August is reporting seasons on the ASX
Reporting season is when most of the listed companies share their financial reports and forecasts as well as their plans for the future – otherwise referred to as ‘reporting’, ‘estimates’ or ‘forecasting’.
Each report is long and detailed, with lots of numbers, tables and data. There is one critical component that is beyond numbers however; the assessment of the company’s respective market conditions, their plans and their thoughts for the company.
The most famous report like this is Warren Buffet’s annual conference; thousands of international investors flock to hear the Oracle of Omaha shares his thoughts. All ASX-listed companies share a similar process but most go unnoticed - although the share prices can tell a lot of the story. We have trawled the share prices and here’s what they say:
International Exposure Helps
If you’re an Australian company earning money overseas, such as getting paid in USD, then this reporting season has been favourable.
Nothing too complicated here: the AUD is buying about $0.10 less USD than at the start of the year, so that’s a 10% income bonus for many of those companies with international operations.
Shopping season seems to be getting stronger.
Many ASX-listed companies in the retail space, being shop-fronts or other non-essential retail services, or ‘discretionary items’, have performed well this reporting season.
Whether this is a continuation of the hard-times, investors have retail shoppers anticipating Amazon arriving in Australia, tightening credit (mortgage lending) regulations or something more subtle, there have been strong performances from discretionary retailers large and small.
Interestingly both physical stores and online providers benefited, from online lottery tickets (JIN), cosmetics (BDA) and Baby Bunting (BBN), to clothing brands such as Just Jeans owner (PMV).
Months ago there was more of a focus on rural / agricultural companies, but a shift has occurred.
Only aquaculture companies (MCA and SFG) are still in the top ranks, whereas the more traditional poultry, veggies and land-based producers have fallen back – possibly a sign of the drought.
Other strong performers have been Coles (WES), but less so for Woolies (WOW), and Domino’s Pizza (DMP) has clawed back some of their multi-year falls.
Oil and Gas companies have performed well this year, although when oil goes up, that’s an easier task.
In the last six months Oil hasn’t increased as much as the six months before. The top performers this reporting season have covered methanol (MAY), Coal (NHC and MYE) and LNG (LNG) and oil and gas (GLL and TAP)
Technology companies have been the most consistent performers for years.
As noted on Talking Stock, this seems less to do with technology itself, but more to do with the fact that most innovation today is heavily reliant on technology.
For example the logistics of packing your Woolies or Coles home delivery order and planning the most efficient route for all the drivers' deliveries is more about technology than being a better grocer.
For this reason we have consistently seen Technology companies be amongst the top performers on the ASX for years, although there’s a bit more to the story:
Technology itself is not enough to rank #1 on the ASX;
Combining with other strong market forces, such as those listed above, with technology, is required to perform at the top
When market-leading industry falls, often so does the Technology innovator
Smaller technology companies are more often the better performers although their fate often meets three large roadblocks:
Growing too fast, beyond management’s abilities, leads to large-corporate drudgery taking the attention from innovation;
Competitors flock to compete for the profitable market space
Acquisition takes the pure-technology innovator away from investor’s reach and often off public markets
Reporting season happens twice a year in Australia and the winning companies change almost every time. The most constant aspect of reporting season is that there is always a new leader, innovator or market force to aid investors to wealth – picking that theme and timing is the most critical ingredient.