similar sized countries have realised this and also focus investment on specific sectors” 

Dig Howitt, CEO, Cochlear Ltd

Retail

“COVID-19 has highlighted the importance of sustainability. Demand for good value, sustainable products is expected to grow in the wake of the pandemic” 

“Well, for the industry as a whole, speed and flexibility will just become more and more important”

Helena Helmersson, CEO, H & M Hennes & Mauritz AB

“As people are spending less on travel, air and hotel and dining out, they seem to have redirected some of those dollars to categories like lawn and garden, furniture and mattresses, exercise equipment, bicycles, housewares, cookware, plastics and the like” 

Richard Galanti, CFO, CostCo Wholesale Corporation

Automotive

“For the rest of the year I would say our base case is still to be back roughly at where we were last year” 

Hakan Samuelsson, CEO, Volvo Cars Corporation AB

Energy & Resources

“At the moment, gas prices are low, but that’s because of COVID. They won’t stay low…eventually they will go up. This [the new Narrabri gas project] will stop them from going back up to ridiculous levels” 

Garbis Simonian, CEO, Weston Energy [energy retailer]

Aviation

“I can only speak from AirAsia’s perspective, I think business travel, intercontinental travel, first-class travel is going to take longer to rebound. But short-haul travel has been proven already with our domestic routes like in Thailand and Malaysia, we are at about 70 per cent load capacity” 

Tan Sri Tony Fernandes, CEO, AirAsia

“I think [going into administration] has provided a huge opportunity for us to reset and to emerge with a much stronger balance sheet and a much lower cost base, which is what we’re going to need going into what will be a fairly competitive market in the early days” 

Paul Scurrah, CEO, Virgin Australia

Travel & Leisure

“You may potentially see some mergers and acquisitions take place, as we’ve seen after the financial crisis but I don’t think it’s immediate though, as there’s a lot of government support around the world” 

Keith Barr, CEO, InterContinental Hotels Group plc

“When the whole industry’s losing money month-to-month and nearly all of that industry must have international travel to survive, clearly there has to be some consolidation” 

Jamie Pherous, CEO, Corporate Travel Management Ltd

“Demand for international travel will not fully recover before FY23 or FY24 in the absence of an effective vaccine” 

Graham Turner, CEO, Flight Centre Travel Group Ltd

Healthcare

“There is an enormous backlog of work” 

Peter Freeleagus, CEO, Cura Day Hospitals [nationwide private day hospital company]

Food & Beverage

“Home cooking has really become a trend that’s becoming a habit” 

Lawrence Kurzius, CEO, McCormick & Company Foods [world’s largest manufacturer of spices, seasonings]

“I think it’s going to be a much more flexible environment and much more tech-enabled remote kind of work, where consumers will be at home a few days of the week. And that will drive, I think, a different behaviour in terms of breakfast consumption and potentially some of the other meals during the day, especially lunch. So that’s how we’re thinking about the long-term category growth” 

Ramon Laguarta, CEO, PepsiCo Inc

Property

“We have no people coming [into Australia]…we don’t have people to buy. We have a big demand for leasing, I lease 200 apartments a week, because those people don’t have the money to buy” 

Harry Triguboff, CEO, Meriton

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Members only updates follow below.

The September milestones continue. Both of us have had a few virtual high fives over zoom.

Our portfolio broke the $200,000 market value barrier one week after we crossed a net investment of $100,000 since we started the current portfolio in March 2020.

Purchase entry and update for members are at the end of this post.

The market has continued its sideways trend this month, albeit staying under 6000 points. A few corrections were triggered by volatility in the US and global markets, due to elections, second COVID wave concerns etc.

The other market recovery phenomenon we’re watching play out is a ‘K’ shaped recovery.

As an example look at the ASX 200 indexes for all tech companies vs financial sector since Feb 2020.

Some sectors have recovered, while others haven’t and may not for a while yet.

The difference in sectors that have recovered and those that haven’t, form a ‘K’ shape.

Similar comparisons can be made with sectors that haven’t recovered yet vs those that have, i.e. healthcare, mining etc.

The key to our success has been picking the right companies in the right sectors regularly as we see them, which will continue to be our plan.

On to the latest CEO insights.

