1 00:00:03,450 --> 00:00:06,890 Sean Aylmer: Welcome to the Fear and Greed daily interview. I'm Sean Aylmer. Well, 2 00:00:06,890 --> 00:00:09,479 Sean Aylmer: we're about halfway through reporting season, perhaps a little beyond 3 00:00:09,480 --> 00:00:12,020 Sean Aylmer: that. So we thought we'd check in with Matthew Kidman. 4 00:00:12,020 --> 00:00:15,150 Sean Aylmer: Matthew is Principal at Centennial Asset Management, and it's always 5 00:00:15,150 --> 00:00:17,139 Sean Aylmer: worthwhile finding out what he likes and what he doesn't 6 00:00:17,140 --> 00:00:20,040 Sean Aylmer: like and where the opportunities might lie in the listed 7 00:00:20,040 --> 00:00:21,790 Sean Aylmer: sector. Matthew, welcome back to Fear and Greed. 8 00:00:22,170 --> 00:00:22,810 Matthew Kidman: Hi Sean. 9 00:00:23,030 --> 00:00:24,700 Sean Aylmer: Have you enjoyed the earning season so far? 10 00:00:25,430 --> 00:00:28,880 Matthew Kidman: Not really. It's been quite tough. As you pointed out, 11 00:00:29,020 --> 00:00:32,250 Matthew Kidman: there is a number of issues hanging around reporting season 12 00:00:32,250 --> 00:00:34,250 Matthew Kidman: that the companies are telling us about that we already knew 13 00:00:34,250 --> 00:00:37,019 Matthew Kidman: about. But when the companies tell you that things aren't 14 00:00:37,020 --> 00:00:39,690 Matthew Kidman: quite right or things are tough, then it hits home a bit 15 00:00:39,690 --> 00:00:41,480 Matthew Kidman: more because the share price moves quite aggressively. 16 00:00:41,940 --> 00:00:44,159 Sean Aylmer: Yeah. So we'll get onto those issues in a moment. 17 00:00:44,159 --> 00:00:46,450 Sean Aylmer: And I know you're always one that you say, don't 18 00:00:46,450 --> 00:00:49,170 Sean Aylmer: worry about what the share price does on the day, 19 00:00:49,420 --> 00:00:52,180 Sean Aylmer: because there's a lot of algorithmic trading going on and 20 00:00:52,180 --> 00:00:54,640 Sean Aylmer: it settles down, but there have been some big moves 21 00:00:54,970 --> 00:00:56,980 Sean Aylmer: in share prices of really big companies. 22 00:00:57,180 --> 00:00:59,280 Matthew Kidman: Yeah. We've had to adjust to that phenomenon over the 23 00:00:59,580 --> 00:01:02,160 Matthew Kidman: years that no matter what a company reports, there will 24 00:01:02,160 --> 00:01:04,370 Matthew Kidman: be a movement on day one. There's a little company 25 00:01:04,370 --> 00:01:06,470 Matthew Kidman: that we had a share holding in and we still 26 00:01:06,470 --> 00:01:09,370 Matthew Kidman: do and we're quite happy with called Money3. It lends 27 00:01:09,370 --> 00:01:11,950 Matthew Kidman: money basically for people who are buying cars that the 28 00:01:11,950 --> 00:01:16,369 Matthew Kidman: banks won't touch. And they came out and they actually 29 00:01:16,370 --> 00:01:19,830 Matthew Kidman: slightly upgraded their numbers. Their outlook was quite positive. But for 30 00:01:20,069 --> 00:01:23,490 Matthew Kidman: some reason it was down 6% on the day. The subsequent 31 00:01:23,490 --> 00:01:26,150 Matthew Kidman: day it was up 5% and we're sitting close to where we 32 00:01:26,150 --> 00:01:28,500 Matthew Kidman: were when we started the whole process. So those kind 33 00:01:28,640 --> 00:01:30,179 Matthew Kidman: of things happen. We've had to get used to that. 34 00:01:30,569 --> 00:01:34,110 Sean Aylmer: Okay. So what about some of the themes. Inflation or input 35 00:01:34,110 --> 00:01:36,580 Sean Aylmer: costs and prices. That seems to be flowing through a 36 00:01:36,580 --> 00:01:37,429 Sean Aylmer: lot of the companies. 