Morningstar Individual Investor Conference highlights
The team at Sharesight had the privilege of attending the Morningstar Individual Investor Conference in Sydney this week.
The event offered investors an opportunity to gain expert insights and practical knowledge to help rise above the uncertainty in today's short-term world, and I've captured the key highlights and learnings from the event for the Sharesight audience.
The rise of ETF investing - opening remarks
The welcome and introduction was led by Jamie Wickham, MD of Morningstar Australia. He set the context and backdrop of the key themes influencing global markets. In particular, the key themes identified were:
- Donald Trump's domestic policies in the USA (tax changes)
- The US-China trade-war
- The influence of bond yields on the price of every other asset class
- Market expectations of 4 more interest rate increases from the US Federal Reserve in 2019
- The opportunity and risk presented by ETFs when the market does start to correct -- as 45% of on-exchange investments in the USA are now passive in nature
Global investing in turbulent geo-political times -- keynote address
The keynote address topic was on global investing in turbulent geo-political times. It took the form of a panel discussion with fund managers across a range of asset classes, including equities and fixed income across the globe. The panel discussion featured Vihari Ross, Global Portfolio Manager at Magellan, Peter Bull, Head of Equities at Morningstar and Jay Sivapalan, Co-Head of Australian Fixed Interest from Janus Henderson. It was moderated by Emma Wall, Senior Editor from Morningstar.
The key takeaway for investors from the discussion was: stick to boring high-quality investments at a good price.
The outlook for Australian shares
Peter Warnes, the Head of Equity Research at Morningstar Australia gave his perspective on the outlook for Australian shares.
He identified the three trends driving share prices:
- Supply and demand for equities
- Share buybacks and corporate debt (particularly in US markets)
- Passive ETFs increasing the risk of highly correlated investments
Coming to the Australian economy, he highlighted the importance of consumption in contribution to GDP growth in Australia. 60% of GDP growth in Australia is driven by consumption. Consumption is under threat from the lack of savings in households and limits on the ability to fuel consumption through debt.
The key takeaway from this for investors is that a world of increased debt and decreased savings is likely to drive lower returns for all, so we need to lower our expectations for risk adjusted return on equity.
The art and science of valuing stocks
Adam Fleck, Director of Equity Research at Morningstar, took us through a masterclass on "The art and science of valuing stocks".
It was a comprehensive talk covering fundamental concepts and how he evaluates companies. The overarching philosophy of Morningstar is "We believe that a company's intrinsic worth results from the future cash flows it can generate".
He walked us through an example of the A2 milk company, which frequently figures in our #Sharesight20ASX and #Sharesight20NZX lists as the most traded company among our client base. He took us through an analysis framework that looks at a company's revenue, EBIT margin trend, discounted cash flow and key driver assumptions to derive a company's fair value.
Managed funds, ETFs and LICs: What it takes to win Morningstar gold
Matt Wilkinson covered one of my favourite topics of the day: "Managed funds, ETFs and LICs: What it takes to win Morningstar gold". At Sharesight we track all 3 of these instruments that help diversify a portfolio.
The key takeaways on how to trade ETFs, ETMFs and LICs:
- Check market depth and the spread
- Use limit orders wherever possible
- Global products are most prone to wide spreads
- Be most cautious of the mornings and volatile markets
20 lessons from 20 years of investing
Anton Tagliaferro and Daniel Moore from Investors Mutual Ltd gave a humorous and educational talk on 20 lessons from 20 years of investing.
Something new I learnt from the presentation was to "play close attention to de-mergers" as they result in better yields more often than not. They presented data on how demergers (such as the Wesfarmers/Coles demerger) perform better than IPOs.
Andrew Clifford, CEO of Platinum gave an keynote address on Global equities. Under the current backdrop of geopolitical tensions, his 3 major investor concerns are:
- Chinese reforms, financial tightening and potential economic slowdown
- Rising US interest rates
- President Trump's trade war
He presented a framework on how to analyse and find opportunities based on market sentiment and facts.
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