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Funds management and in particular the vertical integration of advice, administration and management has generated much debate this week, with the government's plans to wind back some of the investor protections in Labor's Future of Financial Advice (FOFA) being strangled in the senate. In this week's piece we are not going to debate the merits of requiring financial advisers to act in their clients' best interests nor conflicted payments and fee disclosures. This week we are going to have a closer look at the funds management landscape in Australia, and in particular the dominance by the largest players of this A$1.9 trillion industry.

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Over the last eight days we have been digesting multi-billion dollar profit results for the major trading banks and listening to bank CEOs and CFOs commenting on their profit results. In aggregate the four major banks generated $28.6 billion in cash profits over the 2014 financial year, which represented an increase of 5% on the previous year. In this piece we are going to look at the common themes arising out of the results, differentiate between the banks and hand out our reporting season awards to the stocks that comprise a large weighting in most investors' Australian equity portfolios. The large overall size of bank profits reflects that their core business of transforming savings into lending as loans to borrowers remains a very profitable task. Indeed over the past decade (inclusive of the GFC) the big four banks have generated approximately $200 billion in profits after tax.

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When the Hawke government came into power in 1983 one of their first decisions was to float the Australian dollar, assuming that this action would cause the AUD to fall and improve our international competitiveness. Before 1983, the value of the AUD was set each day by the Reserve Bank of Australia (RBA) and the Federal Government. Since then large movements in the Australian dollar are often presented in the press as a vote of confidence in Australia as a nation. A falling Australian dollar is often viewed as a negative event, raising the cost of online purchases, imported flat screen TVs and skiing holidays in Colorado.

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Every few months the financial press publish articles lauding the best performing equity fund managers over the previous 12 month period; generally accompanied by a picture of the manager looking responsible in an expensive suit and a post-match account of which stocks they held that caused them to outperform their peers and win on the day. Underlying these articles is the assumption that all equity funds are managed using the same principles and that a manager's outperformance is solely due to their skill. In reality the underlying investment philosophy or style is normally a major factor in determining performance. Last week's piece looked at the four basic investment styles (index, growth, value and quality) and in this second piece we are going to look at the market conditions under which each style tends to outperform.

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Investors looking for a professionally managed Australian equity portfolio face a vast array of options. At last count Morningstar tracks 120 different institutional fund managers delivering Australian Equity portfolios and this number expands further when you include model portfolios and stock lists offered by stock-brokers, asset consultants and investment newsletters. The individual stocks in this enormous range of portfolios are selected and then blended into Australian equity portfolios based on a range of investment philosophies or investment styles. In this piece we are going to look at the different investment styles used to manage equity portfolios and the foundations upon which these styles are built.

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During the months of February and August the majority of Australian listed companies reveal their profit results and generally provide guidance as to how they expect their businesses to perform in the upcoming year. Whilst we regularly meet with companies between reporting periods to gauge how their businesses are performing, during semi-annual reporting season companies fully open up their car bonnets to let investors have a detailed look at the company's financials. Until this happens, investors don't know for certain whether they are going to find burning oil and hissing snakes or see that the company's growth engine is running to expectations.

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Normally when a company announces a significant acquisition or major new investment it is trumpeted as a company-changing event that will dramatically boost earnings or change market perceptions of a company, both of which should be beneficial for shareholders. Whilst the valuation or market capitalisation of a company listed on the ASX can vary dramatically with market sentiment, in reality a company's business normally changes quite slowly and often the company-changing investment can actually be negative. In this piece we are going to look at recent company changing events that were both positive and negative for shareholders, along with a potentially company-changing event for a company we own in the Core Equity Portfolio; Origin Energy's APLNG project.

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Over the last fortnight investors have been digesting multi-billion dollar profit results for the major trading banks, wading through voluminous investor discussion packs whilst listening to bank CEOs and CFOs report their profit results. Indeed Westpac offered investors over 200 detailed charts in their 137 page investor presentation!

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During the months of February and August the majority of Australian listed companies reveal their profit results and most provide guidance as to how they expect their businesses to perform in the upcoming year. As the financial noise reaches a crescendo during these months, in this note we are going to run through the key themes we have seen so far after 65% of companies have reported their results.

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During the months of February and August the majority of Australian listed companies reveal their profit results. Many companies also provide guidance as to how they expect to perform in the upcoming year. This can be a stressful time for a fund manager. When companies reveal unpleasant surprises the company’s stock price tends to get sold down hard. Alternatively, it can be very pleasant when the company benefits from factors that were behind the investment case for originally owning their shares. In this piece we are going to go through how Philo Research approaches each day during reporting season and relate our actions yesterday when portfolio companies Telstra, GPT, Transurban and Rio Tinto reported their results.