CEO Insights

Technology

“What you’re also seeing in this economy is that the CEOs and the business line executives have realised that technology is the most important enabler for their business” 

Michael Dell, CEO, Dell Technologies

“Today the internet connects billions of people to giant cloud data centres. In the future, trillions of devices will be connected to millions of data centres, creating a new internet of things [IOT] that is thousands of times bigger than today’s internet of people”

Jensen Huang, CEO, NVIDIA Corp [multinational graphics chip manufacturer]

Advertising & Marketing

“I would say that, if you look at the big tech companies, they’re all about now getting into media. If you look at the media companies, they’re trying to use new technologies like streaming and other platforms to distribute their content” 

Brian Roberts, CEO, Comcast Corporation [telecommunications & media conglomerate]

Retail

“Pre-COVID, we projected that the US domestic market would hit 100 million packages per day by calendar year 2026. We now project that the US domestic parcel market will hit this mark by calendar year 2023, pulling volume projections forward by three years from the previous expectations. E-commerce fuelled substantially by this pandemic is driving the extraordinary growth” 

Brie Carere, Chief Marketing Officer, FedEx Corporation

“A lot of the supplier shortages [of inventory] were predominantly around retailers believing their business was going to be severely impacted negatively by COVID and, taking out Victoria, that’s not what they saw. What we saw in fact was that business went through the roof in certain categories” 

Paul Zahra, CEO, Australian Retailers Association

Automotive

“As this pandemic has rolled on people have been quite nervous to take public transport, and there has been an element of the public looking at used cars to maybe get a second car” 

James Voortman, CEO, Australian Automotive Dealers Association

Energy & Resources

“Looking forward, we see a lower carbon technology as being essential. If anything, the changes over the last few months have accelerated the drive towards better, cleaner power solutions. The world is demanding cleaner energy” 

Warren East, CEO, Rolls Royce Holdings Ltd

Transport & Logistics

“A key trend is the dramatic reduction of air cargo capacity as a result of the significant loss of commercial airline capacity. Current estimates indicate that freighter capacity now accounts for 66% of total air capacity on the Transatlantic lane; 83% on the Trans-Pacific; and 80% on the Europe to Asia lane. This compares to pre-COVID freighter capacity of 33% for Transatlantic; 59% for Trans-Pacific and 50% for Europe to Asia” 

Brie Carere, Chief Marketing Officer, FedEx Corporation

Travel & Leisure

“One of the things that has clearly emerged is that there is more of a blending between business and leisure. So, whatever the phrase, I have heard “Bleisure”, knowing exactly what the bookings are, business or leisure, when they go from a Wednesday through a Sunday, is harder to define which that is” 

“I do think there’s some real pent-up demand across all the segments of our business, and while that may not be sustainable forever, I do personally believe that there’s going to be a really nice spike in demand once everybody feels comfortable with traveling”

Leeny Oberg, CFO, Marriott International Inc

“Our view is demand is not coming back. People are not going to get back and travel like they did before until there’s a vaccine that’s been widely distributed and available to a large portion of the population” 

Scott Kirby, CEO, United Airlines Inc

“It’s not going to be nearly the relatively fast recovery as we’d all hoped back in July when borders began to open. We’re definitely looking at four to five years at least until we really come out of this” 

James Kavanagh, Managing Director Australia, Flight Centre Travel Group Ltd

Workforce & Employment

“I think the biggest take away from all the CEOs I talked to, that really to a CEO [they are] very worried about employee engagement right now” 

Aneel Bhusri, CEO, Workday Inc [HR & finance global software company]

Payments & Banking

“What you would typically see in a recession is the savings rate fall. We’re actually seeing the savings rate increase and that’s because, we’ve seen spending go down, but we’ve seen discretionary income be flat or up in some cases” 

Jen Piepszak, CFO, JP Morgan & Chase Co

“If more digital transactions are to be kept safe, more digital transactions also means more data that’s associated with those transactions is available, so we see a trend for more demand for data analytics and for cybersecurity solutions” 

Michael Miebach, CEO, Mastercard Inc

“We’ve all seen a general trend in payments towards this concept of buying now and paying later and, for us, this [creating a BNPL product] is very much a way to capture additional share of checkout. This is something that helps drive additional sales for merchants. You tend to see the average order value be larger, and it creates more customer loyalty as well” 

John Rainey, CFO, PayPal Holdings Inc

Commercial Property

“It’s going to be a couple of years to see the full impact on the market. We are going to have weak office demand and we’ve been very upfront about it” 

Darren Steinberg, CEO, Dexus.

