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Having spent many years working at large organisations, we learned that it’s not the institution that our clients trust, but the people who work there every day. It’s about the careful consideration of each individual client’s unique needs and consistent application of the advisor’s expertise to the changing economic conditions.
As the CFO of one of the world’s leading specialist natural resources investors, and after having employed Luke in a previous role, I’ve been thrilled with the efficiency, capability and service-offering Seneca have been able to offer my SMSF. Relative to the conflicted banks and standard ‘stockbrokers’ they provide me with unique investment opportunities, considered financial advice and most importantly, really tailor their advice to my circumstances and investment preferences. I think their innovative approach is set to really corner the market.
Rob Bishop - CFO, AMCI Investments Pty Ltd
Luke and the team at Seneca have been instrumental in driving returns for our SMSF in recent years. As the CEO of one of Australia’s most innovative organic fertiliser company’s, whilst I’ve been busy operating our business, Seneca has been able to provide us with a diversified set of direct and indirect investment opportunities, provide timely and strategic advice and educate us on our behavioural biases, resulting in excellent compounding returns. We’ve been strong supporters of Seneca since day 1 and enjoy the high-touch, often daily interactions we have with the team and appreciate the respect they show us and our money. We look forward to a long associate with Luke, John, Victoria and the rest of the team.
Anton Barton - Executive Chairman, BioAg
As retirees, the staff at Seneca have done a wonderful job managing our super fund and our additional family financial assets. Their attention to detail, willingness to go the extra mile and friendship is something we value immensely.
Stan W. - Family Office, VIC
The team at Seneca are a refreshing mix of capital markets expertise and client-centric wealth and investment advisory. They have an ability to deeply and quickly understand equity capital market transactions and work with the corporate advisor, such as Cadmon, to devise a client-focused, favourable deal structure, find the appropriate investors and support a company from its first external capital injection through the various stages of development. We continue to enjoy working with Luke, John and the team.
Cameron Low - Managing Director, Cadmon Advisory
Friday 15 Oct 2021
After a sluggish start, the ASX 200 added 1.23% on Thursday & Friday to close the week +0.57%.
Resources stocks (specifically, gold stocks) were the best performers while Industrials were weighed down by stock-specific issues at Pendal (PDL -15%), Star (SGR, -14%) and Redbubble (RBL, -12%).
The index has broken into an uptrend again, bouncing firmly off the 7200-level.
Gold equities moving this week, we think they look fairly attractive given their historical correlation with the US 10y TIPS price (Treasury Inflation-Protected Securities). We use the VanEck Gold Miners ETF here as a proxy.
Gold stocks on the ASX are bifurcated, you’ve got those that trade on c.7x EV/EBITDA…
And then you’ve got your 4x EV/EBITDA crew
Sorry, a bit of a sh*t chart, but kinda shows you what I mean.
The trick is to be able to identify a “rising star”, a stock trading on 4x but that you think can improve its investment quality and justify a higher multiple.
Friday 01 Oct 2021
I hope you didn’t miss me too much last week, I did have good intentions to write a note on Thursday but it just got away from me while we were dealing with moving house.
The ASX200 index kinda went nowhere in aggregate until today, when it’s fallen 2.2%, taking us to -2.4% for the week (writing at 11.30 am). Technology (-6.6%) and healthcare (-6.2%) stocks were the hardest hit as investors sold off interest-rate sensitive names. Energy stocks rallied 4% as oil prices rose 1.4%, Light Crude now up 9.4% over the past 4 weeks.
How did the ASX go against other global markets in this most recent taper tantrum? All major regions are down, except Asia…
Probably more to do with Asia underperforming over by c.10% since 1 Jan.
From an asset allocation perspective, you’d think Asia could be a happy hunting ground for opportunities if you can manage the currency volatility that a changing rate environment will probably throw up.
This all said, inflationary expectations haven’t actually changed that much… Yield curve up c. 10bps over the past month or so.
Friday 17 Sep 2021
The ASX 200 down 0.73% on Friday at 11:11am as I start writing this note for another week. I’m moving house next week and I’ve got a few chores to do over the weekend, so you’re getting mid-Friday numbers as I don’t want to be stuck in front of the computer for 2hrs on Saturday morning.
Resources, in particular, Iron Ore continue to get absolutely trashed. Below is a 10-year chart. Iron ore price in USD in blue, ASX 200 Resources stocks in red. Plenty of downside still to come in my opinion.
Remember, commodity prices follow the business cycle and mining companies are a leveraged play on this cycle.
Earnings revisions also rolling over
Source: JP Morgan Research
I had two conversations (a client and a fund manager) today that reminded me of the importance of considering optionality when looking at a prospective individual stock investment.
Banks look at optionality when assessing risk and return by thinking about “alternative use”, they ask questions like “if this building couldn’t be used for offices, could it be used as a hotel?”
Good investors do the same. Some ideas, you want to think along the lines of:
Am I paying a reasonable price for this business as it is today?
Is there a chance the revenue/earnings grow faster than the market expects?
If that happens, what might this business be worth to investors?
The trick is, sometimes that growth takes a while to develop, and you need to be patient as an investor, understanding that to get into something early, and have the potential for those multi-bag-type returns, you often have to invest ahead of the growth. It’s not very often you have a Vulcan where you just buy it and goes vertical within 12 months.
This is also why valuation in this sort of investing is really important, it protects your downside while you patiently wait.
A really good example of this (as I was reminded by my fund manager client) is:
Friday 10 Sep 2021
A rough old week on the markets, ASX up 52bps today but down 1.5% for the week, resources the main culprit but traditional defensive sectors like REIT’s and Staples were not left unscathed.
Markets generally going into that risk-off sort of mode I think, momentum fading and lots of crazy speculation going on – smells like mania to me.
Leading indicators both show a softening in future economic conditions.
CESI and US Leading Economic Indicator
And for those who don’t think this sh*t matters…
yoy% return on the ASX200 vs the US leading economic indicator.
Bond markets are also telling us expectations of future growth are slowing.
Saturday 04 Sep 2021
You can tell Melbourne is in lockdown because I’m writing all my notes on Saturdays… nothing better to do! ASX 200 up fractionally for the week, but as per last week’s note, plenty of ex-divs inside the top 20, so that’s dragging on index points.
Strong week for the Energy and Real Estate, the two sectors that really haven’t recovered since the pandemic started. National Storage (NSR +5.3%) led the REIT’s while Whitehaven (WHC +18%) guided to a strong outlook for thermal coal. Coal prices in general going vertical.
Looking back at August, it looked like this
The best and worst of the ASX 200 for the month.
From a fund managers perspective, market breadth is shrinking. For the uninitiated, on average, in a given year, 45% of companies on the ASX 200 will outperform the benchmark. When more outperform, it’s easier to generate excess returns for your investors.