The Slack Factor – March 2025 End of Month Update

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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.
ROE is the forecast ROE (ROE 2027), EPSG is the forecast EPSG for the next three years (EPSG AV) and, PE Ratio is the forecast PE Ratio (PE 2027).

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.

NameSymbolPE 2027ROE 2027EPSG 2025EPSG 2026EPSG 2027EPSG (AV)SLACK FACTOR
Telix PharmaceuticalsTLX252623070305052
REA GroupREA40329811174234
CodanCDA19232023182025
Alphabet (US)GOOGL15251214161423
Supply NetworkSNL29382314151723
MegaportMP15019-9160405019
Pro MedicusPME115534042303717
WiseTech GlobalWTC42203238343517
Technology OneTNE48341820191913
CSLCSL20181215161413
Goodman GroupGMG1811 34122012
Coles GroupCOL1832-2175712
RPM HoldingsRUL38181025402512
XRF ScientificXRF20181711111312
CAR GroupCAR28153518122212
ResMedRMD2023910111012
WesfarmersWES24333139811
Nick ScaliNCK1529-282914510
CochlearCOH342515716139
Macquarie GroupMQG15136188119
Botanix PharmaBOTNotRankedNotEnoughInfo

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’.

Monthly price chart for the FTSE 100 – incrediblecharts.com

All Index pages and charts  have been updated to reflect the monthly changes – (ASX IndexUK IndexUS Index). The quarterly updates to the Slack Portfolio have also been completed.

Tinkering with the Portfolio Part 2

Cademix

Most of the time, Slack Investor indulges in the zen of long-term investing and leaves most of his portfolio alone. But, there are times when a little tinkering is advised. Having raised some cash with the sale of DHHF, it is time to put the money to work.

The Return of The Wedgie

Slack Investor introduced the wedge-shaped chart pattern The Wedgie back in 2019′. Technical chart purists will boringly describe this pattern as ‘breaking a long-term downtrend line’. But, Slack Investor hopes that you agree, The Wedgie is more amusing to his child-like mind.

The pattern forms when there is a lot of negative sentiment about a stock and the price is in decline for about six months (or longer). There comes a point where the price gets so low that the sentiment reverses – and the buyers come back in. On the charts, this shows as a leap in price above the wedge-shape (see below) as the institutional investors and other buyers gradually push the price up. Slack Investor loves this pattern as it has had a good (but not perfect!) track record in the past.

Megaport (MP1)

In a world where the cloud and networking are important, the Australian company Megaport puts its own equipment in data centres across the globe. MP1 creates high-speed virtual ‘ports’ that other businesses can connect with. This would seem a useful thing for their customers who need secure data ports and connectivity with AI gateways.

Megaport (MP1) weekly price chart showing the price breakout from the Wedgie –Incredible Charts

What initially attracted Slack Investor to this growing stock is the promising projected numbers and the trend of increasing sales and projected sales shown in the income chart below. Despite these glowing numbers, my initial purchase of MP1 was sold at a loss in September 2024 after a reporting season miss. Sometimes, even with the best of projections, things just don’t work out.

Megaport Income chart – Market Screener

From Market Screener, the current PE Ratio is very high (144) but, as its profits increase over the next few years, the projected PE for 2027 comes down to 42. Accompanied with an acceptable 2027 ROE of 19% (above 15%) and, EPS projected growth rates of 44% and 34% (above 10%) for 2026 and 2027 – this is a growing stock. It is a good exercise to look up the financial metrics on some of your own stocks with the Market Screener – Financial Tab (email is required to register). It might be enlightening to see if they qualify as growing stocks.

The good news is that MP1 achieved its first profit in FY24. There is some uncertainty though, as Megaport has some competitors in this data connectivity field and, it is a relative minnow with less than 2% market share. This could also be seen as an opportunity!

Slack Investor is taking a risk with this buy. However, in his favour are the good forecast profits and the powerful Wedgie pattern. MP1 had an earnings downgrade in 2024 but, he will give it another chance.

If the projected numbers come to pass, all will be well. I have re-bought MP1 @ $8.34 with a small position (0.4% of Slack Portfolio). This post is published a little earlier than the mid-month as, Slack Investor has already done the tinkering – and, at least in the short-term (MP1 $8.99 on 07/02/25), this Wedgie is working. Who doesn’t love a Wedgie!

