Mike Holmans August 25, 2009

Investing in Australia

17

Cricket markets are notoriously volatile and have become even more so in recent times, and investors may be unsure where to put their money. The Holmans Consulting Group (HCG) is therefore pleased to offer this analysis of the Australian market's leading stocks. [Potential investors are reminded that past performance is not necessarily a guide to future returns and should take professional advice before committing any funds.]

Ponting. Hold. The dominant company's batting division is and will remain a world-class performer for the foreseeable future. The management division has posted its third loss in five reporting periods, which clearly gives cause for concern, but there are signs that it will be concentrating more on improving its own performance rather than explaining disappointing results by referring to unfavourable conditions, competitors' business practices or perceived failures of regulation.

Hughes. Short-term sell, long-term buy. Technical defects in the product line have forced a retreat from international markets for retooling. Testing of an updated range in the domestic market should be carefully watched, however, as it is anticipated that this highly innovative entity will prove one of the leading performers over the long term.

Katich. Hold. Since repositioning in the openers sector, Katich has yielded solidly reliable if unspectacular returns which should continue to satisfy the conservative investor.

Watson. Weak hold. Government has long regarded Watto's as a preferred long-term partner, and early results from entry into the openers sector are reasonably promising, but the bowling division has declined from an already weak position to the extent that it should probably be shut down.

Hussey. Sell. There is considerable loyalty to the Mr Cricket brand, and many will be hoping that the strong performance in the last couple of trading sessions signals a return to previous dividend levels. HCG is less optimistic and regards Hussey as extremely vulnerable to takeover, especially if strong domestic competitors emerge.

M Clarke. Strong buy. Long-standing predictions that Clarke will become as important a force as Ponting seem on the verge of fulfilment, and bumper returns are to be expected from this quarter. Especially fine are the products for the spin-facing niche, which for flexibility and agility rival any of those offered by the traditionally-dominant Asian producers.

North. Buy. Well-engineered batting coupled with some very handy spin-bowling accessories should ensure a prosperous medium-term and make the long-term prospects very hopeful.

Haddin. Weak hold. Those with nostalgia for former giants of the keeping industry such as Gilchrist, Healy or Marsh will continue to regard Haddin as yielding very poor dividends. On the bright side, the batting performs somewhat above lowish expectations, but the keeping is of extremely variable quality. An absence of serious competition in the field means that the stock should be retained pending developments.

Johnson. Partial sell. Investors who piled into the Mitch on the back of exceptionally strong performances in the South African market should seek to reduce their exposure. The sling-based technology is inherently unstable and prone to malfunction while offering the potential for very high returns when it operates correctly. It is worth retaining a holding as part of a diverse portfolio, but not as the main focus of investment.

Siddle. Hold/weak buy. Only a recent market entrant, Siddle has already established a reputation for reliability and should provide very steady returns. Optimists may wish to increase their holdings, but HCG sees little potential for further growth and would advise against.

Hauritz. Buy. This stock was badly underrated and deserves more attention. While not offering the earnings potential of a Warne or a MacGill, failure to include this stock can in some circumstances result in catastrophic losses.

Hilfenhaus. Weak sell. This may seem an odd recommendation given that the Hilf was the leading performer in the last reporting period, but similarly swinging trading conditions may not be encountered often enough for him to continue to lead the market.

S Clark. Sell. A loss of oomph in the main power unit has rendered this product line largely ineffective unless the targets are already on the brink of failure. It will be of very limited usefulness going forward and there is little chance of an improvement in the stock price. A more likely option would be the Lee, but it has been absent from the market for some time and future performance is therefore uncertain.

To sum up, batting stocks remain relatively buoyant. Returns may be down compared with the historic market highs of the 1995-2006 boom years, but they remain in the market's upper quartile. However, bowling stocks have fallen significantly, particularly when compared with South African equities, and considerably improved performance will be needed from them if Australian industry is to resume its world-leading position.

Our next report, to be published shortly, will be a survey of the English market.

Comments have now been closed for this article

  • Andrew on September 11, 2009, 12:18 GMT

    Hauritz should only be dragged out for huge spinning tracks, outside India (the Indian batsmen would murder him even on a Krumbler). He bowls good off-spin. That makes him a 1st class bowler - a Test bowler needs to bowl (or throw) off-spin AND well disguised doosras. How many wickets did Swann get with the ball going straight on and not picked, and at crucial times? How will Hauritz go on a flat track? (See "McGain, Bryce")

    As for Watson, if he's to bowl without breaking down they need to invent a form of the game shorter than T20. If people think Hughes has technical deficiencies, what about Watson's 26 consecutive LBW dismissals?