37 00:01:37,630 --> 00:01:40,290 Matthew Kidman: Yeah. There's some economic themes and you've hit upon it. 38 00:01:40,569 --> 00:01:44,000 Matthew Kidman: Amcor came out early and they said, we'll make our 39 00:01:44,000 --> 00:01:48,180 Matthew Kidman: numbers. But don't make no mistake, things are quite tough. 40 00:01:48,180 --> 00:01:51,710 Matthew Kidman: Supply chain, costs. And they said, we are about to lift 41 00:01:51,710 --> 00:01:55,970 Matthew Kidman: all our prices again for our various products, our packaging products. 42 00:01:56,030 --> 00:01:57,690 Matthew Kidman: So they were the first cab off the rank. And 43 00:01:57,690 --> 00:02:00,720 Matthew Kidman: of course we've seen companies like Ansell come out and 44 00:02:00,720 --> 00:02:04,020 Matthew Kidman: they pre- warned, but there's definitely a problem there. And 45 00:02:04,020 --> 00:02:06,820 Matthew Kidman: anyone who's moving goods around the globe, that's an issue. 46 00:02:07,240 --> 00:02:11,190 Matthew Kidman: Strangely enough, the issue around shortages of labor, which really 47 00:02:11,190 --> 00:02:14,440 Matthew Kidman: struck home in Australia before Christmas, is probably eased a 48 00:02:14,440 --> 00:02:17,820 Matthew Kidman: little. That's my feeling that things aren't quite as bad. Companies 49 00:02:17,820 --> 00:02:21,410 Matthew Kidman: have one, put in processes to maybe cope with it. 50 00:02:21,700 --> 00:02:26,130 Matthew Kidman: And two, the actual alleviation, one around just a shortage 51 00:02:26,130 --> 00:02:28,589 Matthew Kidman: of labor and strong demand before Christmas, but then Omnicom 52 00:02:28,590 --> 00:02:31,880 Matthew Kidman: came along and that knocked the demand around. But then 53 00:02:31,880 --> 00:02:34,840 Matthew Kidman: you had the problem of people actually having Omnicom and close 54 00:02:34,840 --> 00:02:37,910 Matthew Kidman: contacts. That now seems to be easing as well. So there's 55 00:02:38,419 --> 00:02:40,040 Matthew Kidman: a little bit of light at the end of the tunnel there. 56 00:02:40,610 --> 00:02:43,889 Sean Aylmer: Yeah. It's interesting on the labor shortage because, I'm just trying 57 00:02:43,889 --> 00:02:46,160 Sean Aylmer: to think back. BHP talked about it in a Western 58 00:02:46,270 --> 00:02:49,600 Sean Aylmer: Australia sense, but outside the state border closure, we actually 59 00:02:49,600 --> 00:02:50,980 Sean Aylmer: haven't heard a lot about that. 60 00:02:51,650 --> 00:02:54,980 Matthew Kidman: No. There's definitely companies like Inghams came out early and they 61 00:02:55,180 --> 00:02:57,120 Matthew Kidman: just said straight out and Woolworths have had the same 62 00:02:57,120 --> 00:03:00,829 Matthew Kidman: issue, but I think that's easing now. As the virus 63 00:03:01,080 --> 00:03:04,600 Matthew Kidman: rose strongly, probably over Christmas, new year's and it eased 64 00:03:04,600 --> 00:03:07,130 Matthew Kidman: through the back end of January. We're probably okay. I 65 00:03:07,130 --> 00:03:11,370 Matthew Kidman: think the other theme coming out of the reporting season was 66 00:03:11,370 --> 00:03:14,549 Matthew Kidman: a market theme as opposed to an economic theme. All 67 00:03:14,550 --> 00:03:17,480 Matthew Kidman: those issues are bubbling around, but I don't think I've 68 00:03:17,480 --> 00:03:21,680 Matthew Kidman: seen a reporting season where expectations have played such a 69 00:03:21,680 --> 00:03:24,790 Matthew Kidman: strong role leading into results. And you mentioned one a 70 00:03:24,790 --> 00:03:28,460 Matthew Kidman: bit earlier, CSL. CSL's been falling for the best part 71 00:03:28,460 --> 00:03:31,180 Matthew Kidman: of six months. It's one of Australia's biggest companies, it's 72 00:03:31,180 --> 00:03:34,359 Matthew Kidman: been a darling of the market. A terrific company, global company. 