Reporting Season
During February, most companies report on their progress up to the end of December. There is a similar reporting season in August for the period up to 30 June. Once all the analyst projections for future earnings are in, it is a good time to update the state of play for companies in the Slack Portfolio.
It took a while for Slack Investor to understand that a company could come in with a great report on the business and still, the price of the shares might go down. This is because reporting season is all about expectations. If a company was expecting an increase in earnings of 22% – and they ‘only’ achieved 20%, the share price is likely to get knocked down on the announcement.
As the Slack Portfolio consists of mostly growing stocks with a relatively high Price to Earnings Ratio. The growing stocks usually have high prices as the company’s growth is priced in. These stocks can get punished severely when an earnings target is missed – price falls of 10-20% are not uncommon. But, it is long term results that really count and Slack Investor is willing to endure any short-term pain for a growing company. This period of ‘Trumpenomics’ is an example of such a time.
Slack Investor uses the excellent Market Screener site (requires email registration) to get information from the Financials tab for each company. Analyst information is not available for ETF’s so, only data on the individual companies that are in the Portfolio is gathered.
In the table below, information is listed for the forecast P/E Ratio (PE 2027), the forecast Return on Equity (ROE 2027), the forecast Earnings Per Share Growth (EPSG 2025) (EPSG 2026) (EPSG 2027) and the average of the three Earnings Per Share Growth figures (EPSG AV). There is some fudging of the figures as some of the forecast EPSG figures were unavailable. Also, for some of the companies that are new to profit, their EPSG figures are skewed – I have limited the EPSG (AV) to a maximum of 50. I have ranked the companies in order according to their Slack Factor.
The Slack Factor
What is the Slack Factor? It is well known that Slack Investor likes
- Profitability – measured in terms of the forecast Return on Equity – ROE 2027
- Growth – measured as the average forecast Earnings Per Share Growth – EPSG (AV) for the three years 2025, 2026 and 2027.
It is well known that Slack Investor does not like
- High Price to Earnings Ratios – measured in terms of the forecast Return on Equity – PE 2027. Sometimes, great companies are just too expensive.
So, things he likes go on the top line and the things that he doesn’t like go on the bottom line. This reduces a lot of the complicated information in Slack Investor’s tiny brain to one number. He has made no attempt to scale (normalise) each input into the Slack Factor. It is just a simple way to rank companies with qualities that he thinks are good. The bigger the number, the more likely the company has attributes that Slack Investor likes – profitability, growth and a price tag that is not too expensive. With these traits … surely good things are more likely to happen?
The fast growing Telix Pharmaceuticals (TLX) is a company that Slack Investor is a fan of, and it has a high Slack Factor of 52. The growth dullard Commonwealth Bank (CBA) has a Slack Factor of only 3 – and, is of no interest to Slack Investor.
| Name | Symbol | PE 2027 | ROE 2027 | EPSG 2025 | EPSG 2026 | EPSG 2027 | EPSG (AV) | SLACK FACTOR |
|---|---|---|---|---|---|---|---|---|
| Telix Pharmaceuticals | TLX | 25 | 26 | 230 | 70 | 30 | 50 | 52 |
| REA Group | REA | 40 | 32 | 98 | 11 | 17 | 42 | 34 |
| Codan | CDA | 19 | 23 | 20 | 23 | 18 | 20 | 25 |
| Alphabet (US) | GOOGL | 15 | 25 | 12 | 14 | 16 | 14 | 23 |
| Supply Network | SNL | 29 | 38 | 23 | 14 | 15 | 17 | 23 |
| Megaport | MP1 | 50 | 19 | -9 | 160 | 40 | 50 | 19 |
| Pro Medicus | PME | 115 | 53 | 40 | 42 | 30 | 37 | 17 |
| WiseTech Global | WTC | 42 | 20 | 32 | 38 | 34 | 35 | 17 |
| Technology One | TNE | 48 | 34 | 18 | 20 | 19 | 19 | 13 |
| CSL | CSL | 20 | 18 | 12 | 15 | 16 | 14 | 13 |
| Goodman Group | GMG | 18 | 11 | 34 | 12 | 20 | 12 | |
| Coles Group | COL | 18 | 32 | -2 | 17 | 5 | 7 | 12 |
| RPM Holdings | RUL | 38 | 18 | 10 | 25 | 40 | 25 | 12 |
| XRF Scientific | XRF | 20 | 18 | 17 | 11 | 11 | 13 | 12 |
| CAR Group | CAR | 28 | 15 | 35 | 18 | 12 | 22 | 12 |
| ResMed | RMD | 20 | 23 | 9 | 10 | 11 | 10 | 12 |
| Wesfarmers | WES | 24 | 33 | 3 | 13 | 9 | 8 | 11 |
| Nick Scali | NCK | 15 | 29 | -28 | 29 | 14 | 5 | 10 |
| Cochlear | COH | 34 | 25 | 15 | 7 | 16 | 13 | 9 |
| Macquarie Group | MQG | 15 | 13 | 6 | 18 | 8 | 11 | 9 |
| Botanix Pharma | BOT | Not | Ranked | – | Not | Enough | Info |
Over the next quarter, I will try and sell some of the Slack Investor owned companies with a relatively low Slack Factor – and invest more in those with a high Slack Factor. For homework, using Market Screener, try to work out the Slack Factor for some of the companies in your own portfolio.
March 2025 – End of Month Update
The current ‘Trump Slump’ in stock prices can be attributed to the largest upheaval to global trade since the Second World War – Thanks Donald! All followed markets fell this month. The ASX 200 down 4.0%, the FTSE 100 down 2.6%, and the S&P 500 down 5.8%. For now, each Index remains above their stop losses. Slack Investor remains IN for the FTSE 100, the ASX 200, and the US Index S&P 500.
Slack Investor took the opportunity to tighten up his stop loss values for the FTSE 100 and the ASX 200. On the UK Index chart below, by drawing a black wavy line under the monthly minimum values, it can be seen that some new ‘higher lows’ have been established. It made sense to move up the stop loss to the most recent ‘higher low’.
All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index). The quarterly updates to the Slack Portfolio have also been completed.