Don't let all time highs stop you buying this "bull" market
Three investments the Centennial Asset Management team believe will outperform - Judo Capital (JDO), Credit Clear (CCR) and Austal (ASB).
The Australian market recently delivered another all-time high. Investors always get worried when markets hit all-time highs, but we can still see a universe of attractive investment opportunities. One positive for equity investors is the global interest rate cutting cycle has begun.
The Federal Reserve delivered a 50 bp cut in interest rates in September, giving investors the confidence to buy equities.
Now that the US Federal Reserve has joined the Bank of England, the Bank of Canada, the Reserve Bank of New Zealand and several major European Central Banks in delivering interest rate cuts, the investment outlook remains positive and we expect the market to continue rallying over the next 12-24 months.
As interest rates decline, we expect corporate earnings to recover. In the first phase of a rate cutting cycle, revenues tend to increase on reduced cost bases which combined deliver expanded operating margins and profitability.
The Level 18 Fund (Platform Class) has performed well over the last year to September 30, 2024, delivering a return of +24.2% (net of fees). We continue to identify good investment opportunities at attractive valuations.
In the video below, we outline the details behind our bullish outlook and discusses our three investment ideas.
Note: this commentary was recorded on Tuesday 22 October 2024.
Small cap investment ideas
Judo Capital Holdings (ASX: JDO) - Relationship Driven Bank
- Growing loan book & market share
- Clear path to expanding margins (NIM) and operating leverage
- Manageable credit quality
- Improving profitability and ROE
Credit Clear (ASX: CCR) - Digital Debt Collection group
- Strong revenue growth (+20%)
- Recent guidance upgrade
- New client momentum and quality increasing
- Operating leverage delivering strong growth
- Potential for further upgrades
Austal (ASX: ASB) - Ship Builder/Defence Contractor
- Exposure to structural growth in global defence spending
- Recent contract wins - US Navy (Submarine Alliance)
- Growing order book and Service/support business
- FY25 - Strong revenue & EBIT growth
Managed Fund
The Level 18 Fund (Platform Class)
Australian Shares
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Michael is a member of the investment and management team at Centennial Asset Management. Prior to this, Michael worked at Merrill Lynch as a Healthcare Analyst for a decade and more recently at Morgan Stanley within the small cap Institutional Equities team. Michael has more than 20 years’ experience working in the Australian equities market.
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Strictly confidential: This report has been prepared by Centennial Asset Management ACN 605 827 745 & AFSL No. 515887 for Wholesale Clients only as an indicative record of the performance of an investment in the Level 18 Fund. No recommendation is made or advice given in respect of any entity in which the Level 18 Fund has, is or may in the future be, invested. The contents of this report are confidential, and the client may only disclose such contents to its officers, employees or advisers on a need to know basis, or with the prior written consent of Centennial Asset Management. Centennial Asset Management does not guarantee the performance of the Level 18 Fund or the return of any investor's capital in the Level 18 Fund. This investment report contains historical information, and does not imply any indication of future performance, recommendation or advice. Past performance is not a reliable indicator of future performance. Any investment needs to be made in accordance with and after reading any relevant offer document. This material has been prepared based on information believed to be accurate at the time of publication. Assumptions and estimates may have been made which may prove not to be accurate. Centennial Asset Management accepts no responsibility to correct any such inaccuracy. Subsequent changes in circumstances may occur at any time and may impact the accuracy of the information. To the full extent permitted by law, none of Centennial Asset Management, or any related body corporate or any officer or employee of any of them makes any warranty as to the accuracy or completeness of the information in this report and disclaims all liability that may arise due to any information contained in this newsletter being inaccurate, unreliable or incomplete. *Prior to launch of the Level 18 Fund on 1 September 2014, Centennial Asset Management had established a separately managed account (“SMA”) and performance prior to 1 September 2014 is illustrated on a gross pro-forma basis, that invests with the same mandate as the Level 18 Fund and is included in the tables above, for comparative purposes only. The returns assume reinvestment of distributions.
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3 stocks mentioned
1 fund mentioned
Michael is a member of the investment and management team at Centennial Asset Management. Prior to this, Michael worked at Merrill Lynch as a Healthcare Analyst for a decade and more recently at Morgan Stanley within the small cap Institutional...
Expertise
Michael is a member of the investment and management team at Centennial Asset Management. Prior to this, Michael worked at Merrill Lynch as a Healthcare Analyst for a decade and more recently at Morgan Stanley within the small cap Institutional...
Expertise
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