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.

Macroeconomics

<ul><li>Interbank Cash Rate Futures point to a 65% probability that the RBA will cut the Overnight Cash Rate (OCR) by 25 basis points to 1.5% on Tuesday.  Real rates have effectively lifted in the first half of CY2016, with the 25 basis point cut to the OCR in May only partially offsetting the 50 basis point decline in underlying inflation.</li><li>Consequently, Evidente believes that the central bank should deliver another rate cut this week of 25 basis points.  With the Governor’s ten year term about to end in September, surely Mr Stevens will not want to leave a legacy of have tolerated a 50 basis point undershoot on the RBA’s inflation target?</li><li>Since its launch a month ago, the key macro principle guiding Evidente’s model portfolio has been the prospect that interest rates will remain low for an extended period due to the shortfall in aggregate demand.  As a result, the portfolio retains a strong defensive bias, with an overall beta of less than 0.85.  Over the past month, the portfolio delivered alpha of 1.2%, reflecting stock selection within the small cyclical budget, including overweights in MND (+41%), BSL (+32%), MYR (+19%) and PMV (+14%). </li></ul>

Interbank Cash Rate Futures point to a 65% probability that the RBA will cut the Overnight Cash Rate (OCR) by 25 basis points to 1.5% on Tuesday.  Real rates have effectively lifted in the first half of CY2016, with the 25 basis point cut to the OCR in May only partially offsetting the 50 basis point decline in underlying inflation.Consequently, Evidente believes that the central bank should deliver another rate cut this week of 25 basis points.  With the Governor’s ten year term about to end in September, surely Mr Stevens will not want to leave a legacy of have tolerated a 50 basis point undershoot on the RBA’s inflation target?Since its launch a month ago, the key macro principle guiding Evidente’s model portfolio has been the prospect that interest rates will remain low for an extended period due to the shortfall in aggregate demand.  As a result, the portfolio retains a strong defensive bias, with an overall beta of less than 0.85.  Over the past month, the portfolio delivered alpha of 1.2%, reflecting stock selection within the small cyclical budget, including overweights in MND (+41%), BSL (+32%), MYR (+19%) and PMV (+14%). 

Retain Defensive Bias as the Reluctant Rate Cutter Likely to Deliver More Stimulus

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>The correct long-term thing to do is, and the right short-term trade don't match. Best to sell <a href="https://www.smartkarma.com/entities/mcj-co-ltd" target="_blank" data-smartkarma-citation="entities:14132:1" rel="noopener">MCJ (6670 JP)</a> above the tender offer price or at the offer price.</li>
<li>At 6.1x forward EV/EBITDA - and ~80% discount to NAV - <a href="https://www.smartkarma.com/entities/avichina-industry-technology-h" target="_blank" data-smartkarma-citation="entities:16315:1" rel="noopener">AviChina Industry &amp; Technology H (2357 HK)</a> is not expensive.</li>
<li>An interesting fact pattern appears like it might be a setup for a significant change in capital structure for <a href="https://www.smartkarma.com/entities/tokyo-steel-mfg-co-ltd" target="_blank" data-smartkarma-citation="entities:16195:1" rel="noopener">Tokyo Steel Mfg (5423 JP) T</a> related to the former CEO</li>
</ul>


The correct long-term thing to do is, and the right short-term trade don't match. Best to sell MCJ (6670 JP) above the tender offer price or at the offer price.
At 6.1x forward EV/EBITDA - and ~80% discount to NAV - AviChina Industry &amp; Technology H (2357 HK) is not expensive.
An interesting fact pattern appears like it might be a setup for a significant change in capital structure for Tokyo Steel Mfg (5423 JP) T related to the former CEO


Last Week In Event SPACE: MCJ, AviChina, Tokyo Steel Mfg, 3SBio

Thematic (Sector/Industry)