“Our view is that the hub-and-spoke model will be about flexibility, so if you are going to ‘spoke’ you’ll do it from home. Hubs are expensive to operate. In fact, in a recession, people are going to be very dollar conscious and so why would they disband a major head office, where they get great economies of scale, and instead open up all of these hubs?” 

Darren Steinberg, CEO, Dexus.

Residential Property

“I do think we are seeing a change in the social fabric. I expect property prices in regional centres to grow and grow strongly. A million bucks doesn’t buy you much in Sydney and Melbourne” 

Steve Laidlaw, CEO, People’s Choice Credit Union [one of Australia’s largest credit unions]

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Members only updates follow below with purchase entries and company updates.

We’re proud to hit a significant milestone this month: We have invested over $100,000 since March 2020.

As of today, the return is a stellar growth of over 88% to bring the folio value to $195,000.

Best way to depict this visually is a chart comparing the Australian market vs Tabarruk’s folio.

We beat the market comfortably and continue to widen the gap gradually despite the market being in a flat, sideways pattern.

We’re confident in continuing our growth as the market and sectors we invest in recover over the long term.

The 3 keys to our strategy have been;

1. Buying quality companies regularly (at least once a month)
2. Averaging down the ones that trend down
3. Holding them patiently despite volatility

Purchase entries and watchlist updates for members are at the end of this update.

A round up of what Management in key sectors are saying around the world follows.

CEO Insights

Australian Economy

“We feel that we are very much in the early stages of COVID-19 and its impact on the economy. The longer-term implications…are really yet to play out” 

Rob Scott, CEO, Wesfarmers Ltd

“It is clear that the recovery will take slightly longer and be more uneven than we thought a couple of moths ago, but there are some positive signs now emerging” 

Matt Comyn, CEO, Commonwealth Bank of Australia Ltd

“East Coast [Australian] infrastructure activity remains resilient, being a key lever for governments to accelerate economic activity” 

Market Announcement, Seven Group Holdings Ltd

“The technology industry is a fast-track to Australia’s post-pandemic recovery. It’s a massive force multiplier for jobs and already makes up 6 per cent of our GDP, a number which could be much higher. Doubling down on our investment in innovation now will reward our nation 10-fold into the future” 

Scott Farquhar, Co-CEO, Atlassian Inc

Global Economy

“In seeking to achieve inflation that averages 2% over time, we are [now] not tying ourselves to a particular mathematical formula that defines the average. Thus, our [new] approach could be viewed as a flexible form of average inflation targeting” 

Jerome Powell, Chairman, US Federal Reserve

“Based on what we’ve seen of our customers, as well as observing the whole market growth, the China market is going to be a much faster-growing market in cloud than the U.S. market” 

Jos Tsai, Co-Founder/Vice Chairman, Alibaba Group

“The [Chinese] government has stepped in with some stimulus that we expect is going to create further momentum through to next calendar year so things are looking pretty positive and pretty resilient [for iron ore]” 

Mike Henry, CEO, BHP Group Ltd

“As the benefits from stimulus waned towards the end of the quarter, we saw our comp sales [comparable same store sales] settle into a normal range” 

MarketDoug McMillon, CEO, Walmart Inc 

Technology

“Organisations have moved beyond addressing immediate business continuity needs to actively redefining and embracing new approaches to support a future of working anywhere, learning anywhere and connecting anywhere” 

Eric Yuan, CEO, Zoom Video Communications Inc

“Many of the security leaders we spoke with believe that experiencing a breach now, while their business is under extreme stress due to the impact of COVID, would be far more detrimental to their business versus last year” 

George Kurtz, CEO, CrowdStrike Holdings, Inc [multinational cybersecurity technology company]

“PCs have become essential. In the past, we were talking about one PC per home. Now we see the need to have one PC per person. This is going to be driving demand [and] it’s going to be staying with us for a while” 

Enrique Lores, CEO, HP Inc

“The economics now are demonstrating, and we have big customers who’ve shown this, that consistently [moving businesses systems to the cloud] is 30% cheaper than if it’s on-premise” 

EPatrick Gelsinger, CEO, VMWare Inc [NASDAQ listed major cloud computing company]

Advertising & Marketing

“Two things are happening; post-pandemic brand advertising – there’s been some reallocation back to brand – and a consciousness that actually various parts of the economy have performed reasonably well through the pandemic, particularly retail in many areas” 

