Earnings estimates 'too high' amid COVID-19

Bloomberg Ned Bell Bell Asset Management earnings

8 July 2020
| By Laura Dew |
image
image
expand image

Companies’ earnings estimates are “too high” according to Bell Asset Management chief investment officer Ned Bell, as the long-term impact of COVID-19 on businesses remains unknown.

In a Bloomberg webinar, Bell said he expected the economy would still be feeling the effects of the pandemic until the second half of 2021.

Many companies had already deferred their earnings guidance as the pandemic had caused uncertainty as to what the future held for them as a result of social distancing and travel restrictions.

“How many companies will be able to survive COVID-19? The market is pricing in a seamless recovery and I think that seems unlikely. I would not expect things to improve until the second half of 2021,” he said.

“Volatility will pick up in the second half of the 2020 as companies start to put out guidance about the impact of COVID-19 to the market and how the business is doing. I think earnings estimates for the next year are too high.”

Bell said he believed the best opportunities were in global small and mid-cap (SMID) stocks if investors had a long-term time horizon. Among its equity funds, the company runs a Global Emerging Companies fund which invests in globally-diversified small and mid-cap companies.

“We like global small and mid-caps and think they offer the best opportunity. For investors who have a three to five-year time horizon then an allocation to global SMID makes sense,” he said.

“Active management hasn’t been rewarded as much lately, there will be a lot more opportunities for active managers to add value in the next five years.”

According to FE Analytics, within the Australian Core Strategies universe, the Bell Global Emerging Companies fund returned 3.67% over one year to 30 June, 2020, versus returns by the global small and mid-cap sector average of 0.25%.

Performance of Bell Global Emerging Companies fund versus global small and mid-cap sector over one year to 30 June 2020

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

Interesting. Would be good to know the details of the StrategyOne deal....

4 days 4 hours ago

It’s astonishing to see the FAAA now pushing for more advisers by courting "career changers" and international recruits,...

3 weeks 2 days ago

increased professionalism within the industry - shouldn't that say, FAR register almost halving in the last 24 months he...

4 weeks 1 day ago

Insignia Financial has made four appointments, including three who have joined from TAL, to lead strategy and innovation in its retirement solutions for the MLC brand....

2 weeks 4 days ago

A former Brisbane financial adviser has been charged with 26 counts of dishonest conduct regarding a failure to disclose he would receive substantial commission payments ...

3 days 3 hours ago

Pinnacle Investment Management has announced it will acquire strategic interests in two international fund managers for $142 million....

2 days 6 hours ago