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Rod Skellet

Equities Investment Strategist

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Rod Skellet

Equities Investment Strategist

Rod Skellet joined Mason Stevens in 2019 in the newly created role of Equity Strategist. In this role, Rod’s focus is the delivery of co-ordinated investment opportunities across private equity and domestic and international markets. He provides clients with information about equity opportunities – ideas, fundamentals research, technical observations, and integrated execution, to align customer engagement and serviceability. With over 30 years of experience in financial markets, Rod has a strong background in both equity and debt derivative markets and equity and debt capital markets, having held positions at ASX, Ords/JP Morgan , Deutsche Bank, BITG and Origin Capital. He was accepted as a master stockbroker by the Australian Stock Brokers Association in 2001 and is an ASX Derivative Floor Governor.

The Australian reporting season is in full swing with circa 59 companies making up the ASX 200 having reported (of the 170 companies due to report) and 37 of the ASX 100 index.

Using market cap as the basis, 51% of the ASX 200 has reported, while in the large caps the season is 53% complete. So far, the report card has been very respectable with EPS growth now projected to be 2.8% for the full year 2020, vs. the guidance of 3.0%, a very resilient outcome all things considered. According to UBS, the growth is fairly broad based, with Industrials ex- Financials (+5.6%), Resources (+2.4%) and Financials (+1.5%).

Of the large cap companies to report, Commonwealth Bank, JB HiFi, AGL and CSL had results that impressed the market while misses included Downer, Treasury Wine & Mirvac. To date 31% of the large cap companies have upgraded guidance for the FY20 while 19% have downgraded.

The tailwind provided by a weaker $AUD, down 3c v the USD since the start of the year has given those company’s with offshore earnings a leg up v the ASX 200.

Most retail investors love dividends (insto investors too for that matter) with dividend surprises coming from AGL, ASX, CPU, Magellan, South 32, QBE, while CBA encouraged all shareholders by maintaining its dividend at $2.00 per share.

The rising market has caused some significant pain for those hedge funds that embrace short positions in large cap stocks. The most heavily shorted stocks have outperformed with JB Hi Fi and Harvey Norman being standouts. This thematic will be closely watched with stocks with large short positions reporting Feb 21st – Inghams, Super Retail (Feb 20th) and Harvey Norman (Feb 28th).

The overall market volatility of the ASX 100 for this reporting season to date has been lower than in previous years. The price reactions for both “EPS beats v EPS Misses” and “guidance Upgrades v Downgrades” has been evenly distributed. According to UBS, the average EPS beats returned 1.43% v EPS misses of -1.62% while Guidance Upgrades returned 3.75% v Guidance downgrades of -3.54%.


UBS expects market volatility to increase for the remaining part of the reporting season as company’s tend to report disappointing earnings in the later part of the season, while company’s that have upside risk tend to report early.

With equity markets being very resilient, the combination of offshore news and economic impacts of the Corona virus, will likely impact near term market movements. The market will no doubt be on edge should other mega cap global stocks follow the lead of Apple and downgrade guidance, while domestically the later half of the season could prove more volatile.

The views expressed in this article are the views of the stated author as at the date published and are subject to change based on markets and other conditions. Past performance is not a reliable indicator of future performance. Mason Stevens is only providing general advice in providing this information. You should consider this information, along with all your other investments and strategies when assessing the appropriateness of the information to your individual circumstances. Mason Stevens and its associates and their respective directors and other staff each declare that they may hold interests in securities and/or earn fees or other benefits from transactions arising as a result of information contained in this article.

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