advertising

Don’t lose your head (and your money) this reporting season

Hope for the best but prepare for the worst. In fact, investors would be better off expecting the worst as well.

That’s the word from the team of strategists at Credit Suisse, led by Atul Lele, who it must be said, tends towards the “glass-half-empty” school of thought.

But as the market fever rises, cooler heads are welcome. Lele, in a note to clients, says he and his team are most worried about overly optimistic earnings growth forecasts for 2013-14. This financial year already looks to be a write-off: the consensus forecast from analysts is for zero growth in 2012-13, down from the 13 per cent “the street” initially forecast.

As we’ve said many times before, analysts tend to overestimate earnings during downturns and then underestimate earnings when things rebound, and vice versa. In other words, they tend to miss turning points (like almost everybody else).

Credit Suisse’s view is that shareholders should take a cautious view coming into this interim reporting season, particularly in regards to companies in the retail, media and building materials sectors, which have received a real shot in the arm from increasingly bullish investors. Lele thinks those sectors will get sold down in coming months as the reality of weak domestic economic conditions bites.

In that vein, the Reserve Bank is likely to continue to ease interest rates this year, reckons Lele.

He recommends investors have a higher relative weighting in their portfolios to “bond proxies”, such as A-REITs, infrastructure stocks and utilities. These stocks will continue to have stable dividends with “the potential for a valuation uplift should long bond rates decline”.

Follow Smart Investor on Twitter: @smartinestr
Find us on Facebook: facebook.com/afrsmartinvestor

Comments

Market Summary

Price % Chg
BRG BREVILLE $ 7.100 - 18.58%
IRE IRESS $ 9.800 + 11.11%
TTS TATTS GRP $ 3.410 - 5.80%
SUL SUPARETAIL $ 9.180 + 5.28%
MML MEDUSA $ 1.235 - 5.00%
BCI BCIRON $ 3.000 - 4.76%
SXL STHNXMEDIA $ 1.130 - 4.64%
AWC ALUMINA $ 1.530 + 4.44%
PMV PREM INV. $ 9.580 - 4.20%
AMP AMP $ 5.750 + 4.17%

Commodities

Price Change % Chg
BRENT SPOT (USD/BBL) 100.170 0.000 0.00%
LIGHT CRUDE OCT4 (USD/BBL) 93.930 - 0.030 - 0.03%
NAT GAS SEP14 (USD/MMBTU) 3.879 - 0.010 - 0.26%
Bid Ask Bid Chg Bid % Chg
GOLD (USD/OZ) 1277.11 1277.88 + 0.12 + 0.01%
SILVER (USD/OZ) 19.41 19.51 + 0.00 + 0.00%
PLATINUM (USD/OZ) 1415.00 1425.00 + 2.60 + 0.18%
PALLADIUM (USD/OZ) 878.25 884.25 + 4.05 + 0.46%

Markets Data »

Currencies

AUD USD EUR JPY GBP
AUD AUD 0.9304 0.7006 96.57 0.5612
USD 1.0743 USD 0.753 103.81 0.6031
EUR 1.4266 1.3277 EUR 137.88 0.8009
JPY 0.0103 0.0096 0.0073 JPY 0.0058
GBP 1.7815 1.6579 1.2484 172.14 GBP

Markets Data »

Stock price lookup

My Watchlists

You need to be logged in to see your watchlists.

My Portfolios

You need to be logged in to see your portfolios.