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Weekly insights from the Trail

Three things that got the team talking this week

August 25, 2023September 1st, 2023
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1. Reading through the results…

Key results themes we noted this week were:

  • Sustainability work is taking off! Worley has seen 79% CAGR in their sustainability related work between FY21-23. To note they consider gas as a transitional energy necessary to achieve net-zero emissions, so this is included in their sustainability work calculations. And we saw from BHP they are increasing capex particularly on their decarbonisation and future facing commodities (FFC) projects, and expect this will get to 70% of their total capex spend in the medium term.
  • Shrinkage, theft, shoplifting, stock loss – whatever you call it it’s an issue! Coles said their theft (including food waste) was up 20% year-on-year. Myer also called it out as a significant impact on sales. And it has been a big theme in the US with retailers reporting this week. We saw Dick’s Sporting Goods drop ~25% after missing earnings, due in part to an uptick in store theft.
  • Window shopping is keeping customers in the mall. Scentre Group (who operates the Westfield shopping centres) reported a +10% year-on-year lift in visitation. Even if the costs of living are rising, window shopping remains free!

Worley – sales pipeline dominated by sustainability work

Source: Worley (August 2023)

BHP – capital spend moving to future facing commodities (FFC)

Source: BHP (August 2023)

Coles – seeing rising theft (total loss)

Source: Coles (August 2023)

Scentre Group – +10% visitors into their shopping centres

Source: Scentre Group (August 2023)

2. Travel bug…

Sydney airport reported this week that international travel is now outpacing the domestic recovery. Data for July showed inter­national passenger numbers through Australia’s biggest gateway were at 89.1% of 2019 levels, while domestic passengers continued to be about 87%. And for the first time since borders reopened, Chinese visitors were the second largest group of travellers (behind Aussies) and are just 24% behind where they were in 2019.

There has been a lot of headlines on the cost of airfares. But we found some interesting US data showing their domestic airfares have actually declined 36% since 1995, after adjusting for inflation.

Source: Charlie Bilello (August 2023)

3. It’s not all in the timing…

At Firetrail we firmly believe it is your time in the market that matters, not timing the market. And the JP Morgan data below helps prove that point. If you tried to time your market entry, or exit, and you missed out on just the 10 best days, you would have lost over half your return. And interestingly, 7 of the 10 best days of market returns between 2003 and 2022 were during bear markets.

Source: JP Morgan (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.

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