Reporting season - An opportunity or a threat?
George Colman from ARCO Investment Management (formerly called Optimal Australia) probably summed up reporting season best by referring to it as "the moment of truth". Although the fund had negotiated it well so far, he expected the full season unlikely to be so easy.
Midway into reporting season 2018 and it would seem that Telstra has grabbed the most headlines in the media, and occupied the minds of investors more than most, although whether positively or negatively would depend on their position - long or short.
While many long term retail investors are understandably keen to hold onto their Telstra shares for the (shrinking) dividend, and others may buy it based on its yield, no one could complain the decision to reduce the dividend wasn't well flagged to the market. A payout ratio of 100% was unlikely to be maintained, and Telstra Chairman John Mullen did indicate in a recent interview that if nothing else the issue was one the board was looking at. For the many fund managers who were short the stock it will no doubt be a "told you so" situation, but it does indicate the dangers that investors face as companies delight or disappoint the market.
Particularly so long/short managers who are taking multiple bets, some long, some short, or just to not hold a position in a stock. Not only do they need to get their call correct, there's no guarantee the market will always react to good news positively, or alternately to bad news negatively. Add this to a normally concentrated portfolio, and full year reporting does indeed risk becoming a moment of truth, and not an easy one at that. For those on their game the moment can make them, for those that aren't it can take a while to catch up.
While on the subject of catching up, past mistakes and a lack of judgement regarding issues such as Storm Financial, CommInsure and AUSTRAC all culminated in the board of the CBA taking it one step further for embattled CEO Ian Narev this week, flagging his departure by next July. Any sooner would have smacked of panic and given insufficient time to find a replacement, but following legal action from AUSTRAC, pending investigations from ASIC, and almost unprecedented negative comments from the RBA's Governor Dr Philip Lowe, there was only going to be one outcome for the Kiwi born CEO.
Hedge Clippings assumed that radio host Alan Jones' suggestion today that Narev would be well qualified to take over the CEO's position of the equally inept Wallabies' management was a joke, but on reviewing the article and video it appears not.
Maybe he would indeed be perfect, but would anyone notice a difference?