<ul><li>In the past week, two bottom up developments have dominated the financial market news flow in Australia: the belated announcement of CEO succession at Woolworths and renewed concerns that Australian banks represent a 'big short' thanks to rumours of the imminent collapse of residential house prices. </li><li>The losses announced by Woolworths in its home improvement division this week and decision to exit the business altogether serves as a timely and powerful signal to other companies about the dangers associated with investing for growth in the current environment of deficient demand.  Corporate Australia has already taken heed, with the economy on the precipice of a capex cliff.  The recently released ABS survey of capex intentions points to a 20% slide in business investment in the current financial year, which would represent the largest annual decline in over 25 years.</li><li>Any bubble talk around housing discounts the important role that dwelling investment and household consumption still has to play to support the outlook while the economy is on the precipice of a capex cliff.  Against the backdrop that interest rates will remain low for an extended period (and likely move lower from here), if there is a bubble in Australian housing it might well persist.  To take a cue from John Maynard Keynes, hedge funds seeking to capitalise on Australia's 'big short' will probably need an abundance of patience (and capital).</li></ul>

In the past week, two bottom up developments have dominated the financial market news flow in Australia: the belated announcement of CEO succession at Woolworths and renewed concerns that Australian banks represent a 'big short' thanks to rumours of the imminent collapse of residential house prices. The losses announced by Woolworths in its home improvement division this week and decision to exit the business altogether serves as a timely and powerful signal to other companies about the dangers associated with investing for growth in the current environment of deficient demand.  Corporate Australia has already taken heed, with the economy on the precipice of a capex cliff.  The recently released ABS survey of capex intentions points to a 20% slide in business investment in the current financial year, which would represent the largest annual decline in over 25 years.Any bubble talk around housing discounts the important role that dwelling investment and household consumption still has to play to support the outlook while the economy is on the precipice of a capex cliff.  Against the backdrop that interest rates will remain low for an extended period (and likely move lower from here), if there is a bubble in Australian housing it might well persist.  To take a cue from John Maynard Keynes, hedge funds seeking to capitalise on Australia's 'big short' will probably need an abundance of patience (and capital).

What the Capex Cliff Means for Australia's 'Big Short'

<ul><li>A number of developments in the past week were a stark reminder that&nbsp;Australia&rsquo;s exports to China&nbsp;are undergoing a revolution thanks to inexorable&nbsp;rise of China's middle class.&nbsp;&nbsp;At a time when BHP dropped to a decade low, the news-flow in Australia focussed on &nbsp;the growing shortage on supermarket shelves of Bellamy&rsquo;s baby formula, while overseas arrivals from China continue to surge.&nbsp;</li><li>Chinese demand for&nbsp;Australia's agri-food products, vitamins, wine, tourism, higher education and other non-commodity goods and&nbsp;services&nbsp;will continue to grow strongly and help diversify our export basket.&nbsp; In an environment where the aggregate supply of growth in Australia is low, the rise of China's middle class is a powerful and seductive investment theme that offers strong growth prospects to Australia's non-commodity exporters.</li><li>The key macro announcement in Australia in the past week was the stronger than expected employment print for the month of October.&nbsp; Expectations of a December rate cut have consequently diminished.&nbsp; Evidente has been of the view that given the spare capacity in the economy and labour market, the RBA should deliver more monetary stimulus.&nbsp; One strong monthly employment outcome is not sufficient to alter my view that labour market conditions are slack and that another rate cut is necessary.</li></ul>

A number of developments in the past week were a stark reminder that&nbsp;Australia&rsquo;s exports to China&nbsp;are undergoing a revolution thanks to inexorable&nbsp;rise of China's middle class.&nbsp;&nbsp;At a time when BHP dropped to a decade low, the news-flow in Australia focussed on &nbsp;the growing shortage on supermarket shelves of Bellamy&rsquo;s baby formula, while overseas arrivals from China continue to surge.&nbsp;Chinese demand for&nbsp;Australia's agri-food products, vitamins, wine, tourism, higher education and other non-commodity goods and&nbsp;services&nbsp;will continue to grow strongly and help diversify our export basket.&nbsp; In an environment where the aggregate supply of growth in Australia is low, the rise of China's middle class is a powerful and seductive investment theme that offers strong growth prospects to Australia's non-commodity exporters.The key macro announcement in Australia in the past week was the stronger than expected employment print for the month of October.&nbsp; Expectations of a December rate cut have consequently diminished.&nbsp; Evidente has been of the view that given the spare capacity in the economy and labour market, the RBA should deliver more monetary stimulus.&nbsp; One strong monthly employment outcome is not sufficient to alter my view that labour market conditions are slack and that another rate cut is necessary.

