Launching The Local Value Strategy

Launching The Local Value Strategy

Rivkin Local’s new Value Portfolio has had an interesting couple of days as many of the companies held in the portfolio reported their annual results.

To say the results were a mixed bag would be to understand the truth. Earnings season provides investors with an update of the company’s progress but predicting how a stock will react to a given earnings announcement is more witchcraft than science and relies heavily on judging investor expectations going into the announcement.

In this article, we will look at some of the companies in the Value portfolio and how their stock prices reacted to their earnings announcements.

Wisetech Global (WTC), is a company that sells logistics software, primarily its flagship CargoWise One product, to global logistics companies.

The stock has been performing well over the last couple of years which the share price climbing almost four-fold since its listing in 2016. Following its most recent earnings announcement, however, the stock price dropped by almost 25% in one day despite reporting revenue growth of 31% and profit growth of 8%.

The prior day, however, Altium Ltd (ALU) reported its financial results and saw its stock price climb by approximately 25% in one day, effectively offsetting the loss from WTC. ALU’s growth was substantially higher than WTC’s with 30% revenue and 51% profit growth. Based on the share price response, this was clearly a positive surprise for investors.

Having these two companies produce such large share price moves that almost exactly offset each other came as quite a surprise to us but amazingly, almost the same thing happened the following day.

Webjet (WEB) is an online travel agent whose share price had been gradually dropping since mid-2017. WEB is trying to capture the growing segment of the travel market that books their trips online without the use of a full-service travel agent.

 WEB’s half year results for FY18 have shown revenue growth of 52% and EBITDA growth of an astounding 63%. As a result, the WEB share price jumped 16%.

Partly offsetting this, however, Blackmores (BKL) announced results that disappointed the market, causing the share price to drop 15%. Although BKL still expects decent growth in the second half of this financial year, the market was concerned about a softer Australian market and increased competition in China. 

Although individual stocks within the Rivkin Value portfolio have exhibited high volatility, the diversification benefits of a ten stock portfolio are clearly evident.

The Value portfolio is up 2% since its inception earlier this month and the daily portfolio value has actually been quite stable despite the volatility of the underlying stocks. The average annual back-tested return of this strategy is 15.5%*. Interested readers can contact us on 1300 748 546 or click here to learn more.

*Past performance is no guide to future performance. 

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