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Chapter 1: What is the significance of ASX reporting season?
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It's the Australian Finance Podcast and Australian Investors Podcast that we're airing to today.
It's been a while since we've had a crossover.
Yeah, crossover episode reaching tens of thousands of investors, which is fantastic, and everyone wanting to know what's going to happen in the month of August.
Yes, and August is special because?
It's reporting season here in Australia. So that means companies that are Australian release their results, whether it's full year or half year, they release their results. There'll be typically three reports with every company result. You'll get a media release, which is the thing that they want you to read.
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Chapter 2: What should investors expect during the ASX reporting season?
So some of the worst stuff comes out in July and National Tyre is another one, a tyre and wheel distributor. And so those companies typically air that first and then they say in that announcement, we're going to do our full year results on this day and there'll be a call at this time.
But my pet peeve with a lot of ASX companies, and I understand why this happens, is they release the results at say 8.30 in the morning. That's when it hits the ASX boards. And then they say, we've got an investor call at 9 a.m. or 10 a.m. And it really only gives you 30 to 90 minutes to read the results and be prepared for what management are going to say to ask the question.
I still think some of these companies do it on purpose. And the other thing to note is that you can have multiple companies on the same day. So you can access your transcripts via the ticker terminal if you have a subscription to tikr.com or their company will sometimes publish them on their website.
Because they don't always record them, do they?
No, they don't always. So some companies do Zoom webinars and they'll answer some questions and they won't record it. Just another thing to be mindful of is that when you sit on an investor call and some of our experienced listeners will be fully across this. Typically you have to register and then you go through a third party investor relations company.
A lot of the times on the call, the investor relations company screens out all the hard questions. And so the questions that actually get put to management are like the kind of glossy ones, the easy, the low balls, the low hanging fruit, like the softballs. And so that's really frustrating.
Because they can just say, we didn't get time to get to that question.
Yeah, that's it. And so you don't always get the whole truth or at least what you want to know. But again, the best thing you can do is be prepared. So in this downloadable checklist or workbook, if you like, I've put together about 15 different questions to prompt you. And the three that are most important for you to think about up front when you're coming into reporting season is,
what is your original thesis? So what is the reason that you own this company in your portfolio? So, you know, if it's a Xero, which is the accounting software company that I own shares in, they're not reporting right now, they're a Kiwi company, but, you know, I own Xero because I think it might win in the UK and Canada. It might win those markets for its business. And so that's my thesis.
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Chapter 3: How can investors prepare for ASX reporting season?
So that's a red flag for most people, which we covered in our Red Flags episode on the Australian Finance Podcast. One final thing is you can use Glassdoor or even Seek Companies to get a quick read on the culture inside of a business. Typically when a company goes X growth, so when it's slowing down its growth, the culture dramatically changes inside a company.
This is not specific to any one company, it's actually for all companies because some people have a growth mindset and some people don't. So when a company no longer achieves milestones, no longer has those lavish dinners because they all did so well, you can see the culture turn.
And so we're going to see that not only here in Australia, but in the US where employees were rewarded for so much growth with stock-based compensation. They were given shares in the company or big cash bonuses. So what happens now?
When that starts to disappear or the value of their employee shares is falling.
And what does management have to do? What can they do? What can they say? So you can quickly get a pulse check on what's happening inside a company for most big companies using Glassdoor. So that's somewhere where I'll be fact checking what management is saying in their culture slides as a kind of a long-term, I guess, fact find or fact check.
Okay. Yeah. And there's, I know there's a lot of things, other factors you've put together in the checklist, but I guess once I've had a look at the annual report, the reason I'm reading it is either to make a decision to continue to hold my investment, to sell it, or maybe I want to buy in. What would sort of, what would you be looking at there in making that decision?
Is there anything that would kill your thesis or be the reason that you buy?
Yeah, so at the end of the day, most people know that companies are anti-fragile. So at their core, companies are just like tribes of people coming together to unite under one common goal. That's all a company is. And so most companies tend to be quite flexible. So what I mean by that is a company, when you go into Twitter or you go into Reddit or you go into your favorite investing forum,
typically everyone's like doom and gloom. Everyone's like, this is a really bad result, this has happened, that's happened, sell, sell, sell, right?
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Chapter 4: What are the key documents released during reporting season?
They go through periods where they're not going to perform optimally. And so the easiest way, I think, to know if your company has that long-term mindset, long-term potential is actually just to write down what your reason or your thesis is before the company reports, like I said, and then do the same thing afterwards and compare if the current thesis is intact.
Because this is a really interesting thing. It's called thesis creep. And the reason that we originally invest in something changes over time. And the only way to really keep track of yourself is actually to write it down. For our modeling, we have like Excel models or whatever and we'll be able to see it. We'll be able to see how we thought this and this happened.
So we thought revenue was going up this much and only went up this much. And you can then see how that plays out in the valuation. But if you don't go that far into the weeds, it's okay. You can just write down why you own something.
And it can change over time. Like decades ago, Amazon was just selling books. You would never have imagined what they could be doing with stores and web services and things like that.
Yeah, so that can happen. And there are many instances of where you test that and you are questioning it.
You're testing, you know, I think there's the great thing that, and I think Brian Feroldi talked about this on the podcast, is that if you go back to the early 2000s and you got the most optimistic forecast of any analyst, the one that was just crazy, the one that was wild, who forecast the most ludicrous growth for this company, even that analyst underestimated what Amazon achieved.
So that can happen, right? But that's typically the outlier. Typically the outlier. I would want to be making sure that, you know, even at the time, Amazon, you could see it working. You didn't have to be a financial analyst to know that everyone was starting to use Amazon. Everyone was ordering their books online. Everyone was migrating to the internet.
But if a company comes out and they're like, yeah, we've got this technology, it's going to change the world. We've got this concept car that's just been manufactured, blah, blah, blah. No.
unless it's actually got something to show for it whether you can actually go and see the product being used by more and more people so you can see that network effect or if you can see it in the financials actual cash flow and actual revenue growth I'd be more skeptical than not at this stage of the market cycle that's not like doom and gloom necessarily it's just that you have to have something to measure your thesis so for me what I look at is like for zero I'll give zero because it's a good example and I've used a lot
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Chapter 5: What are the most important factors to analyze in company reports?
Yeah, I don't know if it's pre or post results. I should find out.
Yeah, so we might see, we might come out with the, we might record and then two days later we'll watch results come out and it flops or something. But that just happens. So there's plenty to go on this reporting season, no matter where you are, no matter which channel you listen to. So it'll be a good month, a really interesting month for investors. So Kate, thanks for joining me.
Thanks for listening, everyone. Thank you so much.
You can also join our online community by following the link in the description. If you enjoyed the show, what we'd love is for you to leave us a snappy review on iTunes. And you can follow us on Twitter and Instagram at Rask Australia. Kate and I are also on both of those channels.
Finally, if you have any feedback, suggestions for episodes or guests to come on the show, or you just have a question for us, shoot us an email at podcast at rask.com.au.
Thank you.
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