Weekly Impressions - Australia's Export Revolution to China's Rising Middle Class

<ul>
<li>Australia's ASIC releases the aggregated short position data four business days after the reporting day. Data in this insight is up to 23rd March, published ~9AM on the 27th March.</li>
<li>The largest industry net increase in the past week was into "Healthcare Distributors"; the largest industry net decrease was out of "Diversified Metals &amp; Mining". Net shorts declined A$2.3bn week-on-week.</li>
<li>Companies mentioned in this regular weekly report include: <a href="https://www.smartkarma.com/entities/pilbara-minerals-ltd" target="_blank" data-smartkarma-citation="entities:7460:1" rel="noopener">Pilbara Minerals (PLS AU)</a>, <a href="https://www.smartkarma.com/entities/sigma-healthcare-ltd" target="_blank" data-smartkarma-citation="entities:15966:1" rel="noopener">Sigma Healthcare (SIG AU)</a>, <a href="https://www.smartkarma.com/entities/yancoal-australia-ltd" target="_blank" data-smartkarma-citation="entities:4145:1" rel="noopener">Yancoal Australia (YAL AU)</a>, <a href="https://www.smartkarma.com/entities/lotus-resources-limited" target="_blank" data-smartkarma-citation="entities:13978:1" rel="noopener">Lotus Resources (LOT AU)</a>, and <a href="https://www.smartkarma.com/entities/treasury-wine-estates-ltd" target="_blank" data-smartkarma-citation="entities:710:1" rel="noopener">Treasury Wine Estates (TWE AU)</a>.</li>
</ul>


Australia's ASIC releases the aggregated short position data four business days after the reporting day. Data in this insight is up to 23rd March, published ~9AM on the 27th March.
The largest industry net increase in the past week was into "Healthcare Distributors"; the largest industry net decrease was out of "Diversified Metals &amp; Mining". Net shorts declined A$2.3bn week-on-week.
Companies mentioned in this regular weekly report include: Pilbara Minerals (PLS AU), Sigma Healthcare (SIG AU), Yancoal Australia (YAL AU), Lotus Resources (LOT AU), and Treasury Wine Estates (TWE AU).


Aussie Shorts (23rd Mar 2026): Pilbara Minerals, Sigma Healthcare, Yancoal, Treasury Wine Estates

Australia

Treasury Wine Estates Ltd was founded in 2010 and is headquartered in Southbank, Victoria, Australia. The Company's line of business includes vineyard operations and international marketing and distribution of wine.

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Treasury Wine Estates (TWE AU)

Retain Defensive Bias as the Reluctant Rate Cutter Likely to Deliver More Stimulus

Interbank Cash Rate Futures point to a 65% probability that the RBA will cut the Overnight Cash Rate (OCR) by 25 basis points to 1.5% on...

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It’s Sunday! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed during the...

David Blennerhassett

What the Capex Cliff Means for Australia's 'Big Short'

In the past week, two bottom up developments have dominated the financial market news flow in Australia: the belated announcement of CEO...

Sam Ferraro

Weekly Impressions - Australia's Export Revolution to China's Rising Middle Class

A number of developments in the past week were a stark reminder that Australia’s exports to China are undergoing a revolution thanks to...

Sam Ferraro

Aussie Shorts (23rd Mar 2026): Pilbara Minerals, Sigma Healthcare, Yancoal, Treasury Wine Estates

As at the 23rd March 2026, total shares short amounted to ~A$52.2bn down~A$2.3bn in the past week. The largest industry net increase in the past...

David Blennerhassett

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