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Speaker 1: Welcome to Fear and Greed Q and A where we

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Speaker 1: ask and answer questions about business, investing, economics, politics and more.

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Speaker 1: I'm suan Alma. Reporting season is underway. Last time the

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Speaker 1: market or last reporting season, the market was very volatile,

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Speaker 1: with companies experiencing huge swings in the minutes and hours

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Speaker 1: after posting their results. Are we in for the same

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Speaker 1: thing over the next three weeks? Remember this is general

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Speaker 1: information only and you should seek advice before investing. Ben

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Speaker 1: Gilbert is the head of Australian research at Jardin. Ben,

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Speaker 1: welcome back to Fear and Greed Q and a thank

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Speaker 1: you for having me broadly. What can we expect over

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Speaker 1: the next three weeks? There's going to be kind of

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Speaker 1: that that August season last year was crazy, says how

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Speaker 1: Willie's Raese plumbing like Mega falls after their results. We're

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Speaker 1: going to see the same thing.

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Speaker 2: Well, its shaping up to be that way. I think sure.

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Speaker 3: I think maybe the word of reporting season is going

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Speaker 3: to be volatility. And obviously we've got all this external

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Speaker 3: chatter and discussion around AI, these sorts of wrisk playing

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Speaker 3: through and you already look at the first year results

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Speaker 3: at are rolling through. You've got some pretty material moves

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Speaker 3: from a sheer price perspective. Then on the flip side

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Speaker 3: of that, you're flowing throwing resources moves in gold, silver, etcetera.

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Speaker 3: I think volatility is going to be the name of

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Speaker 3: the game, So maybe it won't be some of those

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Speaker 3: defensives that you talk to in terms of CSL and

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Speaker 3: Woolies this reporting season, they might be the safe havens.

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Speaker 2: We see people starting to look back towards some of

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Speaker 2: those notes.

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Speaker 1: Let's jump into it and some of the big ones

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Speaker 1: that you follow. You mentioned Woolies. I know you follow Woolies.

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Speaker 1: What are you expecting from them?

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Speaker 3: Yeah, look, I think Woolies we'll see some green shirts

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Speaker 3: maybe part of the pun if we can call it

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Speaker 3: green shirts the green retailer. But look, I think we're

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Speaker 3: expecting to see some better numbers and better momentum a

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Speaker 3: function of the fact that they're cycling through some strikes

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Speaker 3: down in Victoria and the PCP. But you also just

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Speaker 3: notice anecdotally when you walk their stores at the moment,

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Speaker 3: it just feels that they're trading them harder. Are you

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Speaker 3: seeing a lot more displays, You're seeing heavier stock weights.

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Speaker 3: It's hard to not walk past into a lot of

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Speaker 3: these impulse categories right in front of you, sharper pricing,

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Speaker 3: so I expect that's going to have some benefits. And

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Speaker 3: then a few things changing from the competitive standpoint, which

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Speaker 3: we can touch on it if you like, with sort.

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Speaker 2: Of our difference.

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Speaker 3: It's pulling back on brands which provides a bit of

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Speaker 3: an opportunity for themselves and coals and others as well.

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Speaker 1: Yeah, I am interested what is it that drives supermarket

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Speaker 1: earnings for all these end coals because margins are actually

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Speaker 1: really small, So how do you make a difference when

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Speaker 1: you're running a supermarket.

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Speaker 3: Yeah, it all comes down to the little things. And

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Speaker 3: I think what we probably underestimate sometimes when we're walking

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Speaker 3: a store is just how much effort and time and

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Speaker 3: analysis goes into where products are positioned supply chain, getting

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Speaker 3: that additional item in the basket, because it all makes

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Speaker 3: a pretty significant impact. And I think if we look

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Speaker 3: at what does drive engagement, Obviously, value perception is key

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Speaker 3: in terms of where you're going to be shopping from

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Speaker 3: the first supermarket, and then once you get into a supermarket,

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Speaker 3: the level of trust that you have in their price

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Speaker 3: and it gives you confidence to pick up products you

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Speaker 3: might not have some visibility on previously. So all these

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Speaker 3: things play in and I think what you seeds is

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Speaker 3: that the major retails and particular Woollies have definitely been

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Speaker 3: leaning into value and that value perception, and I suspected

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Speaker 3: it's going to have begun to work, and I think

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Speaker 3: we'll see a bit of momentum coming back. That's not

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Speaker 3: to take anything away from Coals. I think Coals are

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Speaker 3: also doing a fantastic job at the moment too.