Hugh Marks, CEO, Nine Entertainment Co

“The worst is behind us in terms of advertising budget cuts [by clients] … The pandemic has caused decades of innovation packed into about four months” 

Mark Read, CEO, WPP plc [world’s largest advertising agency]

Retail

“We still see an accelerated adoption of online shopping for all kinds of goods, including groceries” 

Fabian Siefel, CEO, Marley Spoon Ltd

“We still see there’s life in retail and life in shopping centres. In markets that have less impact from COVID we’re still trading strongly” 

Shane Fallscheer, CEO, Lovisa Holdings Ltd

“BigCommerce is participating in one of the largest and fastest transformations in human economic history, the global shift in commerce from offline to online. It took 23 years for e-commerce to go from non-existent to 10% of all global consumer spending in 2017. eMarketer [market research firm] predicts it will take just 6 years for this percentage to more than double to 21% of global retail spending in 2023” 

Brett Bellm, CEO, BigCommerce Holdings Inc [global ecommerce software platform]

“Affordable luxury is a key trend that we’ve seen in all recessions. Consumers want to pamper themselves, despite the difficulties they’re having” 

Noel Wallace, CEO, Colgate-Palmolive Company

“What we’ve seen in the last quarter is that spending in the household category has been very strong, including furniture, homewares, hardware and electrical. In my 26 years of large-format retail experience, I’ve never witnessed anything like this” 

Darren Holland, CEO Aventus Group

“While many people feel more comfortable shopping online than in stores, those that do venture out are much more intentional to make a purchase when they visit” 

Carlos Alberini, CEO, Guess Inc

Healthcare

“The public [hospital] sector doesn’t have the capacity to be able to deal with the backlog of elective surgery without support, so we are there to do that” 

Craig McNaly, CEO, Ramsay Healthcare Ltd

Energy & Resources

“Looking forward, we see a lower carbon technology as being essential. If anything, the changes over the last few months have accelerated the drive towards better, cleaner power solutions. The world is demanding cleaner energy” 

Warren East, CEO, Rolls Royce Holdings Ltd

Transport & Logistics

“Here we are in September and actually, we’ve almost recovered back to the levels we had in global container volumes compared with pre-COVID”

Jeremy Nixon, CEO, Ocean Network Express [global shipping container company]

Travel & Leisure

“We are running around a bit shy of 30 per cent of last year’s activity [for corporate bookings] and Brisbane-Sydney-Melbourne is 45 per cent of last year’s” 

Jamie Pherous, CEO, Corporate Travel Management Ltd

“We expect our large engine flying hours to recover to 90% of the 2019 levels by 2022” 

Warren East, CEO, Rolls Royce Holdings Ltd

“I believe that travel experiences will be even more treasured when this has ended. People will not hesitate to go and see and do the things they have always wanted to do in the newfound knowledge that circumstances can change very rapidly” 

Andrew Burnes, CEO, Helloworld Travel Ltd

“We believe that the demand for out-of-home family entertainment experiences will be stronger than ever once the pandemic has subsided and restrictions have eased” 

Dr Gary Weiss, Chairman, Ardent Leisure Group

“Our biggest takeaway from capturing and analysing industry data was that e-sports is growing exponentially and traditional entertainment and sports organizations have taken notice of the successful esports model” 

Sam Matthews, CEO, Fnatic [global e-sports entertainment company]

Manufacturing

“More than ever, our industries require solutions that reduce costs, enhance productivity and deliver sustainable outcomes” 

Ryan Campbell, CFO, Deere & Company

Food & Beverage

“Extraordinary demand [was] caused by the pandemic, driven by a major shift in consumer behavior toward eating at home with a resurgence of cooking simple meals and increased snacking occasions”

“This [health shift due to COVID-19] window is so unique, we’ve got to make the most of it…We all knew there would be a pivot eventually back to healthier recipes, from a little more comfort-oriented initially” 

Alison WaMark Clouse, CEO, Campbell Soup Co

“This [COVID-19] is probably the biggest trial ever in the consumer goods industry and the big question is what is going to happen after the special circumstances the consumer is living in today is going to fade and go back to normal. We’re certainly very happy what we have seen so far” 

Dirk Put, CEO, Mondelez International [food & beverage conglomerate/owner of Cadbury]