  • The slinger on September 3, 2009, 9:06 GMT

    Interesting article mike!but australia will find it hard to be world champions unless they find a good spinner.....i think brad hodge did that job wonderfully well after shane warne quit one dayers....and i guess sri lanka is also a strong contender for the no 1 spot as well...

  • Timbo on September 1, 2009, 3:45 GMT

    James - Hussey's "luck" with the umpires???? You need a helluva lot of luck to survive leaving a straight one, or to be more precise, two.

  • Pranav Joshi on August 28, 2009, 14:30 GMT

    Also let me add, James, that Ponting, in my opinion, was a really good captain when he had 4-5 players in the team who could rival him for cricketing greatness. That 1995-2007 team was simply terrific, too good. I am not so convinced about his captaincy when the chips are down. He often seems confused and desperate when Australia are struggling. The decline of Australia has been because of a combination of retirement of their greats coupled with South Africa and India getting better and better. India, especially, have had an ultra-slow ascent since the 80s, when they were poor, to the 90s, when they were average and depended heavily on Sachin Tendulkar, to the early 2000s when they first started being good, to the mid 2000s where they started winning consistently, to 2008-09 when they have started winning series after series without taking it into the last match. The new Australian crop might come good in time; for now, Aus have been dethroned and we'd be loath to deny it, I believe.

  • Pranav Joshi on August 28, 2009, 14:19 GMT

    James..Australia are NOT, by some distance, the best team in the world. That honour does not really belong to anyone yet - SA still keep losing big tournament matches and India have shown that they are great challengers but poor champions. But it certainly cannot go to Australia. This is not because of one series loss - Australia have now lost in India and England over the past one year, apart from a narrowly averted whitewash at home against SA, and performed poorly in the World T20, besides having lost the CB series to India. And I am, personally inclined to believe that the scoreline could have been 1-1 in the Border-Gavaskar trophy had so many umpiring decisions not gone against India. In any case, the decline of the Aussies is far from temporary, because unlike the trough in a batsman's career, here the very players representing Australia have changed. Yes, Johnson is full of heart, Hilfenhaus and Siddle and Hauritz are good and may yet improve, but they are not Warne or McGrath.

  • Protea_fan on August 26, 2009, 18:41 GMT

    James: Let me tell you that South Africa have performed consistently to be on top of ICC rankings and they deserve it, whereas Australia were demolished by India, beaten by SA in their own backyard and now by England. If Australia can't beat the best sides in the world then they don't deserved to be on top.Aussies are 4th and that's where they belong. Beating weaker sides like Pakistan and WI at home isn't a big deal. If Australia want to be on top then first they have to beat SA & India.

  • Weez on August 26, 2009, 14:16 GMT

    James, South Africa is (nearly) the best side in the world. They did beat Australia at home and would probably have whitewashed them if it wasn't for the stupid No.1. ranking - as soon as they heard that was up for grabs they choked. They had 3 consecutive test matches in which a victory would have given them the number 1 spot and they lost every single one. Then when the last test came around and the number 1 ranking was no longer at stake they beat Australia by an innings...hopefully now that the ranking have them at the top they won't have to fear being the best anymore....and they might even stop choking

  • Sreeni on August 26, 2009, 12:52 GMT

    I would think cricket is a classic case where we can employ what is called a barbell strategy to investment. Typically this would involve choosing about 80% of your portfolio to comprise treasury bills/government bonds and the rest 20% potentially to include high risk stock including start ups. Taking this into account, I would think the australian team is a fair bet and likely to yield a stable return in the long run. It would be interesting to see what the guidance on england is. I would say, they are a little like dealing/investing in securities against sub prime debt. Watch 'em crash in the return leg.

  • Richard Jefferies on August 26, 2009, 12:19 GMT

    A very innovative and readable analysis, good stuff Mike. Aby...it says in the intro that past performance is no guide to the future and it's obvious that things could change. But Clark isn't going to take a bucketload of wickets. Aus are looking to the future and Clark isn't it. I still like Johnson, Siddle and Hilfy though, and I'm a Pom. Plenty of time for all three to develop and improve.

  • whiteline on August 26, 2009, 11:17 GMT

    Superb - except I'm with anon - haddin is a liability of the highest order. Can't catch a cold and wears his IQ on the back of his footy jumper - adios chump!

