Are Listed Companies Able To Beat The Downturn?
Sustaining and growing earnings is incredibly difficult to do; probably more so than one might expect. We call the companies that can the “exceptional exceptions” and they are quite an eclectic mix of shares. Globally they range from US financial data firm Factset to Yahoo Japan, and from Atmos Energy to the Chinese brewer Tsingtau. The domestic names are no less diverse, from Mr Price to Wilson Bayly Holmes-Ovcon; from EOH to Famous Brands – these counters have managed to grow earnings consistently ahead of nominal GDP, despite the ups and downs of the economic cycle.
To establish the identity of these exceptional exceptions, Cannon Asset Managers’ investment team started by surveying stock markets across 25 countries and our findings revealed that the most significant factor to impact growth in company earnings is GDP growth. This comes as something of a surprise to analysts and executives. More than any strategy adopted by businesses, including diversification or globalisation, beyond any industry variables or geography, our evidence shows that GDP growth has the greatest impact on companies’ profit performance. As an aside, it should be noted that we looked at influences on company profit over time, not at stock market performance, because ultimately company value is determined by profit, not sentiment...
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