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The importance of ‘global growers’
Over the long term we believe a company’s share price is driven largely by its earnings growth.
ASX companies that have managed to develop a globally competitive product or service and therefore earn the majority of their earnings from outside Australia (we call these the ‘global growers’) have on average delivered far superior earnings growth and share price performance than the ASX300.
Over the past ten years these global growers have delivered roughly double the return of the ASX300 and have traded at an average 37% PE premium to the ASX200 – given their stronger growth.
The current aversion to stocks that are perceived to be impacted either directly or indirectly by tariffs has seen this premium disappear, and the global growers are now trading at around the market multiple
When people observe “the market looks expensive” they are correct that the ASX300 is trading at roughly a 20% premium to its ten year average. The global growers, however, are at a 5% discount to their historical average and a 30% discount to their historic market-relative PE.
Many of the higher quality global earners have not had any change in their long term earnings growth and are substantially cheaper than they were at the start of the year. These are the companies we own. We believe their continued strong earnings growth and relatively cheaper valuation bodes well for future returns.
The content contained in this video represents the opinions of the speakers. The speakers may hold either long or short positions in securities of various companies discussed in the audio. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely as an avenue for the speakers to express their personal views on investing and for the entertainment of the listener.