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A falling Australian dollar is often presented in the media as a negative event, raising the cost of purchases on Amazon, holidays in Europe and indeed sometimes as a declining vote of confidence in Australia by the rest of the world. Over 2013 the Australian dollar has fallen against all major currencies (except for the Yen and the Rupiah), most notably by 14% against the USD. Whilst this move is negative for consumers wanting to buy hand-made French road bikes, the fall benefits our investors, as both our asset allocation (un-hedged International equities) and Australian equity portfolio construction decisions have been geared towards a falling AUD.

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This week marked the end of the reporting season for Australia’s banks with the four major banks delivering a combined $27.3B in profit for the 2013 financial year. In this piece we are going to look at the common themes coming out of the results and hand out our reporting season awards.

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Over the period 2004 to 2007 when China began to seriously compete with Japan and South Korea for Australia’s minerals, a successful investment strategy was either to own companies with vague plans to mine undeveloped deposits or indeed high cost miners that were previously pretty marginal. Furthermore the commodity itself did not seem to matter, as China was seen to want everything Australia could dig out of the ground.  This time has clearly passed and in this piece we are going to look at what minerals are in demand to feed the Dragon and how the Core Equity Portfolio is positioned.

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When you look at the collection of stocks in any portfolio; it is statistically improbable that all the stocks in any portfolio at one point in time will be outperforming the benchmark. In the Core Equity Portfolio we focus on buying quality companies stocks that we believe are undervalued by the market. Consequently we accept that some stocks we own may underperform for a time, before a catalyst occurs that causes the stock to re-rate upwards. Whilst investors should primarily focus on their overall portfolio return (+15.1% in 2013!), in this piece we are going to run through the securities that are performing well in 2013 and those that are lagging.

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Every day investors face a range of news and noise, with market commentators and stockbrokers telling you to buy this stock and sell that. Normally this is a mass of well-crafted advice; all designed to encourage the investor to turn over their portfolio. Increased trading is profitable for stockbrokers, but normally less so investors. In order to focus our research efforts, we have developed a few tools in Philo Capital Research Department designed to help us block out the incessant chatter of the market and focus on ideas that can make our investors money. In this note, we are looking to give our investors some insight into the work that is done on their portfolios every morning.

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As our largest sector tilt in the portfolio and the biggest sector in the ASX after the banks, we spend a large amount of time looking at the resources sector and testing our assumptions. Indeed over the last year, research has travelled to both the hot and dusty mines of the Pilbara and to the gritty Dickensian steel mills of North and Western China. In the press there has been much written about the end of the mining boom, and whilst we see that the boom days are over where marginal mines were making supernormal profits, we don't see that the wholesale dumping of mining stocks is the right move for investors.

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Over the last five years one of most unpleasant feelings for an analyst or fund manager is when a portfolio company posts a notice on the ASX of a "Trading Update". Since 2008 this has almost always been a downgrade of a company's expected profits which then results in a sharp price fall, gnashing of teeth and tears from the analyst responsible for the stock. In recent memory the only profit upgrade we have seen was CSL's lift in November last year, so when I see "Trading Update", I expect the worst.

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In recent times News Corporation (NWS) has generated a great deal of media intrigue itself. The News of the World scandal, Murdoch's level of control, and more recently the proposal to split the company have ironically been major media stories. In this piece we will run through what the spin out of News Corp will mean for investors.

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On a weekly basis Listed Securities fields offers from the stockbroking community for exciting new Initial Public Offerings (IPOs), and large placements from companies seeking to buy other assets or retire debt. As you can probably imagine these offers are couched in the most positive terms and are dressed up to lure investors to part with their capital. The investment banks don't offer us these opportunities from the kindness of their hearts, new security issues are an extremely lucrative fee earner; with the banks earning from 1-5% of the total amount raised! Over the last 18 months in our investible universe (excluding small capitalisation companies), A$30.3B has been raised in the 48 different issues that have been presented to us. Of these 48 issues our Approved Investment Committee has approved only seven. In this piece we are going to run through our hits, misses and fish rejected.

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Over the last 5 years we have seen the AUD/USD break significantly away from its post free float (1983) average of 0.75. This move has put significant pressure on a range of businesses from manufacturing, exporters, tourism to retailers. In May 2013 we have seen a steady erosion of the AUD/USD from 1.04 to 0.96. This move has benefited our investors as both our asset allocation (un-hedged International equities) and Australian equity portfolio construction decisions have been geared towards a falling AUD. This piece goes through the winners and losers from a declining AUD along with how we have positioned the Core Equity Portfolio.

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Reporting season for the Australian banks (excluding CBA who have a June year end) has just finished and the following themes stood out to us:

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