Rudi’s View: This Too Shall Pass

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            [0] => ((GMG))
            [1] => ((REA))
            [2] => ((RMD))
            [3] => ((TNE))
            [4] => ((XRO))
            [5] => ((MTS))
            [6] => ((ALQ))
            [7] => ((AMC))
            [8] => ((NUF))
            [9] => ((ORI))
            [10] => ((PNR))
            [11] => ((CAR))
            [12] => ((PME))
            [13] => ((OCL))
            [14] => ((WDS))
            [15] => ((SIG))
            [16] => ((PME))
            [17] => ((SOL))
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            [1] => REA
            [2] => RMD
            [3] => TNE
            [4] => XRO
            [5] => MTS
            [6] => ALQ
            [7] => AMC
            [8] => NUF
            [9] => ORI
            [10] => PNR
            [11] => CAR
            [12] => PME
            [13] => OCL
            [14] => WDS
            [15] => SIG
            [16] => PME
            [17] => SOL
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)

This story features GOODMAN GROUP, and other companies.
For more info SHARE ANALYSIS: GMG
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

In this week's Weekly Insights:

• This Too Shall Pass
• FNArena Talks

By Rudi Filapek-Vandyck, Editor

Today’s will be my final Weekly Insights for 2025.

My regular Rudi’s View writings on Thursdays will continue until the Christmas and year-end break.

This Too Shall Pass

A few years ago I quoted research by Morgan Stanley suggesting a basket of the highest quality growth companies generates an average annual outperformance of 200 basis points (2% points) versus the market index over time.

Certainly, the ten year performance of the FNArena-Vested Equities All-Weather Model Portfolio fits in with that observation, even though underlying methodologies are not exactly the same and the All-Weathers are being complemented with a standard allocation to gold and to some higher yielding, dividend paying exposures.

But on a rough comparison, the ASX200 has been returning circa 9% (dividends included, ex-franking) against the All-Weather’s 11% (before fees) up until December 31 last year.

What was not highlighted in Morgan Stanley’s research, but has been very much confirmed by my own experience, is that, on occasion, a portfolio filled with high quality and growth companies must be prepared for significant and persistent under-performance, in particular in a market such as Australia’s.

Up until recently, the final four months of 2016 had been the toughest period for those not invested in banks and resources and smaller cap cyclicals, but this year the second half of 2025 is easily replicating that experience.

This time around, the end outcome for the calendar year might not be positive for the higher-valued basket of stocks, so it’s actually worse overall.

Possible explanations include a persistent narrative that AI is the next market bubble waiting to burst (plenty of stories and predictions swirling around on social media), but expectations of better economic growth and thus a broadening of earnings and the equities bull market are equally playing their part, as are higher inflation and a local central bank and bond market that are no longer in sync with the Federal Reserve and US Treasuries.

Add low trading volumes, a market that is increasingly dominated by ‘momentum’, algorithmic trading programs targeting higher PE stocks under bear market-alike conditions (for this market segment) and investors anxious about catching falling knives, plus troubles in the world of crypto assets (taken as a sign of cracks in global liquidity) and it is not difficult to see why share prices for the likes of Goodman Group ((GMG)), REA Group ((REA)), ResMed ((RMD)), TechnologyOne ((TNE)) and Xero ((XRO)) have had a horrible time post mid-year.

Many a smaller cap peer has fared worse.

Australia doesn’t like AI & Technology

The irony remains, of course, in contrast to the many scaremongering predictions and reports, there has been no Nasdaq meltdown with plenty of US market commentators preparing for the next end-of-year rally into a positive finish for calendar year 2025.

While shareholders in offshore peers including Intuit, SAP and Apple (Atlassian too) are unlikely to look back with a warm, fuzzy feeling over the year past, one cannot help but note the general departure from former highflyers on the ASX has resulted in a much harsher ‘punishment’ for those who stayed the course locally.

I have yet to read anyone else’s explanation, but my five cents’ worth is local institutions do not need to own any of these companies as long as they own plenty of banks and large-cap resources, plus low sentiment and low trading volumes create an ideal environment for those who wish to attack and tear down specific targets.

But let’s not sugarcoat it: as the calendar enters the final four weeks of the year, the local share market is merely stumbling along, exhibiting no confidence and no direction, and many will be questioning whether an early zoom-out is most apposite before festivities and the annual holiday.

Comeback Cyclicals

Not helping also is corporate updates are not signaling the anticipated broadening in local earnings growth is arriving soon-ish.

If anything, the FNArena Corporate Monitor clearly shows the bias in the current post-August results season remains skewed towards more disappointment and ‘misses’.

Look no further than Metcash’s ((MTS)) half-yearly result release on Monday, with those shares down in excess of -9% on the day.

It is true, earnings forecasts have risen post August disappointment, but look into the finer details and it’s been almost exclusively a mining and metals story.

