This is why the MB Fund retains exposure to the US earnings boom:
Internet giant Alphabet posted a significant earnings beat on Monday after the close, sending shares up more than 5%.
Alphabet reported adjusted EPS of $11.75 per share compared to $9.64 expected by analysts. Total revenue came in at $32.7 billion; excluding traffic acquisition costs (revenue-sharing payments), revenue came in at $26.2 billion, above a $25.58 billion consensus. Including a massive $5.1 billion fine issued by the EU that the company plans to appeal, Alphabet’s EPS was $4.54.
GOOGL is up 4.5% in after hours and NASDAQ futures took off:
MB Fund holds Alphabet (Google) among other FANGS such as Microsoft and Apple. The reason why is plain. The earnings growth of the tech giants is still so high that it is crushing down fears of over-valuation (that we never shared):
The EPS trend more broadly is also ridiculous. Via Deutsche:
And it has good breadth:
Plus a lot of these tearaway earnings get plowed straight back into buybacks (not investment!):
It’s a temporary boom driven an huge fiscal tailwind but it isn’t over. All next year firms will still finding new ways to game the reformed (deformed!) US tax system.
It’s a late cycle gift for investors. Especially for Aussies that are watching there own earnings hopes get hosed versus the US:
And with the amplifying, as well as hedging benefits of the Australian dollar as China slows, it holds out the prospect of out-sized late cycle returns at minimal risk.
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David Llewellyn-Smith is chief strategist at the MB Fund which is long US equities that will benefit from a falling Australian dollar so he is definitely talking his book. Below is the performance of the MB Fund since inception:
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The information on this blog contains general information and does not take into account your personal objectives, financial situation or needs. Past performance is not an indication of future performance. Damien Klassen is an authorised representative of Nucleus Wealth Management, a Corporate Authorised Representative of Integrity Private Wealth Pty Ltd, AFSL 436298.