Tinkering with the Portfolio Part 1 – and January 2025 – End of Month Update

(Image Source – Cademix)

In the middle of 2024, Slack Investor had some cash from the sale of Altium (ALU) that needed investing. He had spread the amount into buying into some companies that he already had (TNE, CAR, SNL, NDQ, PME, TLX). He also brought in some new blood (WEB, MP1, NCK, RMD, JNDQ, BOT, RUL, DHHF). The new companies were picked because he hoped that they were in the ‘growing stage’ – to replace the growth superstar ALU.

As with most things, some have worked well – and some not so well. The real duds were associated with Webjet (WEB) and its subsequent spin-offs. He also dumped his small holding of Megaport (MP1) – but, he is now having a rethink about MP1. As the Slack Portfolio is fully invested at the moment, to buy something, he must first sell something.

BetaShares Diversified All Growth ETF (DHHF)

This was the last thing that Slack Investor bought on his 2024 buying spree and, to be honest, he didn’t look to0 deeply into it. Slack Investor was initially impressed by the simplicity of an All Growth ETF at a low management fee (0.19%). DHHF has done very well since purchase (+11%). The ETF is certainly diversified but, he is wondering whether the All Growth, as it says on the label, means that it is growing.

DHHF is a bundle of four low cost funds. The funds are:

The percentage allocation, on 24/01/2024, with the Management Expense Ratio (MER) of the underlying funds is shown below. Betashares have done a good job to ensure the underlying funds have very low fees (MER).

ETF% AllocationMER (%)
VTI42.00.03
A20037.10.04
SPDW15.00.03
SPEM5.70.07

Slack Investor must admit to a misunderstanding when he bought DHHF – he thought All Growth meant he was buying a selection of growing companies. It is only when he read the accompanying Product Disclosure Statement that he realised that All Growth was in reference to the fund being almost 100% in growth assets (shares or property). They are using All Growth as a descriptor to investing style. The All Growth assets make this fund suitable for those who have a high tolerance for risk. Betashares recommend a holding period of at least 7 years.

Does Growth mean Growing?

Not necessarily. This can be confusing – it was for Slack Investor! He has been guilty of using these terms interchangeably. Growth can be used as an investment style description – indicating the asset mix and amount of risk. The more shares and property in the mix, the higher the risk (chance of negative returns). According to Investsmart, typical mixes for funds are:

  • High Growth: around 100% in shares or property.
  • Growth: around 85% in shares or property, and 15% in fixed interest or cash.
  • Balanced: around 70% in shares or property, and 30% in fixed interest and cash.
  • Conservative: around 30% in shares and property, and 70% in fixed interest and cash.
  • Cash: 100% in bank deposits or ‘capital guaranteed’ products.

Of course, Slack Investor should have fully read the DHHF PDS before his purchase – a rookie error! Because he also has a stable income portfolio, the ‘riskiness’ of DHHF didn’t bother Slack Investor. However, his favourite companies to fill the Slack Portfolio are those that are having earnings that are actually growing or, are projected to grow, at least 10%.

A big portion of DHHF consists of the ASX 200 (37.1%). Slack Investor owns a small holding of the Australian Index and, he acknowledges that it is a fantastic part of any income portfolio – as it is a great source of dividend imputation income. However, he has never really been a big fan of the ASX 200 in the growth-based (or, should I say, growing-based) Slack Portfolio.

The ASX 200 is a mixture of ‘Duds’ (shrinking companies, decreasing earnings), mature companies (companies in steady state – earning but not really growing) and, companies that are increasing earnings and actually growing.

In the ASX 200, seven of the top ten holdings are either banks or mining companies – these types of companies are not known for growing every year at above 10%. For example, the top ASX 200 holding is the Commonwealth Bank (CBA). According to the Market Screener site, CBA’s 2024 Earnings Per Share (EPS) growth was -4%. For 2025 and 2026, growth is projected to be 5% and then 4% p.a.

Slack Investor rates Betashares DHHF to be an excellent ETF for diversified share exposure at a relatively cheap cost. It definitely qualifies as High Growth as it consists of nearly 100% in shares or property. However, Slack Investor would rather concentrate on companies that are actually growing. He will sell DHHF and use the cash to buy something else.

January 2025 – End of month update

Slack Investor is IN for Australian index shares, the US Index S&P 500 and the FTSE 100.

The new year has started well, particularly for the UK and Australia where, the FTSE 100 is up 6.1 %, and the ASX 200 up 4.6% in January.

The S&P 500 (+2.7%) is relatively subdued after the monster 25% gains of 2024.

All Index pages and charts have been updated to reflect the monthly changes – (ASX IndexUK IndexUS Index).