The February reporting season was largely overshadowed by broad macroeconomic developments that unfolded at the same time results were delivered. Rising trade uncertainty, US economic weakness and expensive valuations were significant headwinds for Australian corporates which, for the most part, delivered another half of solid results. While difficult to discern, we identified three key takeaways from the reporting season that have long term implications for investors. First, there was a rotation out of (yesterday’s) expensive winners as the need for earning certainty declined; Second, there was a rotation into (yesterday’s) laggards as the willingness to bet on an improving earnings backdrop improved; and Third, there was broad caution towards any stock / sector that might be collateral damage of Trumps ongoing trade war. Overall, the reporting season gave us confidence the outlook is brightening and that "value" and performance "laggards" are where future gains lie.
