Market Commentary - February

Glenmore Asset Management

March 2025

Funds operated by this manager:

Glenmore Australian Equities Fund

Chris Gosselin, CEO of Australian Fund Monitors, speaks to Nicholas Chaplin, Director and Portfolio Manager at Seed Funds Management. 

The Seed Funds Management Hybrid Income Fund has a track record of 9 years and 5 months and has outperformed the Solactive Australian Hybrid Securities (Net) benchmark since inception in October 2015, providing investors with an annualised return of 6.46% compared with the benchmark's return of 4.83% over the same period.

Funds operated by this manager: Seed Funds Management Hybrid Income Fund

The future of healthcare: Trump, policy and innovation

Magellan Asset Management

March 2025

Is the healthcare sector ready for transformation amidst uncertainty? Investment Analyst Wilson Nghe explores the current state of the healthcare sector, highlighting the impact of Trump's policy initiatives and the surrounding political noise. Wilson explains that increased uncertainty in the sector adds to higher volatility and regulatory risk, which is crucial in assessing the healthcare sector's outlook and risks. Despite these challenges, there are significant opportunities in healthcare innovation, with companies like Stryker at the forefront of medical technology advancements, and with the rise of GLP-1 therapy development.

Funds operated by this manager:

Magellan Global Fund (Hedged), Magellan Core Infrastructure Fund, Magellan Global Fund (Open Class Units) ASX:MGOC, Magellan High Conviction Fund, Magellan Infrastructure Fund, Magellan Infrastructure Fund (Unhedged)

Important Information: 

Important Information: This material has been delivered to you by Magellan Asset Management Limited ABN 31 120 593 946 AFS Licence No. 304 301 ('Magellan') and has been prepared for general information purposes only and must not be construed as investment advice or as an investment recommendation.  This material does not take into account your investment objectives, financial situation or particular needs. This material does not constitute an offer or inducement to engage in an investment activity nor does it form part of any offer documentation, offer or invitation to purchase, sell or subscribe for interests in any type of investment product or service. You should obtain and consider the relevant Product Disclosure Statement ('PDS') and Target Market Determination ('TMD') and consider obtaining professional investment advice tailored to your specific circumstances before making a decision about whether to acquire, or continue to hold, the relevant financial product. A copy of the relevant PDS and TMD relating to a Magellan financial product may be obtained by calling +61 2 9235 4888 or by visiting www.magellangroup.com.au.

Past performance is not necessarily indicative of future results and no person guarantees the future performance of any financial product or service, the amount or timing of any return from it, that asset allocations will be met, that it will be able to implement its investment strategy or that its investment objectives will be achieved. This material may contain 'forward-looking statements'. Actual events or results or the actual performance of a Magellan financial product or service may differ materially from those reflected or contemplated in such forward-looking statements.

This material may include data, research and other information from third party sources. Magellan makes no guarantee that such information is accurate, complete or timely and does not provide any warranties regarding results obtained from its use. This information is subject to change at any time and no person has any responsibility to update any of the information provided in this material.  Statements contained in this material that are not historical facts are based on current expectations, estimates, projections, opinions and beliefs of Magellan. Such statements involve known and unknown risks, uncertainties and other factors, and undue reliance should not be placed thereon. No representation or warranty is made with respect to the accuracy or completeness of any of the information contained in this material. Magellan will not be responsible or liable for any losses arising from your use or reliance upon any part of the information contained in this material.

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Hedge Clippings | 21 March 2025

All of a sudden, next Tuesday's Federal Budget is upon us. No doubt Jim Chalmers was hoping the Federal election would be sufficiently early so he would not have to go through the motions, but the weather patterns in Queensland put paid to that. So unless Albo, who has previously confirmed next Tuesday evening as budget night, changes his mind over the next 3 or 4 days and pays a visit to the Governor General, that's when it will be.

While it might be a bit of a phoney budget, the logic of holding it pre-election is quite simple, even if Chalmers has to 'fess up to a deficit closing in on $30 bn. December's Mid-Year Economic and Fiscal Outlook (MYEFO) predicted deficits of $26.9 bn for this financial year, and $143.9 billion from now until 2027-28. Most punters will ignore that, firstly as the figure's too large for them to comprehend, and secondly, it doesn't immediately and directly hit them where it hurts, in the hip pocket.

What Jim's budget speech allows is the announcement of a whole range of cost-of-living relief measures, and we've seen and heard a few of them already: Energy bill relief, support for renters, an expansion of bulk-billed GP visits, and cheaper medicines under the PBS, etc., etc.

In other words, directly aimed at the family or household budget.

This will be the start (as if it hasn't been going on for a while already) of the election campaign build-up, even before the traditional pork barrelling in specific electorates takes place. You can only expect handouts, however - tax reform, which is desperately required is unlikely to get a mention.

Should Albo spring a surprise and pre-empt the Budget, the government will be limited to releasing a Pre-Election Economic and Fiscal Outlook (PEFO), independently prepared by the Treasury and Department of Finance. Apart from being independent, it will have none of the theatre and spin potential of Chalmers bringing a whole host of hand-out goodies out of his bag on the night.

It's a tight election schedule however, with the deadline of 17th May, and with school holidays, Easter and Anzac Day all falling in between.

