Pinned straw:
Yes @Clio Good to see fundies buying shares in Audinate. I'm still on the sidelines because I think they could drift south east for a further 6 to 12 months before the issues that have been discussed here work through and customers who had previously overstocked run their stocks down and start purchasing from Audinate again. There will be a fair whack of prospective investors who may well wait for the tide to turn as evidenced by improved reports from AD8 - which could be a couple of 6-monthly reports away yet. Great company, but I feel that for the market to turn positive on them again, the market needs to feel like their sales are growing again at a good clip. Until then, I feel the current share price trajectory may continue, probably not at such a steep angle but still south east.
Also, it's no biggy, but remember that AustralianSuper is Australia's largest super fund, and it's one of a bunch of industry super funds that allow members to directly invest in ASX300 companies with up to 80% of their super balance, subject to rules including no more than 20% of their balance in any single company. In their case, they call that option "Member Direct". In my industry super fund, CBUS, they call it "Self Managed". AustralianSuper have A$341 billion of FUM and over 3.4 million members (as at Sep 30, 2024), so they will pop up all over the place as "Subs" for various ASX300 companies due to their members holding those companies in their AS Member Direct accounts and those shares being held in the name of AustralianSuper not the individual members' names. This usually applies more to ex-100 companies (coz ASX100 companies tend to have market caps that are too large for AS to show up as "Subs" unless AustralianSuper make an intentional active investment in those companies as part of their managed fund strategy).
In my experience, the majority of times when AustralianSuper pop up as substantial holders for a company in the lower two thirds of the ASX300 - such as AD8 who are in the ASX200 but not the ASX100 - it is usually due to their members choosing to hold those companies, not due to decisions made by AustralianSuper themselves, particularly when there are trades listed on almost every trading day in the lower part of these "Change of..." or "Becoming..." or "Ceasing..." notices.
It's still positive, because it means there are individual investors who want to hold these companies in their super fund, but it isn't always down to a decision by a fund manager.
Just on me not holding AD8 currently, but intending to get back in when they are back in an uptrend once more, I bought back into NEU (Neuren Pharmaceuticals) in my own super yesterday after holding them earlier in the year and selling out at over $20/share. I could be wrong, but it looks to me like the selling pressure on NEU has dissipated and I have noted that NEU has risen a bit on some of the market's "down" days recently, so I feel they may have bottomed for now, which has been helped by some positive newsflow, so I reckon it's time for me to get back in.
I'm just wary of opportunity cost when holding companies that are still in downtrends. NEU could fall further, but I feel they are more likely to go up from here.
On the other hand I think AD8 probably will fall further in the absence of positive newsflow. There's no evidence of the AD8 graph flattening out or the trend reversing yet, and no reason to expect it to go back into an uptrend yet IMO until their sales start improving again in terms of getting back to the sort of growth they were exhibiting before the customer overstocking issues earlier this year.
I like both companies, but I don't feel I need to always hold every company I like. I can be selective about when I hold them, and during a sustained downtrend isn't a preference.
Just re-reading that post of mine from earlier today and I can see that I did not explain why I'm still holding Neuren Pharmaceuticals (NEU) despite stating that I don't like to (and try not to) hold companies whose share prices are in sustained downtrends, which NEU is. In that case it was because I only bought back in a month ago when it looked like the downtrend was over - their share price was rising again - however that didn't last and they resumed their downtrend as soon as I bought back in (in December) - AND because NEU's next update is likely to be positive and should cause the market's frown to turn upside down and their share price to rise again - AND they've been actively buying back their own shares except during this current "blackout" period leading up to their full year results release (for the financial year ended 31 December) - they said in their Nov 14th announcement relating to the share buyback that they would not be buying shares back in January due to the blackout period - see: Neuren-announces-A$50m-on-market-share-buy-back-program.PDF. I do like their rationale for the buyback also - which you can read by clicking on that blue link in the line above this one - essentially they have excess money coming in now - surplus to their own requirements - so they are using some of that for capital management, and in this case they are buying back their own shares and cancelling them, which means the value of each NEU share increases (because there are less shares on issue, despite the intrinsic value of the company being unchanged, all other things being equal).
So I think there's a circuit breaker (or "positive catalyst" as Geoff Wilson and everybody else at Wilson Asset Management like to call them) coming - probably in February (their full year results) which is only a couple of weeks away now - that should provide a trigger for a positive market re-rate of Neuren Pharma.
