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Weekly insights from the Trail

Three things that got the team talking this week

August 18, 2023August 25th, 2023
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1. The great (expensive) Australian dream…

Housing affordability is tough in Australia. We have seen home prices continue to rise as the capacity to pay dropped sharply in 2022/23. We have also seen the supply of affordable housing (<$400 per week rent) drop significantly in the past 3 years. Aspen Group, held in the Small Companies Fund, supplies affordable accommodation in the residential, retirement and parks communities. They are working to fix the severe undersupply of affordable housing (<$400pw and <$400k price) where demand is around 4x the current supply.

Source: ABS, Evans (August 2023)

Source: Aspen Group (August 2023)

Companies mentioned are illustrative only and not a recommendation to buy or sell any particular security.

2. Looking forwards not backwards…

The Firetrail S3 Global Opportunities Fund uses a forward looking, fundamental approach to its ‘S3’ sustainable investment approach. Rather than relying on the backwards looking scores from third party data providers. The data below, on year-to-date performance by MSCI ESG rating, shows how important it is to do your own work rather than just relying on the ESG ratings for performance.

Source: Bloomberg, MSCI, Firetrail (August 2023)

Companies mentioned are illustrative only and not a recommendation to buy or sell any particular security.

3. The price is right…

A key theme we have seen across global reporting season has been rising costs, in particular interest costs and wages.

Interestingly, nearly half of the S&P500 debt is set to mature after 2030, so it seems like US companies have been able to lock in lower debt rates. But it hasn’t been as good in Australia, where every sector (ex-Materials) has seen NPAT growth revised lower than EBITTDA growth from higher interest costs.

Meanwhile wage rates have spiked across the US, New Zealand and Australia. In Australia, the 12% of private sector workers who saw a wage increase saw an average increase of 4.5%, the highest in over 10 years. And in the UK they saw wage growth accelerate to nearly 8% for the 3 months to June, and whole economy wages including bonuses jumped to 8.2% from 7.2%.

Source: Bloomberg, Goldman Sachs GIR (August 2023)

Source: Jarden (August 2023)

Source: ABS, Stats NZ, BLS, UBS, Macrobond (August 2023)

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

This communication is for general information only. It is not intended as a securities recommendation or statement of opinion intended to influence a person or persons in making a decision in relation to investment. It has been prepared without taking account of any person’s objectives, financial situation or needs. Any persons relying on this information should obtain professional advice before doing so. Past performance is for illustrative purposes only and is not indicative of future performance.

Whilst Firetrail, PFSL and Pinnacle believe the information contained in this communication is reliable, no warranty is given as to its accuracy, reliability or completeness and persons relying on this information do so at their own risk. Subject to any liability which cannot be excluded under the relevant laws, Firetrail, PFSL and Pinnacle disclaim all liability to any person relying on the information contained in this communication in respect of any loss or damage (including consequential loss or damage), however caused, which may be suffered or arise directly or indirectly in respect of such information. This disclaimer extends to any entity that may distribute this communication.

Any opinions and forecasts reflect the judgment and assumptions of Firetrail and its representatives on the basis of information available as at the date of publication and may later change without notice. Any projections contained in this presentation are estimates only and may not be realised in the future.

Unauthorised use, copying, distribution, replication, posting, transmitting, publication, display, or reproduction in whole or in part of the information contained in this communication is prohibited without obtaining prior written permission from Firetrail. Pinnacle and its associates may have interests in financial products and may receive fees from companies referred to during this communication.

This may contain the trade names or trademarks of various third parties, and if so, any such use is solely for illustrative purposes only. All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with, endorsement by, or association of any kind between them and Firetrail.

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