Since the end of 2016, the market has been in a strong growth cycle until now when rotation from growth to value stocks within the market has been fierce and rapid. Could this be the start of a value phase? In this insight we explore recent market performance, future conditions which are conducive to growth or value stocks, and how to navigate changing market cycles.

Downer is an Australian listed company exposed to urban infrastructure service and employs more people than Commonwealth Bank, BHP or even Telstra. In this research article, we explain why we believe Downer is a high quality business, with an undemanding valuation and some of the key catalysts that make Downer a high conviction investment for Firetrail.

Demand for convenience has seen plastic use multiply and today plastics are fundamental to many aspects of daily life.

At Firetrail, we believe that high quality, high conviction investment managers can outperform the index over the medium to long-term. Over the short-term however, even an investor with perfect foresight will have periods of underperformance.

Baby Bunting presents a rare opportunity to own a retailer that is growing sales and expanding margins. An unprecedented level of market consolidation in the Australian baby retail sector is allowing Baby Bunting to grow sales and profitability materially in a short space of time.

Making investment decisions involves looking at many aspects of a company’s financial position. One critical component is understanding a company’s cashflow. Recurring or deteriorating cashflow issues may be symptomatic of a broader issue in the business.

After four years of underinvestment, the oil and gas cycle is turning positive. WorleyParsons is well positioned to benefit as the market leader in oil and gas engineering.

Losses from weather events are part and parcel of running an insurance business. While they introduce profit volatility and can have some flow-on impacts, we believe the major insurers are in a strong position to mitigate and offset these factors.

Nufarm is an Australian company that specialises in chemical crop protection globally. It produces products to help farmers protect their crops against damage caused by weeds, pests and disease. There are two key reasons we believe Nufarm is one of the most compelling opportunities in the Australian equity market today.

Costs are rising. Raw material inflation is coming through the supply-chain across industrial stocks. As a result, earnings pressures are emerging in many companies with exposure to raw materials.

Rather than trying to anticipate the next market downturn, a far more prudent approach is to mix in a portfolio of uncorrelated assets that can weather different market environments.

Firetrail’s Portfolio Manager, James Miller outlines ways to obtain short exposure through managed funds in Australia, and also two of the golden rules that we follow at Firetrail when uncovering opportunities for stocks to short.

Shorting opportunities are abundant – every year there are stocks that fall, despite the return of the overall market. By researching and identifying the catalysts for these stock declines, shorting can be a significant contributor to alpha in your portfolio.

The ACCC has renewed focus and power to block contentious M&A activity in the Australian market. Given the high level of concentration within Australian industries, we believe this focus is likely to result in the ACCC blocking more M&A.

Is timing the equity market a lucrative investment strategy? If you time it to perfection, the answer is certainly yes. However, in practice the information and skill required to time the market with the accuracy required to add value consistently is challenging at best.

Terms such as big data, artificial intelligence and machine learning are being used more frequently by companies around the globe. While many are talking technology, in our experience, the winners will continue to be focused management teams using data to drive shareholder returns.

Steel making margins have almost tripled off the 2016 lows driven by China’s supply side reform policies. We strongly believe that the higher steel mill margins are sustainable and we see compelling investment opportunities in the steel sector.

The GFC was a decade ago. Since then, companies have focused on cost control and balance sheet repair to drive shareholder returns. From here on, we strongly believe that companies around Australia are set to embark on M&A to grow faster.

A key aspect of our philosophy is that “every company has a price”. In our experience some of the best investment opportunities arise when a company is going through challenging times.