The Online Travel Agent Space

One of the core tasks of an analytical role such as being an equity or business analyst, is really understanding what makes a business tick. Why does the business exist? Why do clients use their product or service? How do they monetise what they do? How sticky are their clients and how long will it last given the ever threat of competition and obsolescence? These are just some of the basic questions that always need to be asked when trying to understand a business and ultimately frame an investment decision.

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Rally Rally

Well, what a difference a few weeks can make in financial markets. It seems that based on the daily moves higher in all things commodities, the bears gave up en-masse on their shorts. Just overnight oil rose another 5.5 per cent and iron ore with 62 per cent content jumped up an incredible 19 percent. The biggest one-day gain since 2009 by some margin.

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Earnings Expectations

If you are a close observer of the share market and the subsequent release of material information such as half-year and full-year reports, you may be perplexed to see a stock price fall after the company increased or even delivered record earnings, or conversely, similarly confused as to why a stocks price would jump after the company announces earnings that decreased producing an ugly set of results? 

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Mean Reversion

A lot has been written about the woes of the resources sector recently with a similar amount of energy spent trying to work out when is the right time to expect ‘mean reversion’. A simple theory that although sounds complex, really just suggests that prices and returns eventually move back towards the mean or average as time periods are extended. Given the resource sector has been a material underperformer of late, the theory suggests you should reallocate a portion of your portfolio to such businesses in the expectation (or hope) that if such an event occurs, recent underperformance will lead to outperformance.

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A Growth Story

Altium Limited (ASX: ALU) is a business we own in our domestic portfolios at Montgomery. It’s highly likely that the business is unfamiliar to most investors given it’s by no means a big business and nor would it be considered by many to be a ‘blue-chip’, but that’s probably why we like it.

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Value Creation – Part 1

When it comes to investing, choosing the right businesses to back may seem like a daunting task. With literally thousands of opportunities presented to you daily and loads of exciting ‘stories’ that management teams are more than happy to tell you about in order to attract your capital, there’s a way you can further break down the opportunity set into more bite sized chunks.

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Breaking Records

Sirtex Limited (ASX: SRX) is a key holding in both domestic Montgomery funds and we have discussed its developments and our thoughts numerous times in the past on this blog. More recently we took a look at the 2015 full year results which in our view, have been the strongest so far this reporting season (by some margin).

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Pop!

Do we have a property bubble in Australia? It’s a topic that has numerous sides to the debate; from supply, demand, debt levels and affordability. However, perhaps the best view of the state of Australia’s property market has rather silently and with little fanfare come straight from the prudential regulator of the Australian financial services industry.

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Keep It Simple

For many investors, the sharemarket seems complicated, daunting and impossible to understand. One day the market is down on fears that interest rates might rise, that Greece will default and leave the Euro zone, or that China is slowing. The next day, it’s up because Greece never defaulted, because is China is slowing and they put in a range of circuit breakers to prevent their stock market from spiralling well and truly out of control.

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Sobering

You might recall we have previously articulated Aldi’s game plan in Australia. Our recent posts here and here, provide some insights. In summary the company is significantly more efficient. They have 1200 Stock Keeping Unit’s per store, instead of 30,000 at Woolies or Coles, which means they can employ six people to run a store instead of 25.

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Industrials vs. Resources

Long-term followers of Montgomery Investment Management would know all too well that we have had very little (we have had some) exposure to resources and energy companies since we began on our investing journey. Looking forward, we are just as unlikely to ever hold anything like benchmark weights to these sectors in our funds and for good reason.

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A Few Prosperous Industries To Keep An Eye On

One of the amazing things about business is that when one industry prospers, outsiders often find a way to tap into that success. A growing industry can attract new suppliers, distributors or back-office service providers, indeed a whole new world can develop that didn’t exist just yesterday and afford opportunities that allows a range of businesses to benefit, particularly those placed at the head of the pack with market leading positions.

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Don’t Yield To Income!

In recent times the market has been captivated by the ‘chase for yield.’  This phrase simply represents the symptom of the repressive money printing acting on interest rates globally. As a result of these low interest rates, funds are being ripped out of the safety of cash and poured into riskier assets in the pursuit of higher returns.

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