Invest
Did investors overreact to the COVID-19 pandemic?
The economic downturn has not hit many sectors of the economy as hard as first predicted, with the reporting season revealing that many sectors will recover quickly, an investment fund has revealed.
Did investors overreact to the COVID-19 pandemic?
The economic downturn has not hit many sectors of the economy as hard as first predicted, with the reporting season revealing that many sectors will recover quickly, an investment fund has revealed.
Tribeca Alpha Plus fund lead portfolio manager Jun Bei Liu believes many businesses are showing resilience despite the COVID-19 pandemic.
“What is now clear is that the immediate impact of COVID (for most sectors) is not as severe as initially feared, but the initial recovery enthusiasm has been muted by concerns of further lockdowns (e.g. Victoria) and the still unknown longer-term economic and behavioural implications of the pandemic,” Ms Bei Liu said.
Ms Bei Lui believes investors are paying very little at this point for earnings, with many likely to experience a V-shaped recovery regardless of the economic cycle.
“The fact the market rallied in August despite net earnings downgrades to FY21 forecasts highlights the extent to which the market is willing to look through near-term weakness.”
“We continue to be on the lookout for businesses that are priced attractively on a ‘normalised earnings’ basis, provided the risk and time of achieving such normalised earnings is appropriately discounted in the price,” Ms Bei Lui explained.
She also explained that investors who have a longer-term horizon could profit from the market’s current reaction to COVID-19.
“Our view has always been that current market conditions offer ample opportunities to buy some premium assets which are trading at a fraction of their intrinsic value. Sydney Airport, Scentre Group and Ramsay Health Care are some of our favourites in playing the reopening theme,” Ms Bei Lui said.
Ms Bei Lui highlighted that the reporting season has revealed retail sales have staged a “phenomenal comeback” despite being one of the hardest hit sectors, as governments continue to stimulate the economy by putting cash into consumers’ pockets.
While cautioning investors about the long-term profitability of some retail businesses, Ms Bei Lui points to a lack of overseas travel also becoming a tailwind for the sector, with housing renovations and discretionary items rising throughout the pandemic.
“In the retail space, rather than the staple names, we prefer the discretionary peers. Like most of our recommendations to investors, a positive top-down view should not be translated into a blanket buy of the whole sector. Fundamental research is the critical factor to generate superior returns. In this vein, Super Retail, which owns Supercheap Auto, BCF, Macpac and Rebel, operates in the sweet spot of this transition year,” Ms Bei Lui concluded.
About the author
About the author
Stock market
US lawmakers quiz key GameStop players
Notorious retail investor Keith Gill is facing a grilling from the US congress and the possibility of a class action lawsuit due to his alleged part in the GameStop saga, with policymakers convinced h...Read more
Stock market
Facebook’s news ban feared to have implications for the sharemarket
Facebook’s move to restrict the sharing and viewing of news in Australia could have huge implications for the sharemarket, an expert has said, as Treasurer Josh Frydenberg readies himself for anothe...Read more
Stock market
Stock market bubble fears overblown: Vanguard
Fears of a stock market bubble are “overblown” despite equity markets around the world closing in on all-time highs, an industry analyst states. ...Read more
Stock market
Experts blast Treasurer’s plan to permanently ease disclosure laws
Sharemarket disclosure laws could be permanently relaxed as the Treasurer looks to shield businesses from disgruntled shareholders, but legal experts have labelled Frydenberg’s reasoning “madness...Read more
Stock market
Is your portfolio climate change ready?
The vast majority of investors believe climate change will have an impact on their portfolio, yet not all investors are readying their asset allocation to take advantage of a net zero world, new resea...Read more
Stock market
Sharemarket penalises mining firms abusing human rights
The sharemarket has been a powerful tool in holding to account mining companies engaged in human rights violations, but informational campaigns by civil society groups and the media are the real aware...Read more
Stock market
ASX warns against the ‘gamification’ of investing
ASX chief executive Dominic Stevens has warned against the gamification of equities, as young traders lock their gazes on chasing returns at the expense of any real sharemarket knowledge. ...Read more
Stock market
What is a stock market bubble?
If history is to be trusted, stock market bubbles inevitably burst and end in a stock crash, with devastating effects on your portfolio. How can you protect your investment from the negative effects o...Read more
Stock market
US lawmakers quiz key GameStop players
Notorious retail investor Keith Gill is facing a grilling from the US congress and the possibility of a class action lawsuit due to his alleged part in the GameStop saga, with policymakers convinced h...Read more
Stock market
Facebook’s news ban feared to have implications for the sharemarket
Facebook’s move to restrict the sharing and viewing of news in Australia could have huge implications for the sharemarket, an expert has said, as Treasurer Josh Frydenberg readies himself for anothe...Read more
Stock market
Stock market bubble fears overblown: Vanguard
Fears of a stock market bubble are “overblown” despite equity markets around the world closing in on all-time highs, an industry analyst states. ...Read more
Stock market
Experts blast Treasurer’s plan to permanently ease disclosure laws
Sharemarket disclosure laws could be permanently relaxed as the Treasurer looks to shield businesses from disgruntled shareholders, but legal experts have labelled Frydenberg’s reasoning “madness...Read more
Stock market
Is your portfolio climate change ready?
The vast majority of investors believe climate change will have an impact on their portfolio, yet not all investors are readying their asset allocation to take advantage of a net zero world, new resea...Read more
Stock market
Sharemarket penalises mining firms abusing human rights
The sharemarket has been a powerful tool in holding to account mining companies engaged in human rights violations, but informational campaigns by civil society groups and the media are the real aware...Read more
Stock market
ASX warns against the ‘gamification’ of investing
ASX chief executive Dominic Stevens has warned against the gamification of equities, as young traders lock their gazes on chasing returns at the expense of any real sharemarket knowledge. ...Read more
Stock market
What is a stock market bubble?
If history is to be trusted, stock market bubbles inevitably burst and end in a stock crash, with devastating effects on your portfolio. How can you protect your investment from the negative effects o...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