73 00:03:34,690 --> 00:03:36,790 Matthew Kidman: But in the six months leading up to its result, 74 00:03:36,810 --> 00:03:42,110 Matthew Kidman: it kind of lost about $60 or $ 70, say, circa 20% as 75 00:03:42,110 --> 00:03:45,070 Matthew Kidman: the issues around blood collection and a few other company 76 00:03:45,070 --> 00:03:48,830 Matthew Kidman: based issues around the globe. Blood collections become a lot harder for 77 00:03:48,830 --> 00:03:52,530 Matthew Kidman: them, which obviously that's their inventory. And that became a 78 00:03:52,530 --> 00:03:54,450 Matthew Kidman: lot harder. But when the result came out, guess what? 79 00:03:54,490 --> 00:03:56,370 Matthew Kidman: Wasn't quite as bad as what the market thought. It 80 00:03:56,420 --> 00:03:59,000 Matthew Kidman: wasn't great. Those issues were relevant, but it wasn't quite 81 00:03:59,000 --> 00:04:01,700 Matthew Kidman: as bad and bang, up 10% in two days. That's 82 00:04:01,700 --> 00:04:04,120 Matthew Kidman: been a theme all the way through. You've seen the 83 00:04:04,120 --> 00:04:06,450 Matthew Kidman: banks, the banks have got issues with their net interest 84 00:04:06,450 --> 00:04:10,840 Matthew Kidman: margins. And there was a lot of negativity leading in 85 00:04:10,840 --> 00:04:13,270 Matthew Kidman: and guess what? The net interest margins did decline, but 86 00:04:13,290 --> 00:04:16,960 Matthew Kidman: not as much probably as what the market thought and 87 00:04:17,430 --> 00:04:19,730 Matthew Kidman: for the main, they've gone up. ANZ probably being the outlier. 88 00:04:20,170 --> 00:04:24,210 Matthew Kidman: And then even Bendigo Bank, the super regional, has been 89 00:04:24,210 --> 00:04:26,680 Matthew Kidman: much maligned. It's been a terrible performer, but it's really 90 00:04:26,680 --> 00:04:30,060 Matthew Kidman: rallied hard. So you've had a number of those companies that 91 00:04:30,339 --> 00:04:34,159 Matthew Kidman: previously not loved by the market, but found their feet. 92 00:04:34,160 --> 00:04:37,630 Matthew Kidman: While some of the market darlings have been treated with 93 00:04:37,940 --> 00:04:41,820 Matthew Kidman: very little respect, IDP Education being one of them. Everyone 94 00:04:41,820 --> 00:04:46,000 Matthew Kidman: wanted the great education global company to perform strongly. It 95 00:04:46,000 --> 00:04:48,210 Matthew Kidman: was a little bit off the mark and bang, they've 96 00:04:48,210 --> 00:04:52,409 Matthew Kidman: solved that REA. Very strong result, but said, hey, this 97 00:04:52,410 --> 00:04:54,120 Matthew Kidman: half's going to be tough. We've got an election, we 98 00:04:54,120 --> 00:04:56,419 Matthew Kidman: had omicron. Let's just see how it goes. They were 99 00:04:56,420 --> 00:04:59,080 Matthew Kidman: being cautious. They've solved that. So the darlings have been thrown out 100 00:04:59,720 --> 00:05:02,470 Matthew Kidman: and probably some of the unloves have been picked up. 101 00:05:02,710 --> 00:05:05,990 Sean Aylmer: The buy now pay later sector, which I must say, I've always 102 00:05:05,990 --> 00:05:08,659 Sean Aylmer: been a skeptic on. Some of those stocks have really been sold 103 00:05:08,660 --> 00:05:09,180 Sean Aylmer: down hard. 104 00:05:09,589 --> 00:05:13,110 Matthew Kidman: Ah, that's an interesting subject in itself because two years 105 00:05:13,110 --> 00:05:15,839 Matthew Kidman: ago it was just every other day, there was a new 106 00:05:16,230 --> 00:05:20,240 Matthew Kidman: BNPL product coming to market. People