Always an independent thinker, Rudi has not shied away from making big out-of-consensus predictions that proved accurate later on. When Rio Tinto shares surged above $120 he wrote investors should sell. In mid-2008 he warned investors not to hold on to equities in oil producers. In August 2008 he predicted the largest sell-off in commodities stocks was about to follow. In 2009 he suggested Australian banks were an excellent buy. Between 2011 and 2015 Rudi consistently maintained investors were better off avoiding exposure to commodities and to commodities stocks. Post GFC, he dedicated his research to finding All-Weather Performers. See also "All-Weather Performers" on this website, as well as the Special Reports section.
Rudi's View | Aug 13 2025
It has become the 'unofficial' tradition in recent years: an interview with Livewire Markets ahead of yet another corporate reporting season in Australia.
This a sub-edited transcript from the pre-August results season interview that took place on August 5.
By Rudi Filapek-Vandyck
It has become the 'unofficial' tradition in recent years: an interview with Livewire Markets ahead of yet another corporate reporting season in Australia.
Below is a sub-edited transcript from the pre-August results season interview that took place on August 5. The video is available on Livewire and on YouTube.
James Marley: Welcome to the Rules of Investing, Podcast that gets inside the minds of leading investors, economists and industry experts, brought to you by Livewire.
My name is James Marley. I'm going to be your host today. With reporting season on the ASX about to kick into full swing, my guest today is someone that has crunched the data on more results and the reactions from the market than just about anyone else.
Rudi Filapek-Vandyck, Editor of research website FNArena and popular contributor to Livewire, is with me to help you get match fit and in the zone for the upcoming reporting season.
From the big picture on current valuations, the impacts of AI and the stocks to watch in August, this is going to be a cracking session.
Now, remember, if you're not subscribed to the Rules of Investment podcast, you can find it in all the major podcasting platforms, or you can sign up to Livewire Markets.
It's free. It's easy to register, and we'd love to have you on board. Now with that, I'd like to extend a very warm welcome to Rudi for our regular reporting season preview.
Rudi, great to have you online, and thanks so much for your time.
Rudi Filapek-Vandyck: My pleasure. The sound you're hearing is the rain coming down in Sydney on the moment this interview starts.
They're saying in investing timing is important. Apparently, with recording, it's equally as important.
James: I thought it was a sign that we're about to get rained down with a deluge of information on reporting season, and you're going to be our little safe harbour to help us get through it?
Rudi: I will definitely do my best, but after such an intro, half my work has already been done!
Valuations Are High, What Gives?
James: Well, we were having a chat about what will we talk about today? And you sent through a few points. One starting point are valuations. Are they high? Are they stretched? It's topical for investors. Difficult one to answer.
I'm going to draw attention to an article that my colleague Kerry Sun put together recently, which effectively told people to stop calling markets expensive. They're at all-time highs but the crux of the article is, drawing from UBS research, the market has evolved. Companies have gotten better.
Therefore, we need to think about market valuations in a different light. So Rudi, does that mean we need to get used to paying higher multiples, should we be more comfortable with higher valuations?
Rudi: I think the answer is yes, under certain circumstances, not always, but we definitely need to stop calling the market overvalued simply because the valuation multiples are higher than what we are used to.
It is being said that generals always fight the last war. I've come to the conclusion that most investors invest in yesterday's market, and they need to invest in tomorrow's market, of course, because it's all about looking forward.
I can't emphasise enough how happy and how glad I am that stories like that and analyses like that are being published, not just by me, but by others as well.
Because I do think a whole change still needs to take place in the psyche of investors. Australia being a typical value-oriented market for such a long time, investors are constantly thinking that something trading on a PE of six or nine is, by default, a better long-term investment than something that's trading on 96 times.
We clearly saw over the past 15 years or so that's no longer true. In addition to all the arguments mentioned --and I completely subscribe to those arguments-- I do think there's also a very simple, easier way to understand the metrics for today's market.
We still reason in averages. We judge the market by the average PE ratio for the ASX200 and we judge the environment for corporate Australia by the average EPS growth forecast.
In both cases, the market is so polarised these days, and it has been for such a long time. The market has at least been polarised ever since covid hit. That's 2020, five years ago now.
On my analysis, the polarisation is quite extreme in today's market. What that means also is those averages we are used to watch, the PE ratios and the average EPS forecast, you can't take them at face value anymore.