If all of this seems pretty tedious for a Friday afternoon, it does have one benefit, namely (hopefully) taking Trump off the front page for a second. Sadly, that's unlikely to last for long - if at all.

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How to Find the Best Stocks After a Market Correction

Marcus Today

February 2025

Why Timing the Bottom is About Sentiment, Not Fundamentals

If you ever say, "I can't buy it, it's gone up 10% in a week," you will struggle as an investor. If you think, "It's up 100%, I've missed it," you doom yourself to conservatism. Chickens don't make money.

You will never find a ten-bagger if you're selling at a 10% gain. Thirty-five stocks in the All Ordinaries have more than doubled in the last year, and 90 are up more than 50%. Do not sell because something has gone up--sell because it's going down.

In a recovery, the stocks that rise the fastest are often the ones that fell the hardest. If the market has already started bouncing, you must buy stocks that have already gone up. Sometimes, you have to buy stocks that have gone up a lot.

The Key Signs of a Market Bottom

No one knows exactly when corrections will come. Those who seemed to predict them were only right in hindsight. They made noise at the right time, and then, after the fact, claimed victory.

You can't predict a market bottom before it happens--but you can recognise it when it arrives. The key signs to watch for:

• Extreme negative sentiment--when the herd has given up.
• A sudden change in market commentary--the shift from panic to cautious optimism.
• A big up day or week after heavy selling--a key signal that the bottom may be in.
• Volatility dropping and buying volume increasing--showing that money is flowing back into stocks.

The best way to time a top or bottom is to read Marcus Today. Not kidding!

Using Market Sentiment to Buy at the Right Time

You Can't Predict the Bottom - But You Can React to It

Do not think you can be clever enough to predict the bottom before it happens. You can't predict the big sell-offs, just like you can't predict the exact turning point. But you can watch the signs and act decisively.

The stock market has an average gain rate of 9% per year. If the market has run well beyond that pace, it becomes vulnerable. But don't act based on warning signs alone--wait until the correction begins, then react.

Yes, be more alert when things get ridiculous, but still--wait for the move. When warning signs turn into a major sell-off, be ready to be decisive.

Indicators That Show a Recovery is Starting

The moment to buy is not when things look cheap - it's when sentiment turns. Fundamentals won't tell you when to buy.

Instead, watch for:

• Large up days on high volume--big money stepping back in.
• Insider buying and institutional fund flows increasing--smart money making its move.
• Riskier assets leading the bounce--growth stocks and speculative names rebounding first.

At extreme moments, the market lifts all boats on the way up, just as it sinks them on the way down. If you're trying to time the market, watch the herd--don't follow it.

Stock Selection After a Correction

What Stocks Rebound the Fastest?

Catching the bottom of a correction is all about sentiment.

When everyone has lost faith in the market and is doing 200 miles an hour with their hair on fire, they generally also lose sight of fundamentals.

That's an opportunity. But you don't buy on the numbers--you buy on sentiment changing for the better.

You need to spot that, and the way to do it is the same way you spot the top: On the balance of probabilities.

If the market has fallen a lot, has a big up day or week, and the tone of the commentary is changing for the better, on the balance of probabilities, that is a bottom.

Watch the herd, don't join the herd.

Avoid These Stocks After a Market Crash

Fundamentals are useless when it comes to timing the market. It's why value investors can never time the market--a PE ratio will never tell you when to sell or buy.

Sentiment watching (price watching) gives you a much better chance.

At extreme moments, the market drives all--sinks all boats, lifts all boats. Focus all your attention on identifying the "Pivot Point" in the market.

In corrections, the woods are on the move--forget the trees until the forest is going up again.

It's no good saying "NAB is cheap" when the GFC is starting.

When the market is crashing, everything will look cheap halfway through the sell-down--but you don't buy falling stocks because they're cheap.

That's for Buffett quoters.

You can't time the market on fundamentals.

Lessons from Past Market Crashes

What History Teaches About Buying the Dip

Stock selection comes second to the market.

In a recovery, stock selection is where you will make the most money--but not until you get the market right first.

If you get that right, you'll make money in everything.

Market first, stocks second.

Case Study: How Stocks Recovered from the GFC and COVID Crash

The recovery will come fastest and hardest in the stocks that have suffered the most extreme sentiment swings.

In a recovery, it is not the stocks with the best fundamentals that recover the best (far from it).

It is the stocks that involve the most sentiment in the price--often the stocks with no fundamentals but the most growth prospects.

The stocks that people made the most money in before the top, and lost the most money in during the correction.

They rebound the earliest, and they rebound the most.

The money is in identifying and timing the extremes of sentiment.

Spend the time in cash listing the "fad" stocks you're going to buy in the recovery.

It's not NAB.

Final Thought: Corrections Are Your Greatest Opportunity

At the end of the day, market corrections are not a threat--they are an investor's best friend. Instead of fearing them, welcome them. They provide the chance to sell at the top and buy at the bottom.

If you buy into the industry narrative that "timing the market is impossible," you'll miss some of the best opportunities of your investing life.

Corrections create wealth for those who know how to take advantage of them. The only question is--will you?

Author: Marcus Padley

Funds operated by this manager:

Marcus Today Equity Income SMA, Marcus Today Growth SMA