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
Westpac 1H profits soar post-pandemic
Australia’s improving economic outlook has seen the profits of a big four bank surge, which is said to signal strong dividend gains across the market, an industry expert has revealed. ...Read more
Stock market
Limiting internet searches for investors ups likelihood of a stock market crash
Internet searching does not exacerbate investors’ biases – instead, it facilitates their ability to access and analyse information, new research has revealed. ...Read more
Stock market
Ethical investing tipped to drive ETF market
Following a volatile 2020 where investors poured into ETFs, shareholders are tipped to focus on ethical investing and technology as the recovery from the COVID-19 pandemic continues, an industry expe...Read more
Stock market
‘The concept of collective investing is here to stay’
The phenomenon of retail investors acting as a collective, led by social media and celebrity investors, is here to stay, says one expert. ...Read more
Stock market
What is short selling and should you do it?
Short selling stocks may sound like a good investment strategy when you’re after quick and big returns, but is it worth the risk? Here’s a rundown of why shorting stocks may not be a sound stock t...Read more
Stock market
How much insider trading really happens?
There are at least four times as many people who get away with insider trading than the number of those caught by prosecutors, new research has revealed. ...Read more
Stock market
Why you should be wary of the tech stock bandwagon
After a strong year of tech stock gains, tech shares have been on a decline in recent weeks as increasing bond yields rattle equity markets. ...Read more
Stock market
GameStop set to release first earnings since Reddit stock market rally
The video game retailer at the centre of the WallStreetBets saga is set to post its first quarterly market update since the fiasco began, with social-media investors heavily tipped to continue backing...Read more
Has the property market reached its peak; Biden’s climate summit and our sharemarket, and the upcoming budget
Listen now
Is the market overheating; should ETFs take your fancy, and what’s happening to the low and middle income tax offset?
Listen now
Home values up 30% (or are they); NFTs taking the world by storm, and why Keating thinks Aussies will be ‘poor’ in retirement
Listen now
Raging floods, the tech stock bubble and the ongoing SG debate
Listen now
Stock market
Westpac 1H profits soar post-pandemic
Australia’s improving economic outlook has seen the profits of a big four bank surge, which is said to signal strong dividend gains across the market, an industry expert has revealed. ...Read more
Stock market
Limiting internet searches for investors ups likelihood of a stock market crash
Internet searching does not exacerbate investors’ biases – instead, it facilitates their ability to access and analyse information, new research has revealed. ...Read more
Stock market
Ethical investing tipped to drive ETF market
Following a volatile 2020 where investors poured into ETFs, shareholders are tipped to focus on ethical investing and technology as the recovery from the COVID-19 pandemic continues, an industry expe...Read more
Stock market
‘The concept of collective investing is here to stay’
The phenomenon of retail investors acting as a collective, led by social media and celebrity investors, is here to stay, says one expert. ...Read more
Stock market
What is short selling and should you do it?
Short selling stocks may sound like a good investment strategy when you’re after quick and big returns, but is it worth the risk? Here’s a rundown of why shorting stocks may not be a sound stock t...Read more
Stock market
How much insider trading really happens?
There are at least four times as many people who get away with insider trading than the number of those caught by prosecutors, new research has revealed. ...Read more
Stock market
Why you should be wary of the tech stock bandwagon
After a strong year of tech stock gains, tech shares have been on a decline in recent weeks as increasing bond yields rattle equity markets. ...Read more
Stock market
GameStop set to release first earnings since Reddit stock market rally
The video game retailer at the centre of the WallStreetBets saga is set to post its first quarterly market update since the fiasco began, with social-media investors heavily tipped to continue backing...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