couldn't get enough of 107 00:05:20,240 --> 00:05:23,739 Matthew Kidman: them. They were oversubscribed. They bellwethered their industry. Afterpay was 108 00:05:23,740 --> 00:05:26,700 Matthew Kidman: just surging high. This is post the first sell off with 109 00:05:26,700 --> 00:05:30,980 Matthew Kidman: coronavirus. But now the market's changed and we know that's 110 00:05:30,980 --> 00:05:33,750 Matthew Kidman: changed. With the pushing up of market rates and soon 111 00:05:33,750 --> 00:05:37,260 Matthew Kidman: to be official rates, what you've seen is a lot 112 00:05:37,260 --> 00:05:41,130 Matthew Kidman: of those non or unprofitable companies being sold off. And 113 00:05:41,130 --> 00:05:43,250 Matthew Kidman: that's been going on in the US through six, or maybe 114 00:05:43,380 --> 00:05:46,430 Matthew Kidman: even closer to 12 months. Now in the last few 115 00:05:46,430 --> 00:05:48,560 Matthew Kidman: months it's really struck home to that sector because none 116 00:05:48,560 --> 00:05:50,700 Matthew Kidman: of them really made money and guess what? They need 117 00:05:50,700 --> 00:05:53,279 Matthew Kidman: capital to grow. Really what they're doing is lending money. 118 00:05:53,279 --> 00:05:54,390 Matthew Kidman: So if you're going to lend money, you've got to 119 00:05:54,390 --> 00:05:56,710 Matthew Kidman: have money to lend. And therefore to grow, you need 120 00:05:56,710 --> 00:05:59,710 Matthew Kidman: the capital and the capital's drying up. So watch that 121 00:05:59,710 --> 00:06:02,520 Matthew Kidman: space. Afterpay has gone off and married up with Square 122 00:06:02,520 --> 00:06:04,770 Matthew Kidman: in the US. Probably a good move, good timing. But 123 00:06:04,770 --> 00:06:07,350 Matthew Kidman: some of the others that are based in Australia, it'll 124 00:06:07,350 --> 00:06:10,180 Matthew Kidman: be interesting to see if they can get through this next 125 00:06:10,200 --> 00:06:13,100 Matthew Kidman: 12 months when the capital won't be there and the 126 00:06:13,100 --> 00:06:16,830 Matthew Kidman: growth will slow and they'll have to adjust enormously to 127 00:06:16,830 --> 00:06:17,100 Matthew Kidman: make it through. 128 00:06:17,750 --> 00:06:19,700 Sean Aylmer: Stay with me Matthew, we'll be back in a minute. 129 00:06:24,250 --> 00:06:27,260 Sean Aylmer: My guest this morning is Matthew Kidman, Principle at Centennial 130 00:06:27,310 --> 00:06:31,010 Sean Aylmer: Asset Management. So on the resources sector. If we go to the 131 00:06:31,010 --> 00:06:34,080 Sean Aylmer: big materials companies, the miners, BHP had a cracking result, 132 00:06:34,080 --> 00:06:37,560 Sean Aylmer: for example. Kind of very mixed. Newcrest was poor. Even 133 00:06:37,640 --> 00:06:39,589 Sean Aylmer: not withstanding commodity prices in some ways. 134 00:06:39,980 --> 00:06:42,659 Matthew Kidman: Yeah. BHP has been a standout so far. Obviously we're 135 00:06:42,660 --> 00:06:46,410 Matthew Kidman: not through the whole reporting season. Smaller iron ore operators, 136 00:06:46,710 --> 00:06:50,290 Matthew Kidman: Min Resources, and even Fortescue disappointed the market. A lot 137 00:06:50,390 --> 00:06:53,180 Matthew Kidman: of it's been hard to get the production right despite 138 00:06:53,180 --> 00:06:56,510 Matthew Kidman: the prices being strong. BHP on the other hand just hit every 139 00:06:56,510 --> 00:06:59,910 Matthew Kidman: ball out of the park. And we saw them pay 140 00:06:59,910 --> 00:07:02,910 Matthew Kidman: a bigger dividend. We saw their balance sheet debt come 141 00:07:02,910 --> 00:07:05,630 Matthew Kidman: down. We saw a huge profit number. It was an 142 