DMX Capital Partners’ Track Record Continues to Grow

DMX Capital Partners is a fund managed by DMX Asset Management. The fund is invested into high quality, largely undiscovered ASX listed companies which are trading below their assessed intrinsic value. The company has just released their Half Year Report for 2017 with expectation for the upcoming reporting season to be the highest they have been in three years.

KEY TAKEAWAYS:

• According to Factset, earnings growth for the S&P/ASX200 is forecast to be 12% in FY17.
• This year’s expected earnings growth is concentrated in the resources sector, where a rebound in commodity prices is forecast to drive more than 50% earnings growth for the sector.
• The six months to 31 December 2016 saw two large political events play out- the Brexit vote and the US election. These significant events have impacted sentiment and business decision in the UK and the US.

“Growing global companies are particularly exposed to these dynamics, with two ASX listed mid-cap companies Servcorp (ASX:SRV) and Aconex (ASX:ACX) recently substantially downgrading their profit expectation in part due to this global macro uncertainty. This followed Brambles (ASX:BXB) downgrading expectations on the back of operational weakness in America. The fact that both SRV and ACX downgraded their forecasts after having just provided more positive guidance in late 2016 illustrates the difficulty in forecasting earnings for global businesses with many moving parts, and also perhaps suggests a degree of management over-confidence in their previous forecasting.

In addition to the issues in Europe and the United States, China continues to present challenges as the well publicised Bellamy’s (ASX:BAL) downgrade highlighted.

Closer to home, challenging retail conditions have seen downgrades to date from large national retailers, Oroton (ASX:ORL), Shavershop (ASX:SSG) and Adairs (ASX:ADH). The market is currently unforgiving in relation to any such downgrades, particularly against a backdrop of general rotation away from small caps into large caps, and a de-rating of stocks on high multiples. The real challenge for investors during the upcoming reporting season will be to avoid exposure to such downgrades and guidance misses.”

For more details please click here to view the report.

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