Commercial Property

“The Sydney CBD [for example] is in decline in the last 4 weeks by 45% as all the offices are essentially shut. If you talk to most stores that are open, they’re trading about half the levels that they were, and that volume has moved to the suburbs and so we’re seeing growth in suburbs” 

Peter West, Managing Director Australia, Coca-Cola Amatil Ltd

“The retail rental market in Australia is not paused because of the pandemic — it is fundamentally changed for the future” 

Scott Evans, CEO, Mosaic Brands Ltd

Residential Property

“The more impacted part of the economy has tended to be lower-skilled workers, more casual workers and sadly more females, [the] more low-income cohort and therefore that’s disproportionately the renter population as opposed to the homeowner population” 

Shayne Elliot, CEO, ANZ Banking Group Ltd 

“The commercial leasing codes have unleashed a red tape octopus that has meant that by mid-August, only one in four dollars of rent relief provisioned by landlords has so far been provided to their tenants in finalised agreements” 

ShKen Morrison, CEO, Property Council of Australia

Automotive

“Semiconductors and software are really the future of cars. That’s the way to think about it. All of the intelligence — the whole bedrock of what’s in the car in terms of the user experience, the intelligence, the driving experience – that is all being, if you like, enabled by semiconductors and software these days” 

Vincent Roche, CEO, Analog Devices Inc [global semiconductor chip manufacturer]

“The scale of the supply shortages differs among brands and it differs among models, but many dealers are still reporting shortages and delays” 

James Voortman, CEO, Australian Automotive Dealer Association (AADA)

“The scale of the supply shortages differs among brands and it differs “Demand has stabilised. In China we saw a V-shaped recovery. That’s not the case in Europe and North America but we have rebounded from the freefall” 

Ola Källenius, CEO, Daimler AG [Mercedes-Benz parent company]

Agriculture

“Labour has been the biggest issue through COVID. A lot of the work is done by backpackers and there are normally about 170,000 backpackers around and currently there are about 70,000, so getting workers is going to be an issue” 

David Schwartz, CEO, Vitalharvest Trust [owner of Costa Group farmland assets]

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Members only updates follow below with purchase entries and company updates.

Our portfolio has had a solid couple of weeks, consistently beating the market and holding between 78-83% growth overall.

COVID cases continue their decline and market is holding at the 6,100 level.

CEO Insights

Technology

“We believe that the future computer company is a data center-scale company. The computing unit is no longer a microprocessor or even a server or even a cluster. The computing unit is an entire data center now” 

Jensen Huang, CEO, NVIDIA Corporation [global manufacturer of computer graphics cards]

“There is never going to be a time – I hope – in our lifetimes where change [for companies] is as cheap as it is now” 

Stewart Butterfield, CEO, Slack Inc

Payments & Lending

“I think what’s happened is the world has accelerated from physical to digital across almost every industry. Across every industry, we’re seeing this surge towards a digital-first strategy” 

Dan Schulman, CEO, PayPal Inc

“The blurring of lines between online and in-store sales channels, and the digitalisation of commerce [has] continued” 

Pieter der Does, CEO, Adyen NV [global payments processor]

Retail

“Consumers have discovered new shopping habits online that are enduring, and this is true of all ages” 

Fabrizio Freda, CEO, The Estée Lauder Companies Inc

Property

“In the developer [property] market, lower investor demand and COVID-19 impacts on immigration, resulted in the deferral of high-rise apartment projects” 

Jason Pellegrino, CEO, Domain Holdings Australia Ltd

Global Economy

“While the outlook for 2021 remains uncertain, within the scenarios that we consider, our base case has the world economy rebounding solidly during the year” 

Market Announcement, BHP Group Ltd

Domestic Economy

“Very clearly, the economy needs to create jobs at a faster rate than has happened … we have got to have conditions that support business investment” 

Dig Howitt, CEO, Cochlear Ltd

Energy & Resources

“Oil markets and refining margins have been impacted by several global events including the transition to low sulphur marine fuels, OPEC+ supply disagreements and reduced global demand for oil products as a result of COVID-19. These have all weighed on global refining margins with sector returns heavily impacted as a result and refineries around the world recording significant losses” 