00:07:06,029 --> 00:07:09,950 Matthew Kidman: outstanding result. But the unfortunate thing for BHP, it's not the 143 00:07:09,950 --> 00:07:11,950 Matthew Kidman: result that we've just seen that will matter too much. 144 00:07:11,950 --> 00:07:15,610 Matthew Kidman: It's that iron ore price and where oil and gas goes and sure enough, 145 00:07:15,610 --> 00:07:18,001 Matthew Kidman: that will get more towards iron ore as they (inaudible) 146 00:07:18,001 --> 00:07:21,060 Matthew Kidman: off their oil and gas assets to Woodside. So it 147 00:07:21,060 --> 00:07:24,070 Matthew Kidman: was interesting. It was a terrific result, but it wasn't across 148 00:07:24,070 --> 00:07:27,190 Matthew Kidman: the board. We had S32 in the mining sector, more 149 00:07:27,190 --> 00:07:31,030 Matthew Kidman: general base metals. People like that. That looked strong. And 150 00:07:31,030 --> 00:07:34,390 Matthew Kidman: some of the darlings though in the lithium sector, the results don't matter so 151 00:07:34,550 --> 00:07:37,510 Matthew Kidman: much, but they've found the going hard in recent times 152 00:07:37,510 --> 00:07:41,590 Matthew Kidman: as well. So the market is very jittery. And you 153 00:07:41,590 --> 00:07:44,330 Matthew Kidman: asked me a bit earlier, where would you go in 154 00:07:44,330 --> 00:07:47,740 Matthew Kidman: this market? I don't think anyone's really clear. You definitely 155 00:07:47,740 --> 00:07:50,930 Matthew Kidman: don't want to be overweight unprofitable tech companies, but we've 156 00:07:50,930 --> 00:07:53,750 Matthew Kidman: known that for a long time. And where the market's 157 00:07:53,750 --> 00:07:55,530 Matthew Kidman: trying to hide this in this last little bit is 158 00:07:55,530 --> 00:07:58,640 Matthew Kidman: at the big end and in companies that are probably 159 00:07:58,640 --> 00:08:02,640 Matthew Kidman: a bit unloved and a bit forgotten. So, Wesfarmers, which 160 00:08:02,640 --> 00:08:05,300 Matthew Kidman: was a darling of the market last year, nice big 161 00:08:05,640 --> 00:08:08,290 Matthew Kidman: company that we can all associate with, a staple in 162 00:08:08,290 --> 00:08:10,870 Matthew Kidman: anyone's portfolio. It was a bit soft. It's got some 163 00:08:10,870 --> 00:08:13,890 Matthew Kidman: issues now compared to where it was sold off. Banks, 164 00:08:13,890 --> 00:08:16,360 Matthew Kidman: as I said, people have hid in there. Even Macquarie 165 00:08:16,360 --> 00:08:18,870 Matthew Kidman: bank had a terrific result and it was a lot 166 00:08:18,870 --> 00:08:21,760 Matthew Kidman: better than anyone thought, but do you stay there? Because 167 00:08:21,790 --> 00:08:24,001 Matthew Kidman: it tracks the market in general because that's what it's (inaudible) 168 00:08:24,001 --> 00:08:27,280 Matthew Kidman: . So a very confusing time. Unfortunately, I'd love to say 169 00:08:27,280 --> 00:08:29,120 Matthew Kidman: to you, this is where you go at this point 170 00:08:29,120 --> 00:08:31,440 Matthew Kidman: in time, but we're in a real state of flux. 171 00:08:31,640 --> 00:08:33,390 Sean Aylmer: Yeah. Okay. I just do want to ask about the 172 00:08:33,390 --> 00:08:35,910 Sean Aylmer: energy and the oil and gas guys, because we saw 173 00:08:36,210 --> 00:08:39,130 Sean Aylmer: the big Origin Energy and AGL both bring forward the 174 00:08:39,200 --> 00:08:42,530 Sean Aylmer: closure of coal fired power stations. Woodside and Santos both 175 00:08:42,530 --> 00:08:44,939 Sean Aylmer: came out. Great numbers on the back of incredibly high 176 00:08:44,940 --> 00:08:48,110 Sean Aylmer: prices. How do you invest in that sector at the 177 00:08:48,110 --> 