  • Andrew on September 11, 2009, 12:18 GMT

    Hauritz should only be dragged out for huge spinning tracks, outside India (the Indian batsmen would murder him even on a Krumbler). He bowls good off-spin. That makes him a 1st class bowler - a Test bowler needs to bowl (or throw) off-spin AND well disguised doosras. How many wickets did Swann get with the ball going straight on and not picked, and at crucial times? How will Hauritz go on a flat track? (See "McGain, Bryce")

    As for Watson, if he's to bowl without breaking down they need to invent a form of the game shorter than T20. If people think Hughes has technical deficiencies, what about Watson's 26 consecutive LBW dismissals?

  • The slinger on September 3, 2009, 9:06 GMT

    Interesting article mike!but australia will find it hard to be world champions unless they find a good spinner.....i think brad hodge did that job wonderfully well after shane warne quit one dayers....and i guess sri lanka is also a strong contender for the no 1 spot as well...

  • Timbo on September 1, 2009, 3:45 GMT

    James - Hussey's "luck" with the umpires???? You need a helluva lot of luck to survive leaving a straight one, or to be more precise, two.

  • Pranav Joshi on August 28, 2009, 14:30 GMT

    Also let me add, James, that Ponting, in my opinion, was a really good captain when he had 4-5 players in the team who could rival him for cricketing greatness. That 1995-2007 team was simply terrific, too good. I am not so convinced about his captaincy when the chips are down. He often seems confused and desperate when Australia are struggling. The decline of Australia has been because of a combination of retirement of their greats coupled with South Africa and India getting better and better. India, especially, have had an ultra-slow ascent since the 80s, when they were poor, to the 90s, when they were average and depended heavily on Sachin Tendulkar, to the early 2000s when they first started being good, to the mid 2000s where they started winning consistently, to 2008-09 when they have started winning series after series without taking it into the last match. The new Australian crop might come good in time; for now, Aus have been dethroned and we'd be loath to deny it, I believe.

  • Pranav Joshi on August 28, 2009, 14:19 GMT

    James..Australia are NOT, by some distance, the best team in the world. That honour does not really belong to anyone yet - SA still keep losing big tournament matches and India have shown that they are great challengers but poor champions. But it certainly cannot go to Australia. This is not because of one series loss - Australia have now lost in India and England over the past one year, apart from a narrowly averted whitewash at home against SA, and performed poorly in the World T20, besides having lost the CB series to India. And I am, personally inclined to believe that the scoreline could have been 1-1 in the Border-Gavaskar trophy had so many umpiring decisions not gone against India. In any case, the decline of the Aussies is far from temporary, because unlike the trough in a batsman's career, here the very players representing Australia have changed. Yes, Johnson is full of heart, Hilfenhaus and Siddle and Hauritz are good and may yet improve, but they are not Warne or McGrath.

  • Protea_fan on August 26, 2009, 18:41 GMT

    James: Let me tell you that South Africa have performed consistently to be on top of ICC rankings and they deserve it, whereas Australia were demolished by India, beaten by SA in their own backyard and now by England. If Australia can't beat the best sides in the world then they don't deserved to be on top.Aussies are 4th and that's where they belong. Beating weaker sides like Pakistan and WI at home isn't a big deal. If Australia want to be on top then first they have to beat SA & India.

  • Weez on August 26, 2009, 14:16 GMT

    James, South Africa is (nearly) the best side in the world. They did beat Australia at home and would probably have whitewashed them if it wasn't for the stupid No.1. ranking - as soon as they heard that was up for grabs they choked. They had 3 consecutive test matches in which a victory would have given them the number 1 spot and they lost every single one. Then when the last test came around and the number 1 ranking was no longer at stake they beat Australia by an innings...hopefully now that the ranking have them at the top they won't have to fear being the best anymore....and they might even stop choking

  • Sreeni on August 26, 2009, 12:52 GMT

    I would think cricket is a classic case where we can employ what is called a barbell strategy to investment. Typically this would involve choosing about 80% of your portfolio to comprise treasury bills/government bonds and the rest 20% potentially to include high risk stock including start ups. Taking this into account, I would think the australian team is a fair bet and likely to yield a stable return in the long run. It would be interesting to see what the guidance on england is. I would say, they are a little like dealing/investing in securities against sub prime debt. Watch 'em crash in the return leg.

  • Richard Jefferies on August 26, 2009, 12:19 GMT

    A very innovative and readable analysis, good stuff Mike. Aby...it says in the intro that past performance is no guide to the future and it's obvious that things could change. But Clark isn't going to take a bucketload of wickets. Aus are looking to the future and Clark isn't it. I still like Johnson, Siddle and Hilfy though, and I'm a Pom. Plenty of time for all three to develop and improve.

  • whiteline on August 26, 2009, 11:17 GMT

    Superb - except I'm with anon - haddin is a liability of the highest order. Can't catch a cold and wears his IQ on the back of his footy jumper - adios chump!

