Dispersion, dislocation and opportunity

July 1, 2020
Dispersion, dislocation and opportunity

Dion Hershan speaks with The Australian Financial Review on dispersion, dislocation and opportunity.

While June 30 might mark the official end of the financial year, it doesn’t really end for professional investors until August 30, at the conclusion of the full-year reporting season.

It’s typically a vital few weeks for fund managers – a chance for investors to look back at the performance of companies in the financial year just gone, and to get a sense of how managers are seeing the one ahead.

But this year will be very different.

Most companies withdrew earnings guidance months ago and many will see their earnings in the June half smashed by the pandemic. But Dion Hershan, the managing director and head of Australian equities at Yarra Capital Management, points out the results of some firms – some of our biggest retailers, for example – will be inflated by panic buying or spending inflated by stimulated payments

“You’ve got to look through the positives and some of the negatives,” Hershan says.

Given results are unlikely to be representative, Hershan is looking forward rather than back – and a long way forward to the 2022 financial year, when hopefully the economy will have found its new normal.

He’ll also be using reporting season to search for signs of balance sheet weakness, given the economy pain that likely lies ahead. “You need the capacity to trade yourself through what will be a difficult period.”

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