Scott Wyatt, CEO, Viva Energy Group Ltd

Transport & Logistics

“You can’t go to concerts or clubs or pubs, or sporting events but you can stay at home and buy stuff for your house. People are spending on themselves directly, instead of spending on entertainment, so we actually have a very strong underpinning and it will probably be a goods led [economic] recovery for some time” 

Richard White, CEO, WiseTech Global Ltd

Travel & Leisure

“Our business for last month has been at or above last year’s levels from a gross booking value. It’s totally crazy…So it dropped by about 80% and I mean, you know, nobody knows that this is pent up demand or not, but no, we’re around last year’s levels all around the world” 

Brian Chesky, CEO, Airbnb Inc

“When travel gets to the point that it turns back on, all past experiences are it turns back on in a big way. I think there will be a huge pent-up demand” 

Kyle Gendreau, CEO, Samsonite International SA

Automotive

“We have observed a strong rebound in demand for vehicles across multiple international markets as countries have emerged from lockdown. People’s aversion to taking public transport [deemed unsafe due to COVID-19] have increased the propensity for car ownership” 

Cameron McIntyre, CEO, Carsales.com Ltd

Food & Beverage

“As the market leader in at-home offerings, we are ideally placed to capitalise on consumer preferences for strong brands during uncertain times and to benefit from the shift in consumer shopping behavior towards no sugar offerings and [no] energy drinks” 

Alison Watkins, MD, Coca-Cola Amatil Ltd

Entertainment

“The gaming industry, with all that’s happening around the world [COVID-19] and it’s really unfortunate but it’s made gaming the largest entertainment medium in the world. More than ever, people are spending time digitally, spending their time in video games” 

Jensen Huang, CEO, NVIDIA Corporation [global manufacturer of computer graphics cards]

“The consumer market is now growing at a much faster pace than pre COVID-19 times. If we look at June and July sales, the market would have been 40-50% higher than last year’s June and July. We clearly see the market growing double digit in gaming. That will continue” 

Rahul Agarwal, CEO, Lenovo [global computer manufacturer]

Education

“Gaining an international education is a lifelong aspiration. Our research shows 74% of IDP students with current university offers are holding on to their study goals” 

Andrew Barkla, CEO, IDP Education Ltd

Members only updates follow below.

Let’s take a different perspective on the market this week instead of the usual references to sideways moving Kangaroos.

Looking at the COVID cases trending down, we were curious to see what the infection rate (growth in cases) looked like superimposed on the ASX 200 chart from March 2020 to today.

Here it is.

Rate of cases go up, market goes down, cases start falling, market recovers.

Is it correlation, causation or something else?

We think it’s interesting albeit not something to read too much into. There are many more factors at play and it’s too simplistic to pin the market’s movements on one variable.

It does add credence to the theory that markets are generally forward looking, anticipating the worst before it eventuates. People expecting the worst is something already priced in.

This is also because of what ‘the market’ really is, covered in our recent article for members.

Members only updates follow below.

The market this week stayed true to its Australian roots, being Kangaroo-like. Only difference from last week is bouncing around the 6,100 points compared to 6,000 as it has been previously.

Signs of recovery? Too early to tell.

For our portfolio, it has been an absolute rollercoaster with momentum swings in a couple of our holdings. We went from 70% in the green down to 48% and back up to 70% again today. We’ve seen enough Kangas to know what to do and stick to our plans.

Reminds us of this quote:

“The stock market is a device for transferring money from the impatient to the patient”

Warren Buffet

Another milestone for us is having picked 5 companies since March that have more than doubled, or grown 100% plus in their share price. We fist-bumped over video to that. Another two holdings are close to doing the same.

We’re doing pretty well on the COVID front too. Us Victorians are doing our bit with stage 4 lockdowns, mandatory masks and our 1 essential trip out. Cases are down to the high 300s from a peak of 700+.