  • Allan Lazrado on August 26, 2009, 10:23 GMT

    Nice article Mike. I liked the way you used the analysts' style of recommending stocks. The recommendation to sell Hilfenhaus (albeit a weak one) is understandable because on sub-continental and West Indian pitches, it will extremely difficult for a bowler like Hilfenhaus to obtain any swing. A buy on Hauritz surprised. It shows that Australian spinning stocks have really declined from the Warne era.

    [Thanks, Allan. I'm not particularly enthusiastic about Hauritz: I just think he's better than the junk bond rating he seems to have in CA selection circles.]

  • James Kuwanda on August 26, 2009, 8:32 GMT

    Let me also add that Australia is still the best. It was interesting to hear Graeme Smith say that now that SA is on top of the rankings they hope to dominate the world. Crap, if you want to dominate the world, beat the best and dont wait for England to do your job. Yes, as soon as the Aussies beat Pakistan and West Indies in australia everyone will be putting praises to them and describing how invincible and exhibitional the Australian side is. Of course everbody wants to see the best out of the palyers but the team is rebuilding and is doing a great job already. Lets be fair, England were whitewashed in Australia and now australia loses 2-1 everybody describes them as losers. Sis, hypocritical, that sucks. These guys are a world dominating force. I find Ricky Ponting as an amazing leader and has done the aussies proud. In fact that whole bunch of guys is an amazing lot. Oh by the way M Johnson held his head and hand up high, he did not stop trying, a sign of a true champion!

  • James Kuwanda on August 26, 2009, 5:36 GMT

    Nice article but wish to differ on the analysis given. 1. Watson - Buy- this will give more returns on both bowling and batting front. Has been out coz of injury. 2. Hussey - Hold- The brand is too strong to let go. Has been unlucky from the umpring side but could see even with low scores Mr Cricket was playing his best. He is the grafting type and it's all there for a very reasonable return on investment. The time is now. 3. Siddle - Buy/Keep - Lots of energy and assures investors of a competitive player, returns coming and will continue to come. 4. Hilhenaus - Buy/Keep offers a balance to the investment. 5. S Clarke Keep- under the current environment this is an asset that needs to be kept. Lots of experience and control. He is a type that does just the bowling and does it well, economically too. Summary- Despite the loss to England the Australian market is still the one to invest in. High turnover in the past few seasons has meant that more assets be brought in and compelement

  • sushant singh on August 26, 2009, 5:32 GMT

    Brilliant , awesome article

  • Anonymous on August 26, 2009, 5:25 GMT

    interesting analysis and i agree with most except haddin. i cant have been the only one to notice the supurb work done by manou behind the stumps in the third test. it was like a breath of fresh air over the more fumbling styles of the more batting oriantated keepers haddin and prior. yes haddin may be a more accomplished batsman than manou but if haddin makes 30 runs with the bat then concedes 20 odd byes behind the stumps is that better than having a genuine keeper in the team that is a keeper first and a batsmen second? i for one would like to find out and cant wait to see what payne can offer in the ODI's. i feel for haddin in the way that he was clearly the next best keeper in the country behind gilly, however i think his peak was when gilly peaked and the window closed about the same time gilly's did. australia should be looking for the next healy and unlike replacements for warne and mcgrath im pretty sure that this one exists!

  • aby mathew on August 26, 2009, 5:06 GMT

    Crap Assessements. I am sure all these ratings will be thrown out if North and clarke go through a slump. and people like clarrk, johnson and siddle takes a bucketful of wickets. People like you sing praises about batsmen when they score and quick to dismiss them moment they fail. Hypocratic lot............ i wonder what you will say if they thrash pakistan and westindies in the home series!!!!

  • Vikas Srimal on August 26, 2009, 4:30 GMT

    Refreshingly innovative way of putting it. And good use of industry jargon too. Were you a finance executive at any time? Not that it matters - a thoroughly enjoyable read, one way or the other :)

    [Mike: Nope. I've ben a computer geek my entire working life. So thanks for the compliment. ]

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  • Vikas Srimal on August 26, 2009, 4:30 GMT

    Refreshingly innovative way of putting it. And good use of industry jargon too. Were you a finance executive at any time? Not that it matters - a thoroughly enjoyable read, one way or the other :)

    [Mike: Nope. I've ben a computer geek my entire working life. So thanks for the compliment. ]

  • aby mathew on August 26, 2009, 5:06 GMT

    Crap Assessements. I am sure all these ratings will be thrown out if North and clarke go through a slump. and people like clarrk, johnson and siddle takes a bucketful of wickets. People like you sing praises about batsmen when they score and quick to dismiss them moment they fail. Hypocratic lot............ i wonder what you will say if they thrash pakistan and westindies in the home series!!!!

