Founder Evidente. Top rated quantitative analyst, Evidente

Sam Ferraro

Founder Evidente. Top rated quantitative analyst

Evidente

Evidente is an independent financial education firm that delivers innovative financial advice to wholesale investors, including active long only funds, hedge funds, pension funds, and sovereign wealth funds, in Australia and globally.  Drawing on academic research in asset pricing, behavioural finance and portfolio construction, Evidente provides wholesale investors with commercial solutions to stock selection and asset allocation decisions across equities and other asset classes.

Equity Bottom-Up

Domino's Pizza Enterprises / Equity Bottom-Up

<ul><li>Four months ago, Evidente published a post suggesting that Australian growth stocks were over-priced <a href="https://www.smartkarma.com/insights/the-big-short-australian-growth-stocks" target="_blank" data-smartkarma-citation="insights:6166">The Big Short: Australian Growth Stocks</a> and followed up with an update of the analysis in December <a href="https://www.smartkarma.com/insights/re-visiting-the-big-short-australian-growth-stocks" target="_blank" data-smartkarma-citation="insights:6838">Re-Visiting the Big Short: Australian Growth Stocks</a>.  In this post, I update and expand the analysis.</li><li>The key conclusions are little changed.  Despite precipitous falls in the share prices of a number of high growth names in recent months, the valuation dispersion between growth and value stocks remains high by historical standards, and cannot be explained by trends in ROE and long term growth expectations.   Lower expected stock returns therefore remains the basis of Evidente's view that Australian growth stocks represent the big short.  The key new insight is that compositional change in the growth portfolio - the 'new growth migrants' - has driven multiple expansion, many of which are newly listed.</li><li>The basket of six short candidates Evidente identified in October to capitalise on the big short have yielded an average accumulated return of -15%, well below the ASX200 return of +8% over this period.  In particular, <a href="https://www.smartkarma.com/entities/757" target="_blank" data-smartkarma-citation="entities:757:1">Mayne Pharma Group Ltd (MYX AU)</a>, <a href="https://www.smartkarma.com/entities/323" target="_blank" data-smartkarma-citation="entities:323:1">TPG Telecom Ltd (TPM AU)</a> and <a href="https://www.smartkarma.com/entities/700" target="_blank" data-smartkarma-citation="entities:700:1">Domino's Pizza Enterprises Ltd. (DMP AU)</a> have each fallen by no less than 20%.  In this post, Evidente identifies a new basket of twelve short candidates.</li><li>Unless growth stocks experience a substantial upgrade to consensus long term EPSg and ROE estimates, 2017 promises to be another challenging year for Australia's community of growth oriented investors.  The analysis advises caution in particular for growth stocks that have been listed for a short time and thus whose business model and management only have a short track record to boast of.  Analysts and investors are therefore likely to have less conviction around their earnings forecasts for these newly listed firms.</li></ul>

Four months ago, Evidente published a post suggesting that Australian growth stocks were over-priced The Big Short: Australian Growth Stocks and followed up with an update of the analysis in December Re-Visiting the Big Short: Australian Growth Stocks.  In this post, I update and expand the analysis.The key conclusions are little changed.  Despite precipitous falls in the share prices of a number of high growth names in recent months, the valuation dispersion between growth and value stocks remains high by historical standards, and cannot be explained by trends in ROE and long term growth expectations.   Lower expected stock returns therefore remains the basis of Evidente's view that Australian growth stocks represent the big short.  The key new insight is that compositional change in the growth portfolio - the 'new growth migrants' - has driven multiple expansion, many of which are newly listed.The basket of six short candidates Evidente identified in October to capitalise on the big short have yielded an average accumulated return of -15%, well below the ASX200 return of +8% over this period.  In particular, Mayne Pharma Group Ltd (MYX AU), TPG Telecom Ltd (TPM AU) and Domino's Pizza Enterprises Ltd. (DMP AU) have each fallen by no less than 20%.  In this post, Evidente identifies a new basket of twelve short candidates.Unless growth stocks experience a substantial upgrade to consensus long term EPSg and ROE estimates, 2017 promises to be another challenging year for Australia's community of growth oriented investors.  The analysis advises caution in particular for growth stocks that have been listed for a short time and thus whose business model and management only have a short track record to boast of.  Analysts and investors are therefore likely to have less conviction around their earnings forecasts for these newly listed firms.

Australian Growth Stocks: The Big Short (Still)

Macroeconomics

<p>The Government's release&nbsp;of Re:think,&nbsp;its tax discussion paper, is a welcome development, designed to kick-start the conversation with the community on a range of reform options designed to&nbsp;achieve a simpler&nbsp;and&nbsp;streamlined&nbsp;tax system&nbsp;capable of meeting the growing needs of an ageing population.&nbsp;&nbsp;&nbsp;I discuss some of the areas raised in Re:think which are of greatest interest to equity investors: how important income and consumption taxes are to Australia's tax take in a global context,&nbsp;the prospect of the growing drag from bracket creep on household disposable incomes (discretionary retailers), the outlook for the GST (supermarket&nbsp;retailers),&nbsp;the efficacy and viability of the dividend imputation system (high yielders with predominantly domestically oriented operations), the sustainability of the concessional tax treatment of superannuation (asset managers), and the risk associated with companies that have low effective tax rates.</p>

The Government's release&nbsp;of Re:think,&nbsp;its tax discussion paper, is a welcome development, designed to kick-start the conversation with the community on a range of reform options designed to&nbsp;achieve a simpler&nbsp;and&nbsp;streamlined&nbsp;tax system&nbsp;capable of meeting the growing needs of an ageing population.&nbsp;&nbsp;&nbsp;I discuss some of the areas raised in Re:think which are of greatest interest to equity investors: how important income and consumption taxes are to Australia's tax take in a global context,&nbsp;the prospect of the growing drag from bracket creep on household disposable incomes (discretionary retailers), the outlook for the GST (supermarket&nbsp;retailers),&nbsp;the efficacy and viability of the dividend imputation system (high yielders with predominantly domestically oriented operations), the sustainability of the concessional tax treatment of superannuation (asset managers), and the risk associated with companies that have low effective tax rates.

Australia

Regis Healthcare Limited is a treatment program that offers Family Therapy, Clinical Psychology, Education and Occupational Therapy.

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Regis Healthcare (REG AU)

Australian Growth Stocks: The Big Short (Still)

Four months ago, Evidente published a post suggesting that Australian growth stocks were over-priced The Big Short: Australian Growth Stocks and...

Sam Ferraro

Taxing Times For Australia

The Government's release of Re:think, its tax discussion paper, is a welcome development, designed to kick-start the conversation with the...

Sam Ferraro

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