Should I Buy ASX Shares Now?

New stock market gamblers in the US also, and Davey Day Trader

This theme of inexperienced investors taking risks in the share market since March is not only a theme confined to Australia.

What if all the bulls and all the bears both get it dramatically wrong?

Earlier I confused probably the readers and definitely myself about where the consensus thinks markets are going. If you are a contrarian now you probably don’t even know what the consensus is to go against it!

Perhaps the contrarian view on the market’s direction from here is to have no view. Or that we stay in a range on the ASX of 5000 to 5,800 for a long time. Then spend a year or more of listening to bulls and bears criticizing each other. That might be painful to listen to.

Rather then offer another two cents on that issue I thought I just might throw in some charts to show some of the dispersion in market performance.

Maybe some areas are dominated by FOMO, but some still show signs of fear?

I shall refer to the following link to reference many charts. Bear in mind the article was a little over a month old on April 9th. I think it still tells some interesting stories.

https://www.topdowncharts.com/single-post/2020/04/09/10-Charts-on-the-PE10-Valuation

Because the charts more reflect when markets were bottoming out in March they are less meaningful now from an absolute standpoint. They might provide some context over why markets were able to rebound sharply from the March lows though.

I think it still offers some insights into how much dispersion of performance in markets we have seen.

Investors who have focused a lot on investing outside of the big cap names in the US (or some glamour ASX thematic stories), are probably hardly feeling exuberant about their investment returns from the last couple of years. (well maybe I am just speaking for myself!). Think of themes such as value vs growth (yes I realise they are joined at the hip but refer to how many define these), emerging markets, small cap value in particular. Not a lot of FOMO in those areas.

But perhaps it is all different this time, the new normal?

Now for some usual rants

Should I buy WAM shares?

I want to stress here that I have a healthy respect for the long term performance numbers of WAM. Geoff Wilson had done a good job over a long time and is generous with his time at the investor meetings. I have to call it as I see it though and I don’t like their latest format of the NTA reports.

A few things that have come to light since I last commented on them are as follows. Recent performance versus their benchmarks have been disappointing.

ASX LIC performance reporting

 What I find more frustrating on that is not quickly being able to look up the figures for recent years. Investing is about the very long term of course. I would argue though that WAM over the last 3-5 years is a different beast to their first decade. Huge AUMs now, different staff making the calls. Knowing performance of the last 3-5 years might still have some relevance I would have thought. I hope they haven’t fallen in the trap of playing games with performance reporting.

I bring this up because another issue with some lacklustre performance is the depleting profit reserves at a time of an increasing premium to NTA. According to the last NTA report,  their premium to NTA was 20%, with 6 cents in profits reserve, and they were holding 25% of the fund in cash. If they ever have to cut their dividend in the future it will be interesting seeing how the share price reacts.

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Disclaimer: These views on excessive premiums to NTA have been made before on this blog. Not much has changed so I have been wrong on this before and may well be so in the future!

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