00:08:52,170 Sean Aylmer: moment, given the global trend towards green and we kind 178 00:08:52,170 --> 00:08:54,290 Sean Aylmer: of know that coal will be transitioned out? We think 179 00:08:54,290 --> 00:08:58,110 Sean Aylmer: gas will be the transition energy. Renewables are the future, 180 00:08:58,110 --> 00:09:00,329 Sean Aylmer: but that's not going to happen tomorrow. That's for sure. 181 00:09:00,330 --> 00:09:03,040 Sean Aylmer: How do you think about sort of energy and oil and gas? 182 00:09:03,480 --> 00:09:06,370 Matthew Kidman: Well, the interesting thing, the move towards renewables is being 183 00:09:06,370 --> 00:09:09,400 Matthew Kidman: accelerated by the fact that some of the old ways 184 00:09:09,400 --> 00:09:13,050 Matthew Kidman: of making power, especially coal, are not cutting it anymore. 185 00:09:13,059 --> 00:09:14,610 Matthew Kidman: And we saw Origin come out and say, well, we're going to close 186 00:09:15,130 --> 00:09:17,120 Matthew Kidman: early. This is going to burn a hole in our pocket. 187 00:09:17,550 --> 00:09:20,710 Matthew Kidman: The big retailers, AGL and Origin are quite interesting, because they've been in the 188 00:09:20,710 --> 00:09:23,170 Matthew Kidman: doghouse for a couple of years, but their share prices 189 00:09:23,170 --> 00:09:26,059 Matthew Kidman: have turned and it's coming with a little bit more 190 00:09:26,059 --> 00:09:29,410 Matthew Kidman: clarity around energy getting to market. In other words, what 191 00:09:29,410 --> 00:09:32,739 Matthew Kidman: kind of energy? The alternative energy, the green energy now, 192 00:09:33,170 --> 00:09:37,150 Matthew Kidman: it seems to be having a grip and being more 193 00:09:37,160 --> 00:09:40,059 Matthew Kidman: broad. It's just not a supplement anymore. So I would 194 00:09:40,059 --> 00:09:43,140 Matthew Kidman: watch that very closely. I think it's early doors for 195 00:09:43,140 --> 00:09:46,559 Matthew Kidman: them, but it looks like maybe the worst is behind 196 00:09:46,559 --> 00:09:49,440 Matthew Kidman: them in this transition, which it's been a big upheaval 197 00:09:49,700 --> 00:09:52,580 Matthew Kidman: from one sort of energy to the next and what it means for 198 00:09:52,580 --> 00:09:55,679 Matthew Kidman: prices and so on. And we've seen prices move around, retail 199 00:09:55,679 --> 00:09:59,490 Matthew Kidman: prices everywhere. In terms of the downstream guys who actually 200 00:09:59,490 --> 00:10:02,630 Matthew Kidman: produce the oil, it's a really hard one. If you've been on it in the 201 00:10:02,630 --> 00:10:05,140 Matthew Kidman: last 12 months, you're a winner. So, well done to 202 00:10:05,140 --> 00:10:07,710 Matthew Kidman: everyone who did that. But now you get the feeling 203 00:10:07,760 --> 00:10:10,630 Matthew Kidman: that there is a fair bit of trading going on. The traders 204 00:10:11,350 --> 00:10:13,570 Matthew Kidman: have got hold of the oil price. And that makes 205 00:10:13,780 --> 00:10:17,910 Matthew Kidman: sense because we've got geopolitical tensions, definitely in Europe. That's 206 00:10:17,910 --> 00:10:20,550 Matthew Kidman: right on our doorstep. And we know how important that 207 00:10:20,550 --> 00:10:23,640 Matthew Kidman: is to European energy prices with the Ukraine and Russia. And 208 00:10:23,640 --> 00:10:26,429 Matthew Kidman: then obviously what happens with China and Taiwan off the 209 00:10:26,429 --> 00:10:28,880 Matthew Kidman: back of it. These have bubbled to the top. So 210 00:10:29,260 --> 00:10:30,800 Matthew Kidman: I think that's a bit of a dangerous place to 211 00:10:30,809 --> 00:10:33,370 Matthew Kidman: be just at this very point in time. And you 212 00:10:33,370 --> 00:10:35,070 Matthew Kidman: ask how to play it, I'd stay away from it for the moment. I 213 00:10:35,640 --> 00:10:37,709 Matthew Kidman: think a lot of the good work's been done in 214 00:10:37,710 --> 00:10:38,610 Matthew Kidman: the oil producers. 