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Speaker 1: Where's Farmers? What about that? One's sort of mostly retail

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Speaker 1: though other businesses as well. What do you expect from them?

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Speaker 3: Yeah, look, Weezies I think should have a pretty solid result.

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Speaker 3: The reason I say that is is that Bunnings is

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Speaker 3: again as they always have, continued to execute well. I

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Speaker 3: would note though that the ABS today did call out

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Speaker 3: tools a bit of a softer category. It's obviously big

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Speaker 3: one with Bunnings, but look warmer weather, it's cetera. To Christmas.

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Speaker 3: I think it's really helped trade. Kmart's continuing to lean

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Speaker 3: into their value proposition. But we talked to sort of

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Speaker 3: perception that West Farmers is more of a retailer.

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Speaker 2: Lithium.

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Speaker 3: We can't forget they've got the mind, the Mount Holland mind.

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Speaker 3: Lithium prices in terms of concentrate and spods of man

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Speaker 3: have been going through the roof, and that's potentially an

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Speaker 3: area that people are looking at as a source of

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Speaker 3: positive surprise and what optimism around the outlet, which could

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Speaker 3: be supportive for ownings as well.

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Speaker 1: What about some of those other smaller retailers, that is,

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Speaker 1: premier investment, super retail, reject shop, any of those that

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Speaker 1: really some of us trace. We can throw JB hi

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Speaker 1: Fi in there, though it's not small, any of those

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Speaker 1: that really jump out at Jim.

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Speaker 2: Yeah, Look, I think the smaller name.

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Speaker 3: I think there's going to be spincing ones like you

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Speaker 3: look at youth fashion for instance. You look at all

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Speaker 3: the festivals and concerts, and it's been called out publicly

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Speaker 3: just how strong that is universal still will be an

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Speaker 3: interesting one. They always really lean in and do a

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Speaker 3: good job around merchandising, positioning. Everyone going out to those

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Speaker 3: concerts and festivals were pretty supportive. So I think that's

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Speaker 3: one that could look look pretty good. I think electronics

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Speaker 3: it's competitive. We've had and seen Telco has been very strong,

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Speaker 3: but at the same time, larger appliances and TVs has

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Speaker 3: been more competition, so I think results could be a.

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Speaker 2: Bit more mixed in that space.

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Speaker 3: Harvey's is probably the one we favor there because furniture

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Speaker 3: has been very strong. That should also benefit groups like

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Speaker 3: Temple and Webster and Scarales. Albeit Scullies did upgrade pre Christmas,

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Speaker 3: So yeah, I think there's definitely some opportunities and discretionary Obviously,

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Speaker 3: the million dollar question now are talking to is the

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Speaker 3: RBA with the rate hike, is it insurance hike or

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Speaker 3: we're going to see more? And if we're going to

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Speaker 3: see more, I think it could dampen some of the

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Speaker 3: expectations across the sector as we move forward, and I

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Speaker 3: think as we moved through reporting season there's going to

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Speaker 3: be a lot of focus on what the management teams

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Speaker 3: are saying around January and even a week or two

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Speaker 3: of trading in February, all a bit very short. Just

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Speaker 3: if the consumer has responded all to the hike that

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Speaker 3: we've seen come through.

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Speaker 1: Okay, let's move on to a couple of stocks which

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Speaker 1: have not done well. Surely is some good news for

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Speaker 1: Treasury winer States shareholders.

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Speaker 2: Surely, Ben, Please.

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Speaker 3: Well, you'd hope so, But a lot of these internal factors, which,

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Speaker 3: to be fair to them, a lot of this is

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Speaker 3: outside of their control. You've got distributed changes in the US.

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Speaker 3: This talk of one of the bigges, distributed changes sort

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Speaker 3: of seeding some more regions, which just crowds, disruption and uncertainty,

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Speaker 3: and as we know, this market doesn't like uncertainty, so

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Speaker 3: that's another risk. You've got China, which, while the consumer

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Speaker 3: backdrop is not gray, it's definitely probably not as bad

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Speaker 3: as maybe feared, but there's still risks there around pricing.

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Speaker 3: So I think the new CEO is come into that

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Speaker 3: business and has sort of taken the medicine early, and

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Speaker 3: we've seen some negative revisions.

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Speaker 2: I would hope that that's it.