CEO Insights

Employment & Workforce

“We believe that the post-COVID world will see an increase in distributed [remote] work in all industries” 

Scott Farquhar, Co-CEO, Atlassian Inc

“If right now roughly 5% of the workforce is permanently at home pre-Covid, we think that will double. We think as much as 10%, 11% of the workforce could be at home permanently” 

Brett White, CEO, Cushman & Wakefield plc [global commercial real estate company]

Travel & Leisure

“The fixed costs to operate airports have not changed throughout this period, with runways still needing to be kept open and safety and security screening maintained despite the greatly reduced numbers of passengers” 

James Goodwin, CEO, Australian Airports Association

“We have seen increased [bookings] momentum in the latter half of July” 

Mark Hoplamazian, CEO, Hyatt Hotels Corporation

Chinese Economy

“China has been able to very, very quickly recover from the origin of the crisis. In our business, China is actually up compared to last year’s period, so we’ve seen higher numbers in demand then we used to see pre-crisis” 

Joe Kaeser, CEO, Siemens AG

US Economy

“If we continue down this path with no significant stimulus…we estimate that between 35-45% of 30 million small businesses in America will begin to permanently close by Labor Day [first Monday of September]. It is no longer a crisis. This is a five-alarm emergency” 

Howard Schultz, CEO, Starbucks Corporation

Retail & E-Commerce

“We see an even more pronounced fashion shift towards leisure. The increase in workplace flexibility is here to stay. And the majority of companies plan more and more permanent remote working and of course, when you sit at home, you don’t wear your suit, you don’t wear your tie, but you tend to wear sneakers from Adidas or hoodies” 

Kasper Rorsted, CEO, Adidas AG

“Goodman has seen increased demand for both temporary and permanent space from customers in the food, consumer goods and logistics sectors, particularly related to e-commerce operators and those transitioning to online” 

Greg Goodman, CEO, Goodman Group

“Right now everybody needs to be pivoting digitally because that’s how consumers are interacting with companies, because they need to, I don’t know what will happen when they don’t need to [shop online post COVID-19]” 

Jim Clayton, CEO, Breville Group Ltd

Residential & Commercial Property

“The easing of restrictions in June led to an immediate increase in enquiry back to pre-COVID levels, which gives us confidence that demand [for seniors living] will quickly pick back up when restrictions lift again” 

James Kelly, CEO, Lifestyle Communities Ltd

“We’ve been surprised by the volume of [home loan] applications we received. At least so far, housing has been more robust that we have anticipated” 

Matt Comyn, CEO, Commonwealth Bank of Australia Ltd

“Historically, in the early stages of most downturns, almost all occupiers facing a leasing renewal decision in a market shock do one or two things: they either delay that decision as long as they can or they try to agree with the building owner to renew on a short-term basis. I mentioned this because roughly 75% of leasing activity represents existing tenants with expiring leases” 

Brett White, CEO, Cushman & Wakefield plc [global commercial real estate company]

Transport & Logistics

“The impact coming from COVID-19 is incomparably larger than the Lehman failure [GFC]” 

Shuichi Ishibashi, CEO Bridgestone Corporation

“Our reading for now is that we will see [the COVID-19] impact and the impact will persist until the first half of 2022, so the severity will persist longer. However, thereafter, our future expectation is that people will start to move about, and the movement of goods will become much more invigorated. 

Shuichi Ishibashi, CEO Bridgestone Corporation

Media & Advertising

“I think as it relates to the sponsorship side, I think things went pretty quiet just in the early stage. As I said the first month or two of the virus period…We actually feel pretty good about the traction in the last few months. We’re actually in a pretty good place in terms of renewals so I think the sponsorship is a place we clearly believe there’s real room to grow” 

Chase Carey, CEO, Formula One Group

Insurance

“The prospects of lower-for-longer interest rates, increasing climate-related weather events, some continuation of heightened casualty loss trends and, indeed, losses directly arising from COVID-19, left insurers with almost no alternative but to materially increase pricing” 

Pat Regan, CEO, QBE Insurance Ltd

Energy

“[An] opportunity is the full exploitation of hydrogen as an energy-carrier of the future. Hydrogen has the potential to be a game-changer in the complete decarbonization of industry, transport and housing” 

Johannes Teyssen, CEO, E.ON SE [global major electricity utility company]

Members only updates follow below.

After ending July under 5900, the market started off August still cautious on Monday (3rd August) before following the US markets and rallying back over 6000 by lunchtime on Tuesday (4th August).

The rising cases in Victoria and stage 4 metro lockdown seemed to have little effect if anything on the market.

We’ve purchased shares in 1 new company, adding it to the folio. Purchase entry detailed below for members only.

We’ve also averaged down on some of our oldies but goodies. Also detailed in our purchase entries below.

These last round of purchases have us hit another milestone: over $100,000 invested in our portfolio since 10th March 2020.

