Short-term volatility... Long-term opportunity
While it is inevitable that short-term volatility and market drawdowns can cause angst for investors, it is not all bad. It is important to remember that with volatility also comes opportunity and this period of weakness has been no exception.
The Australian equity market now looks better value than it has for some time, trading at 14.5 times one year forward earnings. Despite the reasonable valuation, we believe a selective and focused approach remains key to uncovering great opportunities.
In this environment, companies with robust “future yield” characteristics are well placed. Companies like Transurban, Contact Energy and Chorus Ltd all, in our view, have the desired attributes.
As an example, let’s look at Transurban. We believe it offers one of the most transparent and robust earnings profiles in the Australian market. It has a staggered pipeline of value adding future projects and continues to generate synergies from its acquisition of the Queensland Motorways Ltd. The chart below depicts the “future yield” characteristic that we mentioned above. Despite having a dividend of ~4% in 2015, we expect the company to experience dividend growth for years to come.
If you wish to speak to one of our Brisbane or Gold Coast Financial Advisers to review situation please contact us on 075562 2200
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