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Speaker 3: I wouldn't expect there's going to be much change in

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Speaker 3: terms of commentary. The big focus for US is just

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Speaker 3: going to be around getting this realignment of pricing and

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Speaker 3: imatry in China, and we are hearing anecdotally there have

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Speaker 3: been some more cuts in pricing, So I don't really

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Speaker 3: expect there's going to be much change. I think it's

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Speaker 3: going to be interesting to see if they can just

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Speaker 3: give some confidence around strategy, some reassuring around strategy.

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Speaker 2: We look at what happened in Endeavor the other day.

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Speaker 3: I think the new CEO came in and spoke pretty

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Speaker 3: clearly and articularly in terms of what she wanted to

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Speaker 3: do and how she wanted to do it. The market

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Speaker 3: responded positively. There's probably an opportunity for Treasury in terms

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Speaker 3: of giving confidence and giving the market confidence and the

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Speaker 3: strategy they're looking to implement.

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Speaker 1: So Endeavor was actually the other one I wanted to

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Speaker 1: ask you about. They have got a new CEO, a

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Speaker 1: highly regarded CEO and Jane Hrdlicka.

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Speaker 2: Is that enough?

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Speaker 3: Yeah, Look, it's similar to Treasury. It's in a tough industry.

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Speaker 3: At the moment, people are drinking less. There's a big

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Speaker 3: focus on health. Whether it's just doing a dry January

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Speaker 3: and eating better and execuizing, or whether this is sort

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Speaker 3: of a structural shift. It's both playing out people looking

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Speaker 3: to be healthy. So you're operating in industries where the

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Speaker 3: market forces are against you, and I think that then

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Speaker 3: really goes to is how do you leverage your scale,

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Speaker 3: how do you leverage your brand strength? How do you

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Speaker 3: try to innovate to drive engagement. I think the innovation

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Speaker 3: engagement is a big one for Treasury. They're the biggest

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Speaker 3: single operator in wine globally. Now, i'd argue that the

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Speaker 3: weights on their shoulders to drive engagement and younger people

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Speaker 3: into the category. Similarly, Endeavor, I think it's around saying, well,

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Speaker 3: we all trust Dans. We talked about price trust before

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Speaker 3: you go into Dan's and you're confident that you're going

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Speaker 3: to get a deal. How do they stretch that brand,

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Speaker 3: how they give us confidence to go and buy more

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Speaker 3: stacking do we think it was more of an entertainment.

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Speaker 3: How do then drive our purchasing down so they make

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Speaker 3: us want to go to the pub to watch the footy,

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Speaker 3: et cetera. These are the things I think they've got

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Speaker 3: to think about and how they stretch brand and what

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Speaker 3: the market really liked to be. As they would talking

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Speaker 3: to revenue growth at this update, it's about driving revenue.

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Speaker 3: If your revenue is growing, that can cover a lot

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Speaker 3: of sins and really allows sort of leverage through the

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Speaker 3: P and L. So I think that's going to be

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Speaker 3: the key potch point for Endeavor as we move forward

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Speaker 3: from here.

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Speaker 1: I'm just throwing these ones at your Dominoes fits into

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Speaker 1: that Endeavor in Treasury category in terms of performance over

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Speaker 1: the past twelve months or some Yeah.

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Speaker 3: Now, look, I think you've got some consumption challenges there.

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Speaker 3: You look at GLP one and the growth that's seeing.

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Speaker 3: You've got change in PBS, it's going to be more

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Speaker 3: even faster take up again, consumers eating more healthy. I

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Speaker 3: don't know whether that's the bigger issue.

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Speaker 2: With Dominoes at the moment.

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Speaker 3: I think domos is about just trying to drive engagement,

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Speaker 3: get the pricing position right, and particularly getting some markets

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Speaker 3: like Japan and Germany in particular, that are massive opportunities. Look,

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Speaker 3: I think the QSR space is challenged. We're generally a

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Speaker 3: little bit less constructive on it. I think the competitive

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Speaker 3: backdrop is intense. I think it's only intensifying, and I

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Speaker 3: think consumers just have more choice. So we're a little

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Speaker 3: bit more cautious generally around QSR as we head injury

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Speaker 3: results and over the next sort of six or twelve months.

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Speaker 1: And many of the stocks we've talked about are very

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Speaker 1: interest rate dependent, and we know that we just had

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Speaker 1: a hike and potentially another hike later on. What about

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Speaker 1: some of the other sectors property financed, not necessarily the

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Speaker 1: specific stocks, but the sectors generally. How do you view

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Speaker 1: them verse the consumer staples. At the beginning you said

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Speaker 1: some of those staples might actually do better. Is that

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Speaker 1: mostly about interest rates?