Make sure you check out our two new articles:

1. Mining poised to lead in the post pandemic recovery
2. How much tax do you pay after selling shares on the ASX share market

CEO Insights

Aviation

“We believe that talk of a quick recovery is definitely at the optimistic end of the scale. A deep global recession has already started and consumer habits are changing quite dramatically. We’re seeing a rapid rise in unemployment across markets and even for those with jobs, we know some consumers will choose to save more”

Alan Jope, CEO, Unilever

“We are really seeing the strong demand across a number of brands for our business, very strong demand”

Brian Goldner, CEO, Hasbro Inc [world’s largest toy & game company]

“This pandemic might change people, might change attitudes, might change customer behaviors, but the desire for beauty and uniqueness will never change”

Remo Ruffini, CEO, Moncler SpA [global fashion brand]

Travel & Leisure

“I’m less optimistic today than I was 30 days ago”

Arne Sorenson, CEO, Marriott International Inc

“We’re seeing restaurants come back obviously faster than you see airlines or hotels coming back, but I also think what you’re seeing is there is an unbelievable demand for people to travel”

Steve Squeri, CEO, The American Express Company

“We’re surveying guests every week. And what they’re telling us is when they see a flattening of the curve, they want to get out [and travel]”

Michael Spanos, CEO, Six Flags Entertainment Corp [world’s biggest theme park company]

Consumer & Retail

“We believe that talk of a quick recovery is definitely at the optimistic end of the scale. A deep global recession has already started and consumer habits are changing quite dramatically. We’re seeing a rapid rise in unemployment across markets and even for those with jobs, we know some consumers will choose to save more”

Alan Jope, CEO, Unilever

“We are really seeing the strong demand across a number of brands for our business, very strong demand”

Brian Goldner, CEO, Hasbro Inc [world’s largest toy & game company]

“This pandemic might change people, might change attitudes, might change customer behaviors, but the desire for beauty and uniqueness will never change”

Remo Ruffini, CEO, Moncler SpA [global fashion brand]

Technology

“Digital technology is no longer viewed as just new project starts, but it’s becoming perhaps the most key for business resilience”

Satya Nadella, CEO, Microsoft Corporation

“Information technology has become so complex that there’s no single vendor that can supply all the needed software and hardware”

Mary Stojcevski, CFO, Dicker Data Ltd

“We believe digitisation is a catalyst and key change agent for our industry, enhancing customer experience and the safety of our products, transforming our whole value chain, opening up new opportunities to create value for our customers, our users and our employees. All of this is happening faster than ever, changing the way we work”

Thomas Oetterli, CEO, Schindler Holding AG [global elevator/escalator maker]

Transport & Logistics

“The ageing of buildings is slowing on, let’s say the appetite or the demand of new technology is increasing. I do not worry about the long-term [demand drivers of our industry]”

Thomas Oetterli, CEO, Schindler Holding AG [global elevator/escalator maker]

“On the cargo side, the reduction of belly cargo capacity has led operators to utilize essentially all available freighters. Significant use of passenger aircraft as freighters continue, though yields are starting to return to normal as more belly cargo capacity comes back online. We’ve also seen improvement in global fleet utilization. Around 65% of the fleet is now back in service with hundreds of aircraft reactivated weekly. Utilization metrics are improving as airlines resume more of their network and schedules”

David Calhoun, CEO, The Boeing Company

Automotive

“Automotive sales in June and the first part of July are above the prior comparable period and show strong double‐digit demand growth. Recent empirical and anecdotal feedback suggests workshop and end customer demand is coming back strongly”

Market Announcement, GUD Holdings Ltd

Health & Fitness

“What we’re hearing back from consumers that the product categories that we’re in are the ones where people will spend their money. With cycling computers [watches] and those kinds of products, we are spending more on air freight as we try to get those into place at retailers. Cycling activities have been very popular with customers”

Cliff Pemble, CEO, Garmin Ltd

Food & Beverage

“We believe premiumisation will remain an important source of top and bottom line growth in both developed and emerging markets. Beer as a category is still in its early stages of premiumisation, even in developed markets, when compared to other alcohol categories” 

Carlos Brito, CEO, Anheuser Busch Inbev NV

“We expect that right now, we’re still seeing at-home consumption obviously elevated. But as we think about planning and giving guidance for the rest of the year, the best that we felt we could do is take a planning stance that says it will decelerate”

Steven Cahillane, CEO, The Kellogg Company

Purchase entries follow below for members only.