For West Australian (WA) exposed companies, COVID continues to have an oversized impact on profitability. While closed borders have contributed to good health outcomes in WA, the restrictions on people mobility have been a significant issue for companies with WA exposure. We explore the prospects of fortress WA reopening and assess the likelihood of whether earnings expectations in our basket of six WA exposed companies have bottomed ahead of the February results season.

Australian travel stocks have been beaten up over the past month over concerns around the pace of reopening and rising energy prices. The emergence of COVID variant Omicron as a potential threat to the travel recovery over the past week has taken the retreat in travel stocks to around 20% since mid-October. At this stage, it’s difficult to be too definitive around the ultimate impacts of Omicron on economies and economic reopening until more data is available - likely mid-December. As a result, travel-related stocks will remain price sensitive to news flow surrounding the Omicron threat. Against this backdrop we share our positive thesis for QANTAS.

We delve into the case for holding gold equities in inflationary-driven risk-off periods.

In periods where an acceleration in inflation drives the risk-off event - like the 1970/80s - physical gold proves to have even stronger diversification benefits vs equities. Better still, gold equities significantly outpace the physical gold price proving to be true portfolio diversifiers during periods of high inflation.

Across three decades the market has valued Commonwealth Bank (CBA) at a premium relative to its three peers. Whether we look at earnings, dividends or book measures of valuation, CBA has consistently traded at a 15-20% premium since the 1990s. Currently 2-3x higher than the past 20 years, we outline why we believe CBA’s premium has peaked.

The Wilsons Australian Equity Focus List has been updated following a number of earnings announcements and company updates in the past month. A rollover in earnings momentum has continued for the S&P/ASX 200. Some of this is a function of falling iron ore prices and domestic lockdowns, but several stock-specific situations have seen earnings slip from FY22E and into FY23E. We see the key implication for investors being the need to be more selective around portfolio positioning.

Does a rising A$ create a headwind for the equity market? Our short answer is that headwind is not insurmountable, given the earnings recovery thematic is likely to still win the day. We explore several underlying reasons around the composition of the Australian market to explain why a potentially stronger $A is not a threat.

Major bank reporting season gets underway this week. We see FY21 results as being more about stock-specific issues rather than being driven by macro factors that have dominated recent results. We unpack the four key themes of reporting season.

The gaming industry, which has traditionally delivered GDP-like growth rates across many decades, is now facing a period of digitisation and profound structural change. We unpack the drivers behind the reorganisation of a number of global companies and identify where we believe opportunities are currently mispriced.