A big part of the reason why the PE ratio looks this high for the Australian market is because we have 11% --Commbank ((CBA))-- of the index probably trading at the highest valuation any of us has seen in our lifetime.
At 11% of the index, of course, it's going to have a big influence on the average PE ratio, and that's one of the reasons why the PE ratio is that high.
The bigger question, I think, is should the market sell off because CBA is trading at an all-time high?
I know sentiment is important, but I would argue it doesn't need to. The other element is resources remain a very important input in Australia.
They are the second biggest index weight, and they too have an outsized impact on all the averages we can calculate for the index.
So I would often smile when the next person is calling for the bubble to burst.
I don't think there's a bubble. I think it's way too early to say there's a bubble. Are valuations high? Yes, they are, but there are particular reasons why that potentially can be justified.
I'm sure we'll talk about it over the next however long this interview takes.
Why Is Corporate Australia Not Growing Earnings?
James: One of the things you mentioned there was earnings. And we get told, as investors, over time, where earnings go so too will share prices.
Same note from UBS, or a more recent note perhaps, pointed out we're about to get the second consecutive year of negative earnings growth for the ASX.
Now, to your point, that's on average, but we've got all-time highs being hit at the time when earnings are weak. So, what gives?
Rudi: Again, yes, you're right at face value. We are at an all-time high, with a PE ratio we very seldom see, on average, and August will mark the third consecutive year of negative EPS growth on average for the local market.
So you would think it's all about multiple expansion; there's no earnings growth here.
But that's not true when you look below the surface. Below the surface, the two largest components of the index locally, banks and resources, are weighing negatively on the average.
The banks are positive for this year, but it's not much, and the resources --again-- negative, both the mining companies and energy companies.
If you strip those out, you see the growth forecast for corporate Australia outside of those two sectors, is actually not that bad at all.
It's more in the mid to high single digits EPS growth. Long term the average in Australia is 5% EPS growth per year.
If the forecast now is six or seven or eight, that means there are large parts of the Australian economy that are performing above average.
Coming back to the polarisation that I touched upon earlier, what you will find in sectors is that one company has performed and the other one hasn't. If you want to drill down to it, it's usually that one company has performed operationally and the other one hasn't.
So, earnings do count, not only in August, but also for the in between seasons.
?
August Too Early?
James: Banks, it's going to be hard for them to meaningfully move their earnings. They're flat-ish type businesses and have been for a long time. Resources, highly cyclical. Can you see a turnaround story in that earnings outlook? People have been waiting for that broader earnings picture to move into positive territory again. Are we going to see it this August?
Rudi: Its going to be interesting. My view in advance, I think the question that will come to the fore for August is: is it not too early still?
That will be the question that will be asked for a lot of things. We've now had at least three years of large caps on average outperforming small caps. Is that going to reverse?
I think the question will be: is it not too early for that?
We have subdued consumer spending. We have profit warnings from consumer spending-related companies in Australia. Is that going to turn around in August?
I think the question will be: isn't it too early yet for that?
I also think the whole revival of the resources sector is most likely too early.
Are we going to see a big improvement in earnings forecasts? I think it's too early in August; the RBA has been very reluctant in helping out, Trump tariffs, it hasn't all helped.
I think maybe a more logical time will be February next year, instead of August this year, which clearly will pose some challenges for investors.
You can also expand that to other sectors and to other themes. Are we going to see a broadening out of the advantages, the benefits, the applications of AI across corporate Australia?
Probably a little bit too early to see concrete results of that. If you take the broad view this whole AI theme at some stage will stumble and at least have a pause, but that too, I think, will be too early for August. I think that will continue.
So, I think the challenges are lining up, and I know the usual reflex of investors is trying to figure out which companies haven't performed yet -- they might perform in August.
I think the danger is they will say goodbye too early to companies that have performed and that still have a lot of firepower to continue performing.
If you look, for example, at the three corporate results just prior to this interview, Champion Iron ((CIA)) and Rio Tinto ((RIO)), two commodities companies, two iron ore producers, two disappointments.
Both share prices went down. Both share prices have not performed over the year past.
We also had ResMed ((RMD)) reaching an all-time high, and it comes out with a result better than expected. Share price up.
I think there's a lesson here for investors. Don't say too early to companies that have performed that this is the end of the road, and don't think too easily that those who are lagging that their time has come to perform now.
August might just be too early for that.
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