215 00:10:39,059 --> 00:10:41,150 Sean Aylmer: Okay. And then just finally Matthew on small caps. One 216 00:10:41,260 --> 00:10:44,250 Sean Aylmer: of your favorite areas. You've mentioned a few earlier on 217 00:10:44,300 --> 00:10:47,420 Sean Aylmer: in this discussion. Stock specific I presume? 218 00:10:48,090 --> 00:10:51,449 Matthew Kidman: Yeah. Look, it's been very stock specific. The small caps 219 00:10:51,450 --> 00:10:57,030 Matthew Kidman: overall are probably been slightly disappointing. I know we're a 220 00:10:57,030 --> 00:10:59,689 Matthew Kidman: fair way through February, but we've probably had slightly over 221 00:10:59,700 --> 00:11:01,849 Matthew Kidman: half of the companies. It wouldn't be any more than 222 00:11:01,850 --> 00:11:04,780 Matthew Kidman: that reported. Most companies have done all right. They've handled 223 00:11:04,780 --> 00:11:08,990 Matthew Kidman: things quite well, but there's not an obvious trend. Some 224 00:11:08,990 --> 00:11:12,760 Matthew Kidman: companies will do quite well. Some won't. For example, the 225 00:11:12,760 --> 00:11:15,360 Matthew Kidman: mining services sector. We've for a long time had a 226 00:11:15,360 --> 00:11:18,760 Matthew Kidman: holding in a company called Index, which supplies companies that 227 00:11:18,760 --> 00:11:22,750 Matthew Kidman: drill for gold and other resources, various parts to them. 228 00:11:22,950 --> 00:11:25,110 Matthew Kidman: And it's done incredibly well and put out a great 229 00:11:25,110 --> 00:11:27,829 Matthew Kidman: result. The market was a bit ho hum on it because it's 230 00:11:27,830 --> 00:11:31,900 Matthew Kidman: expensive. Then you had NWH, another mining services company. More 231 00:11:31,900 --> 00:11:35,130 Matthew Kidman: based in supplying the yellow equipment and various different other 232 00:11:35,130 --> 00:11:38,270 Matthew Kidman: parts rather than drill parts. And it's been on the nose 233 00:11:38,650 --> 00:11:41,250 Matthew Kidman: for a long time, but the result was reasonably strong 234 00:11:41,600 --> 00:11:45,059 Matthew Kidman: and despite labor shortages in WA and it rallied. So it is 235 00:11:45,059 --> 00:11:48,260 Matthew Kidman: definitely stock by stock. I think the small caps you've 236 00:11:48,650 --> 00:11:50,880 Matthew Kidman: seen in general in the US have had a horrid 237 00:11:50,880 --> 00:11:53,450 Matthew Kidman: time. They've fallen a lot further with the prospect of 238 00:11:53,450 --> 00:11:57,609 Matthew Kidman: higher interest rates and inflation. I think you're probably going to 239 00:11:57,610 --> 00:12:00,069 Matthew Kidman: do a tough in that end of the market people. 240 00:12:00,550 --> 00:12:04,590 Matthew Kidman: As we grind through this interest rate cycle, people are going to 241 00:12:04,750 --> 00:12:09,610 Matthew Kidman: migrate towards bigger, more liquid companies that have stronger franchises. 