That could also be the case with Audinate (AD8) but my gut feel is that we may well be at least another 6 months away from that scenario with AD8. Unlike Neuren, Audinate has a financial year that ends on June 30 so in Audinate's case it will be their H1 report in Feb; In Neuren's case it will be their full year report in Feb because their FY finishes on Dec 31st. And I'm thinking the OEM overstocking issues may well not have fully resolved just yet with Audinate - so their sales will likely have remained subdued in H1 of FY25 - and that it's going to take more than one report - and probably at least one really good full year report - to prove to the market that AD8 are back to being the sort of growth company the market liked so much previously when Audinate were bid up to over $20/share in that Feb thru April period last year (2024).
I also break my own rules fairly often, when I think the circumstances warrant it, and an example of that would be Southern Cross Electrical (SXE) which has been in a downtrend since they hit a $1.96 high in August. I do not hold SXE in any real money portfolios, just here on SM since buying back in @ $1.675 on Nov 22nd and averaging down to $1.39 on December 10th, however now I'm thinking about buying back in with real money as long as they stay above $1.40, a level they've bounced off a couple of times in the past 5 weeks:
If SXE break below $1.40 I'll likely wait a bit longer, but if they can stay above $1.40 I do feel they are primed for a rebound.
Here are their last three announcements, which were all marked as market/price sensitive, in chronological order, from earliest to latest:
- Notification-of-commencement-of-arbitration-02Dec2024.PDF
- Project-awards-circa-$125m-11Dec2024.PDF
- Project-awards-over-$100m-16Dec2024.PDF
The first one could be viewed as negative, however SXE are only seeking $22m plus costs for additional costs resulting from the delay and disruption to the WestConnex M5 motorway tunnel project in Sydney, associated indirect costs, other unpaid variations, and related sums, and they are doing so because they believe that CPB Dragados Samsung Joint Venture (“CDSJV”) mismanagement of the project was the root cause for substantial completion not being achieved until mid-2020 instead of November 2019.
SXE said in that announcement that it had pursued all other available avenues to resolve the matter, including negotiation, security of payment processes, and mediation, without success and given the passage of time it had no choice other than to commence arbitration proceedings under the contract. They said that the arbitration will be conducted pursuant to the Australian Centre for International Commercial Arbitration (“ACICA”) Expedited Arbitration Rules 2021. ACICA’s Expedited Arbitration Rules are designed to resolve disputes in a timely and cost-effective manner. Accordingly, SCEE expects that this matter will be resolved this financial year.
SCEE Group Managing Director Graeme Dunn said “In Heyday’s many decades of conducting business it, and for that matter every other member of the SCEE Group, has never had to commence proceedings of this nature against a client and it is with great reluctance that we have adopted this course of action. However, Heyday must pursue what it considers are its contractual entitlements and so, while we continue to remain open to a commercial resolution of this dispute, we shall pursue this matter to its conclusion."
So any negative reaction to that one is in my opinion an overreaction, and the other two more recent announcements are overwhelmingly positive. Furthermore, I don't believe that everybody fully comprehends or realises that SCEE is not really a mining services company any more, or to be more clear their revenue from the Resources sector is now dwarfed by their revenue from infrastructure and commercial, which together represented 73% of SCEE's (SXE's) Group revenue in FY24 - with Resources providing only 27% of FY24 revenue.
And while their margins went backwards in FY24, something that the market clearly did not like, there are plenty of positives there as well, including record profit from increased revenue.
Slide sourced from: 29/10/2024: SXE's Managing Director's AGM Presentation [Slide 6, added to by me to highlight the positives and negatives]
Anyway, this is another case where I'm thinking the SCEE (SXE) H1 report next month is likely to surprise to the upside, especially the size of their current order book ("work in hand"/contracted work) after all of these recent contract wins, as well as the makeup of that work in terms of sector exposures. So I'm prepared to take a view that the downtrend has run its course or is likely to be very close to the bottom.
I don't think we're there yet with AD8, but I think we're damn close with SXE and NEU. Just my opinion. I don't hold SXE in any real money portfolios yet, but I could add them to one soonish - not my SMSF because SXE are not yet in the ASX300 so I can't add them there - but to the other larger one outside of super. So, yeah, I certainly have exceptions to my own investing rules.
I have been buying IRL since 2021 (Lowest $5.88 & Highest $15.85 & a lot of in-between shots). I am a little underwater now with any gains and have totally accepted that I can no longer even guess the psychology driving the trades. Have switched to HOLD-and-SEE mode.
great post. Or maybe I just like it because of confirmation bias. I’m dropping more into this one as it falls also so nice to hear the institutional money is seeing things the same.