Thoughts on markets, investing, and equity research.
Wesfarmers, GYG, and Breville have management credibility of 8.7, 9.0, and 8.1 out of 10. All are 24-27% above fair value. The quality premium has absorbed the margin of safety.
HUB24 has grown to 9.3% platform share and is 57% above our A$42.23 fair value. Magellan has compressed from 63bps to 55bps in fees and is 35% above A$6.13. Insignia is priced at CC Capital scheme value. AMP is at equilibrium earning below its cost of equity.
IAG (8.3/10 credibility) and Suncorp (8.0/10) look worst in reporting season yet both are at or above through-cycle targets. IAG's underlying ex-RACQI margin is 16.3%, its highest on record. Suncorp's UITR of 11.7% came in within the 10-12% target despite A$453m of above-allowance nat-cat losses.
Transurban, Telstra, and APA are executing flawlessly. But with the 10-year bond yield at 4.86%, their yield spreads have collapsed to zero or negative. Quality infrastructure at the wrong price.
Spodumene crashed 87% from US$5,000 to US$672 per tonne. Three ASX lithium companies were fully exposed. Their fates diverged based on one factor: where they sat on the cost curve.
Gold is at record highs above A$6,000/oz. Regis Resources made A$323 million profit. St Barbara made A$1.3 million. The difference is hedge book positioning, balance sheet strength, and jurisdiction.
Five Australian REITs in the same rate environment with valuations spanning a 26% NTA discount to a 171% premium. The market is shifting capital from passive landlords to property platforms, and the gap is widening.
Bendigo Bank trades at a 38% premium to fair value with sub-cost-of-equity returns, an AUSTRAC fine of A$250M-A$800M pending, and credit normalisation about to compress earnings 12-15%. The market assigns 80% transformation probability; we assign 40%.
JB Hi-Fi posted record half-year sales of A$6.09 billion, then January comps dropped to +2-3% from +5-7%. The two-speed consumer and late-cycle policy lag signal broader retail weakness through H2 2026.
Cochlear and Pro Medicus are two of the highest-quality businesses on the ASX, both overvalued by 60%+, and both just reported disappointing H1 results. The comparison isolates the quality premium trap from two different angles.
GQG Partners generates 77% operating margins and is run by a founder who owns 70% and has co-invested US$1B+ alongside clients. The market prices a cyclical trough as structural decline, creating a 47% discount.
Across 31 companies, the highest quality scores correlate with the widest overvaluations. PME at 8.4/10 is 61% overvalued. VVA at 5.9/10 offers 107% upside. Quality deserves a premium, but the market has lost track of how much.