Three things that got the team talking this week - Firetrail Investments

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Three things that got the team talking this week

November 1, 2024

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1. Earnings growth found OUTSIDE the Mag7?!!! Surely not!

We note there is a year of estimates in the below chart (which could be wrong) but the numbers suggest similar earnings growth for the Mag7 and the overall S&P. Given the weighting of the Mag 7, it implies the S&P493 are still growing slower, but the gap will be the closest in 3 years.

Source: Bloomberg (November 2024)

2. Private equity – Exits becoming harder to come by

Markets are at all-time highs and earnings multiples are reasonable but private equity firms are finding it hard to make realisations. Data from Pitchbook suggests exits vs investments are at decade lows with 2024 set to be the worst. We went away to examine the reasons and couldn’t put our finger on it.

Our rationale: Ex-technology, the economy isn’t great with many industrials struggling to maintain or grow profits in the face of inflation and tepid top lines. PE tries to maximise their exit value and selling on depressed earnings isn’t a great way to do that. But you can’t wait forever!

Source: Pitchbook (November 2024)

3. Smoking rates

Out on the road we are hearing that illicit tobacco sales are rising sharply as consumers look to save money. Some have estimated 30% of Australian cigarettes sold are illicit. We found the following chart on smoking rates and were surprised that remote areas have 20% smoking rates while just 7% of people in major cities smoke.

Source: Australian Institute of Health and Welfare (November 2024)

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Disclaimer

This article is prepared by Firetrail Investments Pty Limited (‘Firetrail’) (ABN 98 622 377 913, AFSL 516821) as the investment manager of the Firetrail Australian High Conviction Fund (ARSN 624 136 045), the Firetrail Absolute Return Fund (ARSN 624 135 879), the Firetrail Australian Small Companies Fund (ARSN 638 792 113) and the Firetrail S3 Global Opportunities Fund (ARSN 653 717 625) (‘the Funds’). Pinnacle Fund Services Limited ('PFSL') (ABN 29 082 494 362, AFSL 238371) is the product issuer of the Fund. PFSL is not licensed to provide financial product advice. PFSL is a wholly-owned subsidiary of the Pinnacle Investment Management Group Limited (‘Pinnacle’) (ABN 22 100 325 184). The Product Disclosure Statement (‘PDS’) and Target Market Determination (‘TMD’) of the relevant Fund are available via the links below. Any potential investor should consider the PDS and TMD before deciding whether to acquire, or continue to hold units in, the Fund.

Links to the Product Disclosure Statement: WHT3810AU, WHT5134AU, WHT3093AU, WHT7794AU

Links to the Target Market Determination: WHT3810AU, WHT5134AU, WHT3093AU, WHT7794AU

For historic TMD’s please contact Pinnacle client service Phone 1300 010 311 or Email service@pinnacleinvestment.com

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