Investor Insights

We believe Spotify (NYSE: SPOT) is an attractive investment opportunity because it commands an improving leadership position in the structurally growing, global digital audio streaming marketplace, underpinned by its expanding reservoir of proprietary consumer preference data. Flywheel: scale, technology, and data Spotify is the world’s largest digital music and podcast streamlining platform.

When the stock market sold off dramatically in March this year the US Federal Reserve responded by pumping financial markets with liquidity for the next three months and the stock market rocketed. But the Fed’s role in financial markets has moderated recently and signals that share market investors should proceed with caution.

The Montgomery Small Companies Fund, which was launched in September 2019, recently hit a record high. Since inception to 30 June 2020 The Fund has returned 3. 63 per cent,  which compares very favourably to its benchmark, the S&P/ASX Small Ordinaries Accumulation Index outperforming it by 12. 11 per cent.

The coffee can investment approach is an important concept that illustrates a key factor in how we view prospective businesses. It was coined by famed advisor Robert Kirby, who discovered that one of his clients had been selectively acting on all his buy recommendations, putting away the stock certificates and ignoring any sell recommendations.

You’d think that Australia’s global winemaker and distributor, Treasury Wine Estates (ASX:TWE), would be reasonably immune to the effects of the COVID-19 pandemic. But the owner of famous brands like Wolf Blass, Lindemans and Penfolds is also feeling the pinch, with its latest trading update pointing to a tough year ahead.

Many readers will be familiar with the transformation being wrought in the information technology space by cloud computing. Where previously an enterprise would own and maintain all of its own computing infrastructure on-premises, increasingly, businesses are coming to view computing as a non-core activity that is best consumed as a service.

Twelve months back, who could have predicted the world would be in the state it’s currently in?   And yet, despite the pandemic-induced turmoil, some world markets are not that far from where they were a year ago.   Here’s a quick look at the year that was.

What’s the best way to minimise risk when investing during a recession or economic crisis?   Research by NYU’s Stern School of Business shows that one method could be to allocate funds according to where the company sits in its business lifecycle – which is the approach taken by the Montgomery Small Companies Fund.

One of the rather surprising trends since the COVID-19 lockdown has been the new wave of first-time share market investors. Many have enjoyed huge gains since the March market rout – often by speculating on highly risky businesses. But the ensuing dislocation between share prices and economic reality tells me that some could get their fingers badly burnt.

As you may know, the furniture retailer, Nick Scali, is one of our holdings in the Montgomery Small Companies Fund and CEO Anthony Scali has just updated fund managers through a broker-arranged conference call.

If you’re a regular reader, you probably know that one of my favourite Australian companies is Codan Limited (ASX: CDA), which makes communications, metal detection, and mining technology. Its share price has doubled in the past year, and its latest trading update gives me more reasons to be pleased we hold it in our funds.

Since the COVID-19 induced market low, our fund has put a substantial proportion of our cash to work.   But we’ve been very selective about the companies we bought. We added to our holdings in Macquarie Financial Group, Westpac, Commonwealth Bank, and Scentre Group.  And we are building additional positions in undisclosed stocks.