  • Anonymous on August 26, 2009, 5:25 GMT

    interesting analysis and i agree with most except haddin. i cant have been the only one to notice the supurb work done by manou behind the stumps in the third test. it was like a breath of fresh air over the more fumbling styles of the more batting oriantated keepers haddin and prior. yes haddin may be a more accomplished batsman than manou but if haddin makes 30 runs with the bat then concedes 20 odd byes behind the stumps is that better than having a genuine keeper in the team that is a keeper first and a batsmen second? i for one would like to find out and cant wait to see what payne can offer in the ODI's. i feel for haddin in the way that he was clearly the next best keeper in the country behind gilly, however i think his peak was when gilly peaked and the window closed about the same time gilly's did. australia should be looking for the next healy and unlike replacements for warne and mcgrath im pretty sure that this one exists!

  • sushant singh on August 26, 2009, 5:32 GMT

    Brilliant , awesome article

  • James Kuwanda on August 26, 2009, 5:36 GMT

    Nice article but wish to differ on the analysis given. 1. Watson - Buy- this will give more returns on both bowling and batting front. Has been out coz of injury. 2. Hussey - Hold- The brand is too strong to let go. Has been unlucky from the umpring side but could see even with low scores Mr Cricket was playing his best. He is the grafting type and it's all there for a very reasonable return on investment. The time is now. 3. Siddle - Buy/Keep - Lots of energy and assures investors of a competitive player, returns coming and will continue to come. 4. Hilhenaus - Buy/Keep offers a balance to the investment. 5. S Clarke Keep- under the current environment this is an asset that needs to be kept. Lots of experience and control. He is a type that does just the bowling and does it well, economically too. Summary- Despite the loss to England the Australian market is still the one to invest in. High turnover in the past few seasons has meant that more assets be brought in and compelement

  • James Kuwanda on August 26, 2009, 8:32 GMT

    Let me also add that Australia is still the best. It was interesting to hear Graeme Smith say that now that SA is on top of the rankings they hope to dominate the world. Crap, if you want to dominate the world, beat the best and dont wait for England to do your job. Yes, as soon as the Aussies beat Pakistan and West Indies in australia everyone will be putting praises to them and describing how invincible and exhibitional the Australian side is. Of course everbody wants to see the best out of the palyers but the team is rebuilding and is doing a great job already. Lets be fair, England were whitewashed in Australia and now australia loses 2-1 everybody describes them as losers. Sis, hypocritical, that sucks. These guys are a world dominating force. I find Ricky Ponting as an amazing leader and has done the aussies proud. In fact that whole bunch of guys is an amazing lot. Oh by the way M Johnson held his head and hand up high, he did not stop trying, a sign of a true champion!

  • Allan Lazrado on August 26, 2009, 10:23 GMT

    Nice article Mike. I liked the way you used the analysts' style of recommending stocks. The recommendation to sell Hilfenhaus (albeit a weak one) is understandable because on sub-continental and West Indian pitches, it will extremely difficult for a bowler like Hilfenhaus to obtain any swing. A buy on Hauritz surprised. It shows that Australian spinning stocks have really declined from the Warne era.

    [Thanks, Allan. I'm not particularly enthusiastic about Hauritz: I just think he's better than the junk bond rating he seems to have in CA selection circles.]

  • whiteline on August 26, 2009, 11:17 GMT

    Superb - except I'm with anon - haddin is a liability of the highest order. Can't catch a cold and wears his IQ on the back of his footy jumper - adios chump!

  • Richard Jefferies on August 26, 2009, 12:19 GMT

    A very innovative and readable analysis, good stuff Mike. Aby...it says in the intro that past performance is no guide to the future and it's obvious that things could change. But Clark isn't going to take a bucketload of wickets. Aus are looking to the future and Clark isn't it. I still like Johnson, Siddle and Hilfy though, and I'm a Pom. Plenty of time for all three to develop and improve.

  • Sreeni on August 26, 2009, 12:52 GMT

    I would think cricket is a classic case where we can employ what is called a barbell strategy to investment. Typically this would involve choosing about 80% of your portfolio to comprise treasury bills/government bonds and the rest 20% potentially to include high risk stock including start ups. Taking this into account, I would think the australian team is a fair bet and likely to yield a stable return in the long run. It would be interesting to see what the guidance on england is. I would say, they are a little like dealing/investing in securities against sub prime debt. Watch 'em crash in the return leg.