FNArena’s Monitor is showing nearly 39% of the 49 results updated to date disappointed against analysts’ forecasts.

This is a similar percentage from market updates between March and July, suggesting not much has improved on top of uninspiring results in February and August.

Some might say these are not the outcomes one would expect from an index at current level, and they would have a valid point.

Whereas market valuations are higher in the US –often cited as a major concern by more anxious investors locally– it is equally important to highlight those valuations are underpinned by much more robust levels of earnings growth, albeit more so for the Megacaps and AI-beneficiaries.

To be fair: the current generally disappointing results season has added plenty of credence to the local momentum swing in favour of cyclicals as market updates from the likes of ALS Ltd ((ALQ)), Amcor ((AMC)), Nufarm ((NUF)), Orica ((ORI)) and Pantoro Gold ((PNR)) have provided sufficient evidence of improving prospects to turn analysts and investors excited again.

No appetite for Growth & Quality

Equally important: while share prices for currently out-of-favour quality growth companies –think Car Group ((CAR)), but also Pro Medicus ((PME)), Objective Corp ((OCL)) and Xero– cannot catch a sustainable bid these days, it’s good to keep in mind these companies remain poised for ongoing strong growth and history suggests they generally do deliver on that potential.

The one key caveat here is that AI will increasingly become more important and this not only includes higher margins and more efficiencies, but equally so businesses being disrupted; temporarily or otherwise.

It is well possible many of yesteryear’s solid performers will have to increase their spending in order to safeguard their market share and stay relevant, but such is life during major technological transformation.

The counter-argument is maybe such risks are already reflected in today’s share prices?

FNArena’s consensus target for REA Group, for instance, sits currently 32.50% above the share price. For Xero shares the gap is almost 64%.

Viewed from a different angle: in the aftermath of the GFC global bear market, I started a journey into investing in high quality, dependable, robust growth stories but maybe this journey has equally provided enough evidence to suggest it’s not a luxury to diversify one’s portfolio?

The fact US equities are no longer leading the world in 2025, and with Growth and Technology stocks in Australia literally experiencing a lost year, it’s very hard to argue against it.

The present is not the future

It’s equally important to remind ourselves: nothing ever lasts forever.

Energy companies had their moment under the sun back in 2022 (when very little assets stood their ground), but there hasn’t been much joy since for those not jumping on and off during momentum turns.

2025 hasn’t been too bad for Woodside Energy ((WDS)) & Co, considering the broader context. In the same vein: today’s no appetite for anything AI or trading on above-average multiples shall pass too, eventually.

In the absence of that Nasdaq sell-down finally happening (I remain a skeptic on that front), I don’t know exactly how or when or why exactly investors will again embrace the growth and prospects from companies they are not preferencing today, but it won’t last forever – that’s as firm a forecast history can put forward.

The FNArena-Vested Equities All-Weather Model Portfolio is using the moribund market in October and November to diversify the portfolio through the addition of Sigma Healthcare ((SIG)), Pro Medicus ((PME)) and Washington H Soul Pattinson ((SOL)).

In all three cases, weaker share prices are occurring against solid growth prospects; we believe for many years to come.

With still around 10% sitting in cash, the Portfolio remains in a position to act upon further opportunities, but we’re not in a hurry.

The February reporting season will be upon us soon. If the trend from the past two seasons can be relied upon, it’s going to be another wild ride.

The All-Weather Model Portfolio selects from the curated lists that are 24/7 available to paying subscribers:

https://fnarena.com/index.php/analysis-data/all-weather-stocks/

The FNArena Corporate Results Monitor: 

https://fnarena.com/index.php/reporting_season/

FNArena Talks

My contribution to the Investment Markets conference in November: AI Megatrend; Blessing or Bubble?

(I think most of you already know my answer)

https://www.investmentmarkets.com.au/videos/investor-education/ai-megatrend-blessing-or-bubble-139

or view the video on Youtube:

https://youtu.be/Eea1yk3OSCE

Model Portfolios, Best Buys & Conviction Calls

This section appears from now on every Thursday morning in a separate update on the website. See Rudi’s Views for the archive going back to 2006 (not a typo).

FNArena Subscription

A subscription to FNArena (6 or 12 months) comes with an archive of Special Reports (21 since 2006); examples below.

(This story was written on Monday, 1st December 2025. It was published on the day in the form of an email to paying subscribers, and again on Wednesday as a story on the website).

(Do note that, in line with all my analyses, appearances and presentations, all of the above names and calculations are provided for educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views are mine and not by association FNArena’s see disclaimer on the website.

In addition, since FNArena runs a Model Portfolio based upon my research on All-Weather Performers it is more than likely that stocks mentioned are included in this Model Portfolio. For all questions about this: contact us via the direct messaging system on the website).

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