[VIDEO ANALYSIS] Why has Brambles (BXB) fallen so much lately?

Will O'Loughlin: Question one. Terry from Western Australia asks, "Could you comment on Brambles BXB? Why it has fallen and what it would need to recover?"

Shanno Rivkin: Yeah, we may both have some comments. Look, the very simple answer is at the most recent interim profit announcement, they reported a profit that disappointed, both on a past year as well as forecast. Brambles is very much considered one of the safer blue chip investments out there, so for them to disappoint (they trade at typically high multiples as well), it really took the market by surprise. So appropriately it's been falling. I think that the big concern for the market is what they've said very much has a feel that there's a change in the industry that names like Amazon are now actually starting to change the way business is done. Brambles is a pallet producer, traditionally, most people do their shopping by going into stores. The way those products are usually provided to those stores is through pallets. If that is now changing to a lot more deliveries to homes, then obviously less pallets are going to be used. They did make some commentaries, they are seeing that and in my view is that's a trend that is just going to change more and more and more, and the percentage of shopping that's going to be done online in 10 years is going to be significantly higher than where we are now. That is a real concern as to the direction of the company. Whether cheap and it's been overdone, that's a different story. Right now I think the sentiment is very negative because of what they've said, so just tread carefully with this one.

Will O'Loughlin: I think it highlights one of those things where I've said before where when you do get these downgrades, you often get more of them.

Shanno Rivkin: Well there are two, actually. There were two bad sell offs.

Will O'Loughlin: Right. That may not even be the end of it.

Shanno Rivkin: Yeah, I think you're right.

Will O'Loughlin: You've just got to be careful with those ones.

Shanno Rivkin: Then we usually say that with beaten down names. We're more comfortable buying them higher once they've come out with some commentary. An example is TPG, which we've been talking about. They've had some real issues. There's been some negatives about the NBN. They came out with their profit update, finally showed some real positives there, and the market bounced 5%. I'd much prefer to buy 5% higher with that update behind us than 5% lower without it.
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