After a number of ‘out of season’ annual/interim results in the last month, aggregate earnings expectations for the ASX 300 remain largely unchanged at the index level. However, beneath the surface there have been several positive updates at the stock specific level that have triggered meaningful consensus upgrades for select companies, including Focus Portfolio holdings Webjet (WEB), Aristocrat (ALL), and Xero (XRO).  These companies are the focus of this report.

The outlook for the Australian insurance sector remains attractive with positive earnings momentum likely to persist over the medium-term. The Focus Portfolio retains an overweight exposure to the insurance sector relative to the ASX 300.

Following the release of half-yearly / quarterly updates from each of the Big 4 Banks this month, our sector view remains unchanged with the Focus Portfolio retaining an underweight exposure to the sector. While the banks reported broadly sound results for 1H24, the sector’s medium-term earnings outlook is still challenged while valuations remain stretched relative to history.

While the ASX 300 A-REIT Index has outperformed this year, the sector’s performance has been highly concentrated in nature driven by strong returns from large index constituents including Goodman Group. The sector remains well placed over the medium-term with a number of A-REITs still trading on attractive discounts to their underlying asset valuations, including HealthCo Healthcare and Wellness REIT (HCW) which has been materially oversold amidst misguided concerns regarding the ongoing restructure of its key tenant Healthscope.

Following the pull back in the the ASX 300 this month in response to an upward shift in US interest rate expectations, attractive investment opportunities have emerged in certain companies that have become oversold despite still strong underlying fundamentals. The largest drawdowns have been among the growth-orientated and interest-rate sensitive sectors where the valuation impact of higher bond yields has been the strongest. This backdrop has created an attractive opportunity to add exposure to Aristocrat Leisure, Breville, and Collins Foods.

The ASX-listed gold miners have lagged this year’s rally in the physical gold price, which is out of step with the sector’s long-run tendency to significantly outperform the gold price during gold bull markets. As we discuss in this report, this has created an attractive opportunity to invest in the sector.

A confluence of factors has recently pushed oil prices to $90 a barrel. Yet Australian energy stocks have lagged behind the price of Brent crude oil and global oil majors so far this year.

Amidst a challenging year to date for the resources sector, copper has been one of the standout commodities of 2024 with spot prices approaching 12-month highs. The recent rally in the copper price has been driven by the pull forward of expectations of market deficits into 2024 following significant supply cuts in recent months. In our latest report we share an update on recent copper market dynamics and explore the attractive long-term outlook for the metal.