Investor Insights

One of the most exciting parts of the market is the small and mid-cap space, where you can find companies that have grown their average annual earnings per share by a sustained 20 per cent. In the cases where these companies can also internally fund their growth, strong long-term investment returns typically follow.

Over the past 12 months, the All Ordinaries index and the S&P 500 have risen around 26 and 35 per cent, respectively.   Not bad when you consider the economic ravages of the COVID-19 lockdowns. But despite these strong performances, there are three good reasons to believe sharemarkets will continue to climb over the coming year.

Macquarie Telecom (ASX:MAQ) is a data centre owner/operator with facilities in Sydney’s CBD, Macquarie Park in Sydney’s north, and Canberra. MAQ’s cloud services generated 46 per cent of the company’s revenues in FY21, while telecom services, in which it competes with Telstra, Optus, TPG and Vocus, and includes data, voice, mobile and colocation generated 47 per cent of revenues.

The COVID-19 pandemic has dented the profits of Ramsay Health Care (ASX: RHC), Australia’s multinational healthcare provider and hospital network. The good news is that earnings are growing again across key regions as lockdowns and restrictions start to ease. And an increased final dividend signals that the company expects a better year ahead.

The MSCI (Morgan Stanley Capital International) organisation is arguably the best know provider of global equity indexes and provide an excellent insight into the investable equity markets around the world. The MSCI indexes are market cap-weighted indexes, which means stocks are weighted according to their market capitalisation—calculated as stock price multiplied by the total number of shares outstanding.

Mastercard (NYSE:MA) is the second largest processor of debit and credit transactions globally behind Visa. It has a market capitalisation of US$354 billion and is a top 10 holding in the Polen Capital Global Growth Fund.

In March 2020, during the COVID-19 sell-off, the share price of shopping mall company, Scentre Group (ASX:SCG), hit a low of $1. 51. It’s been a bumpy ride since then, with more lockdowns, but the share price has recovered nicely.

As with many other discretionary retailers, FY21 proved to be a bumper year for homewares and online furniture retailer, Adairs (ASX: ADH). The company enjoyed record sales growth and operating margins. But there are already signs that FY22 will not be as easy.

The COVID-19 pandemic, and associated lockdowns, have impacted some businesses very positively, but been less kind on others. These impacts are coming to light in the current FY21 reporting season. Here, I’d like to highlight the results of six companies I’ve been following for a while.

Funds in the Montgomery stable are long-time holders of Spark, New Zealand’s leading telco. Spark is a steady performer, and a consistent dividend payer. And its recently reported full year results paint a picture of a telco in good financial health with potential for value creation by capital recycling.

Last year’s JobKeeper payments provided a handy tailwind for many of our discretionary retailers, particularly those with a strong online presence. But was this as good as it gets?   It looks like it, if the recent sell-off in some of our better known retail names is anything to go by.

In June this year, Philips was forced to recall 14 sleep and respiratory care devices due to safety concerns. While this has been a setback for the Dutch company, it’s been a major plus for Australia’s ResMed, which is poised to significantly boost its market share.