Reporting season wrap up

It was a mixed reporting season. I guess we’re all looking for signs of whether a slowdown was occurring and in some instances that was evident. Most companies were talking to higher labor costs, that was a really key theme that continued to run through a lot of companies. We thought the consumer related stocks were mixed. Some stocks really struggled, Harvey Norman, whereas some others such as Bunnings continued to perform quite well. But it seems to be that that’s an area of the economy that’s deteriorating, housing likewise, related to the consumer housing is pretty soft. And then there’s been some stock specific or sector specific areas such as banks, which have been doing really well, but starting to show signs that they’ve peaked out. And we’ve got some concerns around bank profit margins from here. As fixed home loans start to roll to variable, it’s very competitive and as people start to demand more on their savings.

So we think that’s an area that’s quite competitive. But there were some areas that looked a little better. We thought some of the quality companies in the market, those ones with pricing power, able to pass on inflation to their customers. Companies like SEEK really shone through, and as well as some of those companies benefiting from a recovery in COVID. And I’m thinking the healthcare sector in particular delivered some good results. Again, they show benefits of a fairly strong market position. And then the other sector that stood out was insurance sector, which benefiting from higher interest rates, increased pricing coming through the broader market.

We had a very good month, performed well above the market, would’ve been better without Dominoes, which was a stock that had a poor result and cost us through the month. That certainly was a softer result. They were struggling with the inflation, which impact the cost of delivery and meant that people choosing cheaper options. So that stock certainly suffered, but in any given reporting season will have some winners and some losers. And on the positive front, we had stocks such as QBE, Qube logistics. So the queues did particularly well for us through the month, and a whole range of other companies delivered excellent results, which meant we had a good outcome through the month.

This market is reasonably volatile, but some good opportunities are emerging through in the midst of this volatility. Key stock that we thought delivered a good result was Ramsey Healthcare. Ramsey is one of those companies that had a very difficult COVID, patients were locked out of hospitals for many elective surgeries. Nursing costs were rising, so a lot of these problems are starting to dissipate a little bit now, and they’re getting that recovery, in earnings starting to come through. Ultimately, it’s a company with good defensive earning streams. We think an aging population gives it a good tailwinds, because as you age you need knees, and hips, and hearts, and other activities that need to take place in the hospital. So they’ve got the demographics in their favour. They’ve had some really difficult headwinds, which are now dissipating. So that gives a nice setup for growth over the next three years that that’s not particularly tied to the strength of the economy. So I think you can invest in that with some confidence going forward.