How this fundie is stress-testing stocks

April 6, 2020
How this fundie is stress-testing stocks

Dion Hershan’s focus is on stress-testing the medium-term profits of companies. But first they need the liquidity to get there.

Just six weeks ago, Dion Hershan was, like most fund managers, in the middle of the February earnings season – perusing profit numbers, crawling over cash flow statements and trying to read between the lines of guidance.

But in the middle of the pandemic, the managing director and head of Australian equities at Yarra Capital Management finds himself looking for very different things.

“What we observe from a profit perspective in the next 12 months is meaningless,” he says. “What we are trying to work out is the medium-term earnings power.”

With a very important caveat.

“The thing that we’re squarely focused on is if the company can get to the medium term. It’s not that relevant if they can’t.”

Read more…. (subscription to The Australian Financial Review required)