Today’s market volatility plays more to FOMO (fear of missing out) than to a company’s underlying fundamentals. The most recent ASX Reporting Season revealed that as companies prepared for the worse last year, many of them stripped costs out of their business in preparation for a potential recession. When the consumer-led recovery arrived sooner than expected, they were well placed to enjoy an uplift in margins and robust operating leverage.

The Australian Fundamental Active Equities team highlight below three key themes and stock story videos to come out of the most recent ASX Reporting Season.  

The case for strong management

It’s important to look beyond the short-term numbers to determine which trends are more permanent in nature – and which companies have the means to make the most of these. Ultimately, the long-term winners will be those that have strong managers, Charlie Lanchester, Head of Fundamental Active Equities says, something that’s more likely to get overlooked in times of volatility. The team use the scale of BlackRock to visit every company they invest in, getting to know the boards and managers behind the stocks. It’s what has recently attracted them to some of the market’s smaller value caps. Here, they’ve found some up and coming managers who are strongly aligned with the future of their company. These companies also stand out for the fact they are busily reinvesting into their businesses. “Of particular interest are those that are leading their field in investing in research or technology,” says Australian Fundamental Equity, portfolio manager Madeleine Beaumont.

Why COVID winners will keep on winning

Lanchester and his team of four also view e-commerce stocks in a different light to the rest of the market. They are confident that several of these companies will build on the gains they made during the height of COVID, rather than reverting to pre-pandemic levels. As Lanchester says: “While there will be a number of people that will scale back their usage post-pandemic, those that really love the service offered will keep using it.” The fund’s managers are similarly upbeat about entertainment stocks. “The TV market bounced strongly in the December quarter and continues to rebound this year,” Beaumont points out. She sees no reason why this strong performance won’t continue in coming months, again because of the customers they amassed during COVID.

Going for growth and value

It helps that the BlackRock fund plays across the full spectrum of small, mid and big cap stocks and are style-agnostic. “We like to have growth names in the portfolio, but we’re also happy to pivot towards some of the value names if the time is right,” Lanchester explains. And now is one of those times.

To find out more about how Australian companies have performed, the replay of our - CPD accredited - ASX Reporting Season webcast is now available on demand.

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What the market will often miss is the compounding effect of really good management teams.

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Charlie Lanchester, Head of Fundamental Equities

Stock Stories: Nine Entertainment (ASX: NEC)

Learn why the market is still underestimating Nine Entertainment and why Madeleine Beaumont believes it's a forward looking company with potential of growth.
Watch Now (Viewing time: 1:20min)

Stock Stories: Marley Spoon (ASX: MMM)

Find out why Australia is one of the leading markets for e-commerce business Marley Spoon and why Charlie Lanchester believes the company will become a global leader in the foodkit delivery space.
Watch Now (Viewing time: 1:20min).

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