Report Cover Page

Contents

Where are we in the Cycle?
Cyclical positioning has changed little with the worst of the downward pressures having been overcome but without sufficient growth to support the market rebalancing needed before prices can begin moving through a new cycle. More...

Market Directions
Widespread sector losses have eroded gains made in the past six months with the largest stocks now trading below their prices of a year ago. Smaller stocks which had displayed greater leverage to the improved risk tolerance evident in the first half of 2016 continue to display strong net gains despite near term losses.    More...

Portfolio Performance and Positioning
Diminished sector momentum is becoming more evident with Phase I stocks showing the greatest losses. Cash retention remains high in the absence of cyclical improvement. No portfolio changes were initiated.    More...

Stock Reviews and Rating Analysis
Fortescue Metals Group (FMG:AU) stands out as an Australian mining industry success story after having overcome extreme scepticism about its prospects. The PortfolioDirect modelling methodology assesses the Fortescue steady-state bond equivalent return, based on its 2015/16 operating outcome, at 4.7%, significantly better than the negative return displayed by BHP Billiton. A 50% iron ore price increase raises the Fortescue bond equivalent yield to slightly over 19% compared with the 6% yield for BHP Billiton. Fortescue now offers investors a stronger underlying financial performance than available through BHP Billiton. Fortescue is gaining fresh respect within investment markets and, based on its existing business model, retains latent relative value capable of being re-priced without an improvement in cyclical conditions.
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Although the statements of fact in this communication have been added from and are based upon sources E.I.M. Capital Managers Pty Ltd, the publisher, believes to be reliable, their accuracy is not guaranteed and any such information may be incomplete or condensed.

All opinions and estimates in this communication constitute judgments by E.I.M. Capital Managers as of the date of this communication and are subject to change without notice. The publisher is under no obligation to make public any change in view about any matter referred to in this or any linked documents.

No references to past investment performance should be taken to indicate anything about future performance.

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