Half Time

Half-time. Not only in the Euros, but in markets too. With June all but in the can, there is much to ponder. Indices bounce about at all-time highs giving the punch bowl its punch, and for good reason. It’s been a fiesta of economic data on the upside, with everything, literally everything on a tear. Lock up the world and then let them out and see what happens. This. It is, in some cases literally, off the charts. All told, the temptation has been to lever up and go all in. Albeit some months behind a heated retail trade that stacked the ‘stimmy’ cheques and went long the ETF of their choice. In July 2017 the respected investor Howard Marks wrote a memo, raising the potential unfavourable risk/reward profile of the market. This was shaped by such matters as valuation, the VIX, FAANG froth, low yields and the celebration of everything ETF. Since publication of the memo, investors have got rich. By doing nothing. And yet, today, there’s a buffet of measures that are at or near extremes, and the manner in which the market reacted to news the FOMC was maybe, possibly, perhaps mulling a small rate rise in eighteen months’ time leaves a sour taste in the mouth. For stock pickers, plying a line in this revved up macro mood, it’s comforting to find stocks that offer something else. Something more than lap-dog tendencies to the economic tape. Hasbro is one, a toy company, normally defensive, with a lot to like going on internally. Robust double-digit earnings growth is possible over the next few years from insourcing, a recovery in toys as people flock back to the cinema, and continued higher growth in their high-margin Wizards of the Coast, a fantasy come Sci-Fi card game – this is in the midst of a digital transformation. Whilst the market might yet melt up, given the reasons to be cautious out there, companies with hidden assets, or those with specific turnaround tales, are likely to continue to court attention from those who take a more active interest in their holdings.

 

The securities mentioned in this blog may be held by funds managed by Majedie Asset Management Ltd.