242 00:12:10,190 --> 00:12:12,040 Matthew Kidman: That doesn't mean there won't be the odd small cap 243 00:12:12,100 --> 00:12:15,100 Matthew Kidman: that does really well. But I think it will be 244 00:12:15,200 --> 00:12:17,780 Matthew Kidman: a far harder course for a lot of the small 245 00:12:17,780 --> 00:12:20,050 Matthew Kidman: caps because investors will find it too hard. 246 00:12:20,429 --> 00:12:22,900 Sean Aylmer: Matthew, this earning season, do you enjoy them? There's two a year. 247 00:12:24,220 --> 00:12:26,290 Matthew Kidman: Well, they're quite difficult for the reason we said at 248 00:12:26,290 --> 00:12:29,650 Matthew Kidman: the top of the show is that companies come out, 249 00:12:29,700 --> 00:12:31,760 Matthew Kidman: we've been talking to them and then they go into 250 00:12:31,760 --> 00:12:34,210 Matthew Kidman: blackout and the numbers come out and you say, well that looks all right. This 251 00:12:34,210 --> 00:12:36,100 Matthew Kidman: is a bit better. This is a bit worse. Okay. 252 00:12:36,100 --> 00:12:38,870 Matthew Kidman: And the stock moves and it doesn't move a percent. 253 00:12:39,559 --> 00:12:44,020 Matthew Kidman: It moves 5%, 6%, sometimes 12%, 13% and you spend a whole day going well, what 254 00:12:44,020 --> 00:12:47,650 Matthew Kidman: did we miss? And your anxiety levels are up. Sometimes 255 00:12:47,650 --> 00:12:49,949 Matthew Kidman: they're up more, which is nice and you walk around 256 00:12:49,950 --> 00:12:51,589 Matthew Kidman: saying, well, I got that right. But when you look 257 00:12:51,679 --> 00:12:53,309 Matthew Kidman: at it closely, there's not much different to what you 258 00:12:53,309 --> 00:12:59,350 Matthew Kidman: thought. So it's just that volatility that reporting season now is not 259 00:12:59,350 --> 00:13:01,569 Matthew Kidman: so much an update about the company, but a trading 260 00:13:01,570 --> 00:13:04,660 Matthew Kidman: event. And I think it's just the type of investors. And 261 00:13:04,660 --> 00:13:06,900 Matthew Kidman: of course it's a trend that's come out of the 262 00:13:06,900 --> 00:13:10,730 Matthew Kidman: US where they have quarterly investing. But a colleague said 263 00:13:10,730 --> 00:13:15,900 Matthew Kidman: to me recently, it reminds him of the Japanese markets 264 00:13:15,900 --> 00:13:19,160 Matthew Kidman: going back 20 years where the fund managers just sit 265 00:13:19,160 --> 00:13:21,869 Matthew Kidman: there with a book with all the forecasts and the 266 00:13:21,870 --> 00:13:25,420 Matthew Kidman: expectations and a beat would see, oh, it beat it. 267 00:13:25,490 --> 00:13:28,280 Matthew Kidman: Therefore it's up. It missed, therefore it's down. So it 268 00:13:28,280 --> 00:13:31,850 Matthew Kidman: becomes this kind of gaming lottery type of scenario that 269 00:13:31,850 --> 00:13:34,460 Matthew Kidman: you're at the track rather than let's have a look 270 00:13:34,460 --> 00:13:37,360 Matthew Kidman: at the company. So it is a bit stressful and it's 271 00:13:37,360 --> 00:13:39,189 Matthew Kidman: not like it used to be, but that's the way 272 00:13:39,190 --> 00:13:42,790 Matthew Kidman: it is. And over time in between reporting season markets work out 273 00:13:42,840 --> 00:13:45,540 Matthew Kidman: what's what. So it's just the short period where you go 274 00:13:45,850 --> 00:13:46,130 Matthew Kidman: through it. 275 00:13:46,980 --> 00:13:48,790 Sean Aylmer: It'll all be over soon. Matthew, thank you for talking 276 00:13:48,790 --> 00:13:49,500 Sean Aylmer: to Fear and Greed. 277 00:13:49,620 --> 00:13:51,270 Matthew Kidman: Thanks for the counseling Sean. 278 00:13:51,309 --> 00:13:55,929 Sean Aylmer: That was Matthew Kidman, Principal at Centennial Asset Management. This is 279 00:13:55,929 --> 00:13:58,290 Sean Aylmer: a Fear and Greed daily interview. Join me every morning 280 00:13:58,290 --> 00:14:00,470 Sean Aylmer: for the full Fear and Greed podcast with all the 281 00:14:00,470 --> 00:14:03,440 Sean Aylmer: business news you need to know. I'm Sean Alymer. Enjoy 282 00:14:03,440 --> 00:14:03,599 Sean Aylmer: your day.