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

Weekly insights from the Trail

Three things that got the team talking this week

January 28, 2022

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Is lockdown back?…

We’ve seen some interesting data on the quasi-lockdown going on in Australia right now due to the increased Covid cases. Mobility and spending have taken a hit, as has consumer confidence. Its putting more pressure on growth expectations in Australia and adds another interesting topic we are hoping to get insight on in earnings season – particularly from the domestic retailers.

2. Volatility is back…

The Henry Hub natural gas futures price was up 46% overnight. The front-month February futures contract expired at the end of the trading session. It had been up as much as 70%, the largest jump on record due to an apparent short squeeze.

As one month’s gas contract approaches expiration, traders move to the subsequent month contract, resulting in volumes falling significantly for the soon-to-expire contract. It appears that a person, company, or fund was caught short the February contract and forced to cover in the afternoon, in a very thinly traded market.

It’s not great timing for energy demand as a winter storm warning has been placed on the Northeast of the US.

Source: Bloomberg

3. TINA is back…

The only current “megacap” holding in the Firetrail S3 Global Opportunities Fund, Microsoft, reported strongly during the week. There’s no slowdown from Covid with MSFT – it’s cloud business (Azure) grew revenue 46% year on year, we continue to see more than 20% free cash flow growth for the next few years, and its trading on just 27x PE.

The more interesting news was the trends in Office 365 (Outlook, Excel, Word etc!). Sales grew 19% y/y, of which 16% is increased users. And users have doubled in the last four years!

The next thing to look out for is in March, when further price increases of 10-20% will be implemented. It looks like TINA (‘there is no alternative’) is back…except if you think Lotus Notes can make a comeback?!

Source: MSFT, Firetrail

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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