Companies need to reinvest
Companies need to balance returning capital with funding growth and make investments for the future, according to Perennial Value Management.
Wrapping up the reporting season, Perennial Value’s managing director, John Murray, stressed it was important to encourage the companies to reinvest and “invest for the future”.
Even though the majority of investors did like dividends, Perennial said it was of a view that the companies should not necessarily pay out the dividends, especially if they could see some growth prospect for their businesses.
“You can’t shrink to greatness at the end of the day and companies need to reinvest,” Murray said.
“I think there was a view on behalf of most of observers of the Australian stock market that corporate Australia is just giving it all back.”
“But when you start to look on the stock by stock basis there is actually a lot of reinvesting going on and that’s a great news.”
Murray also said that despite the fact Australian growth was out of synch with global recovery while incomes were lower and GDP per capita was weaker, the reporting season delivered mixed responses.
Perennial, which typically holds 35 stocks in its portfolio, however had reduced its holdings in the banking sector.
“We hold less in the banks than we did in six to 12 months ago,” Murray said.
“Our view there was sort of predicated on fairly low earnings growth of the next two or three years.”
Additionally, he warned that the houses price and “some sort of shock “ that might lead to a reduction in houses prices would also affect the situation across the banking sector and the sentiment toward it.
Recommended for you
In the latest Meet the Manager profile, Money Management speaks with Michael Skinner, founder and managing director at Blackwattle Investment Partners.
Perpetual has seen AUM rise 6 per cent in the last quarter but the departure of a longstanding JOHCM fund manager led to outflows of $2.2 billion from his strategy.
Global fixed income fund Bentham Global Opportunities has been added to several major platforms, enabling it to be accessed more easily by financial advisers.
Following yesterday’s news about First Sentier Investors closing four investment teams, a second global asset manager has announced it is closing its only dedicated Australian fund.
