Investing highlights & lowlights — October 2015

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Investing highlights & lowlights — October 2015.
  • In New Zealand, Summerset again upgraded its earnings forecasts for the 2015 year on the back of stronger than expected third quarter sales of new and existing occupation rights to units at its retirement villages. Fisher & Paykel Healthcare had an investor day where it reiterated the strong growth in its addressable markets for its innovative respiratory and sleep apnea products. The share prices of both companies were up strongly during the month. Sky TV downgraded earnings expectations for the 2016 year on the back of increased costs of delivery of its new services, increased programming costs and the likelihood of increased churn of subscribers after the Rugby World Cup.
  • A positive month for the Australian portfolio as the broader share market followed commodity prices upwards. Nick Scali showed strong same store growth and solid progress on new store openings, while Domino's Pizza upgraded their targeted number of European stores when they acquired Sprint in France. ResMed's run of healthy constant currency sales growth continued with a first quarter increase of 15% but the headwind of adverse foreign exchange movements reduced its bottom line earnings by 3% on a year ago. Investors took a dim view of Credit Corp's outlook as a global competitor entered the Australian debt-ledger market, and peer Collection House started showing some signs of stress.
  • October was a good month for our Property & Infrastructure Fund, both in terms of news flow (or lack of negative news) and fund performance. The quarterly results from our US railroad holdings, Union Pacific and Norfolk Southern, exceeded market expectations. Both companies achieved better than expected productivity and cost reduction improvements as volumes remain below 2014 peaks. Meanwhile, new holding US wireless infrastructure provider Crown Castle had a strong third quarter which saw it raise its 2015 full year earnings guidance and we continue to marvel at the growth in mobile data.
  • Third quarter earnings season was the focus in October for our International portfolio with highlights being positive Q3 earnings results from portfolio heavyweights Alphabet (formerly known as Google) and Wirecard, both of which continue to grow strongly. On the flipside, Biotest's profit warning due to a large impairment charge, and disappointing results at Harley Davidson largely due to a strong USD were not well received by investors.
  • The corporate bond market rebounded strongly in October, providing a solid boost to the returns of our global fixed income funds.


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