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Speaker 3: Yeah, Look, staples is just a little bit around the

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Speaker 3: fact that they're defensive. If people looking for a bit

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Speaker 3: of insurance, if there's volatility in consumer spending, in structural

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Speaker 3: risks orund ai, and volatility around commodities, you can typically

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Speaker 3: see people sort of lean in and deviate towards that.

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Speaker 2: Similarly, obviously you look at rates.

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Speaker 3: Cycles comes down for rates, it comes down to sort

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Speaker 3: of cap rates and how they sort of sit with

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Speaker 3: their hedging books. And similarly, banks it's around ability to

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Speaker 3: sort of retain deposits when your rates are moving and

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Speaker 3: sort of playing that spread. So there's a lot of

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Speaker 3: movements I think typically obviously in a rising rates environment,

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Speaker 3: it's a function of the fact that the economy is

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Speaker 3: stronger in some form and that benefits cyclicals on the

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Speaker 3: way up. The question I think is in terms of

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Speaker 3: our mind is is this first hike is an insurance

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Speaker 3: hike from the RBA. Will the rising Aussie RUPs sort

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Speaker 3: of six seven eight percent from the sort of the

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Speaker 3: levels in the middle of last year for the US,

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Speaker 3: do can that curb inflation? Will the AI threat start

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Speaker 3: to again curb some of the employment growth? Does that

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Speaker 3: allow the RBA to now be on hold? If that's

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Speaker 3: the case, look, I think some of these cyclicals can

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Speaker 3: still perform pretty well. If not, I think to your point,

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Speaker 3: we'll see a continued rotation or could see more of

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Speaker 3: a rotation back in towards some of these defensives.

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Speaker 1: One last question AI. How much do you I mean,

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Speaker 1: how do you think about AI when you're talking to

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Speaker 1: these companies? Do you want to see them using it?

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Speaker 2: Do you like?

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Speaker 1: How do you play the AI bubble if it's a bubble?

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Speaker 3: Yeah, Look, I think it's there's always a sort of

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Speaker 3: a discussion point around to the markets sort of should

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Speaker 3: first ask questions later in terms of sort of what

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Speaker 3: were some of the share prices, And this has been

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Speaker 3: some pretty mature moves recently. Look, it's obviously it's a threat,

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Speaker 3: but it's also with threats come opportunities, and I think

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Speaker 3: people who embrace change quickly, whether you're a fast follower

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Speaker 3: or leader can be debated around where it's better to be,

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Speaker 3: But generally speaking, look, I think it presents opportunities. There's

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Speaker 3: obviously productivity opportunities which have been going for some time.

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Speaker 3: There's opportunities around taking greater share of wallet or offering

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Speaker 3: new services with your customer base, So I think people

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Speaker 3: need to look at it as an opportunity to embrace

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Speaker 3: and engage. That said that, it's obviously going to disrupt

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Speaker 3: some industries, and that's the big debate at the moment.

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Speaker 3: I know when I sit there and play around that

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Speaker 3: you can go down rabbit holes in terms of what

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Speaker 3: you can learn and the opportunities, and I think we

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Speaker 3: need to be assessing how companies are looking at evaluating

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Speaker 3: at the opportunity and threat in measured ways where they

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Speaker 3: lean into and where they realize might not they might

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Speaker 3: not have a competitive advantage and look to partner with

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Speaker 3: someone to sort of try.

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Speaker 2: And reduce that risk. So look, there's a lot of

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Speaker 2: balls in the air at the moment.

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Speaker 3: I think we've really got to sort of try and

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Speaker 3: simplify opportunities threats and go back to that old swad

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Speaker 3: analysis from UNI, and we've got to and then have

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Speaker 3: conviction in companies and their management teams and the ability

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Speaker 3: to navigate or turn it into an opportunity.

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Speaker 1: Ben thanks for talking to fear and greed he problem.

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Speaker 2: Thanks for much having me.

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Speaker 1: As Ben Gilbert, head of Australian Research at jard And

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Speaker 1: remember this is general information only and you should seek

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Speaker 1: advice before investing. If you've got something you'd like to know,

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Speaker 1: then sent through your questions on LinkedIn, Instagram, Facebook or

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Speaker 1: at fearangreed dot com dot are you I'm sure all Matt,

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Speaker 1: this is fear and greed, Q and d.