March Quarter Review
The March quarter brought the return of Geopolitical risk consequently enhancing inflation concerns for investors. The Russian invasion of the Ukraine prompted an ASX200 selloff of 11.3% from peak to trough, before closing higher by 55 points or less than 0.01% for the quarter. Globally, the US tech stock index, the NASDAQ, heralded the beginning of a bear market with indiscriminate selling leaving more than half the companies in the index down by over 50%. Possibly creating opportunity for those investors willing to assess these companies’ future earnings capabilities.
State of Australia
The Australian economy has continued to strengthen over the March quarter. Key economic metrics of unemployment falling to 4.0%, and annual wages growth increasing to 2.3% in conjunction with spiking inflation of 3.5%. These metrics have combined to accelerate the Reserve Banks of Australia’s (RBA) timetable for increasing interest rates from 2023 to mid this year. Speculation now turns to how high and when interest rates are likely to peak. Both questions will gain clarity once the RBA begins its tightening cycle i.e. increasing interest rates.
Portfolio Positioning
The Quarter has been challenging with individual portfolio returns diverging based on exposure to what the market has deemed technology stocks. Most notably holdings in DUB and WZR. Both companies’ recent shareholder reports contain strong evidence of robust businesses continuing their growth paths. We are reminded of legendry investor Benjamin Graham famous words “in the short term the market is a voting machine, but in the long run, it is a weighing machine.” Ultimately these two businesses have been caught up in short term ‘voting’ on technology stocks with no regard to the underlying quality of their business which we believe will be recognised sooner rather than later.
We will continue our focus on honing portfolios considering changing investment conditions. Selecting businesses with robust long term business prospects and more certain earnings. Despite short term valuations, structural markets trends of six months ago remain in place even accelerating such as shifting to the cloud, disruption of incumbent businesses and ecommerce. These trends will continue to present investment opportunities in the foreseeable future.
Limberg Asset Management
We would like to take the opportunity to thank you for your enduring trust and continued support over what has been an extraordinary period in markets. Should you have any question with respect to your portfolio please do not hesitate to contact us.