Chief investment officer at Dalton Nicol Reid, Jamie Nicol, said the firm’s research on the performance of Australian listed companies – in the current reporting season – found 36 per cent of companies surpassed market expectations, while 23 per cent of companies had missed the mark.
“It’s important to note that there is a small downgrade of around 0.8 per cent forecast for 2015,” Mr Nicol said. “Already around 28 per cent of companies have been upgraded for 2015, and 27 per cent downgraded.”
Mr Nicol added it has been difficult to forecast markets in the current economic climate.
“Offshore markets were impacted by the volatility of the weather, and domestic companies were hit by the federal Budget which caused a drop in consumer confidence,” Mr Nicol said.
“While analysts are reluctant to project the difficult trends to continue, they are also reluctant to forecast a large bounce.
“In a number of our holdings we see analysts’ forecasts as being quite conservative and have been adding to these positions,” Mr Nicol said.
Mr Nicol said the underlying backdrop of low yields has made the prospect of companies returning capital to shareholders seem appealing on the short tear; however, there are concerns the strategy might be short sighted.
“We are concerned that while the market continues to reward near-term yield over longer term growth, most company boards will be reluctant to invest in future opportunities, preferring the short-term impact of returning capital,” Mr Nicol said.
“We are already seeing a trend where companies with buy-backs (even if small) and special dividends were rewarded – such as Suncorp,” he said.
