2020 Reporting Season

Simon Glazier:

Good afternoon everybody. Thanks for joining us today. My name is Simon Glazier and I'll be hosting the discussion today. Before we do get started again, just some housekeeping. We're planning on going for about 40, 45 minutes today. So, if you have a question you can submit it via your Zoom portal. If you've dialled in via the phone today, unfortunately you will not be able to ask a question and we'll do our best to incorporate questions as we go, but we should have some time towards the end of the discussion to really cover off some of those Q&A's. And also, a reminder that CPD points will be available post today's session. And, today we have Paul Taylor, portfolio manager of the Fidelity Australian Equities Fund.

Simon Glazier:

Paul's joined us a few times now. This year we've discussed things like the second derivative, market leadership, when to transition the portfolio and many impacts from COVID including government stimulus. Today, we'll cover a bit of a look back, the views and insights from reporting season and then take a look forward to the headwinds, tail winds and trends that will likely support the winners of the future. So Paul, thanks for joining us today. And, well, after 30 years without a recession in Australia here we have GDP is contracted around 7% if the markets bounce pretty hard from its lows. And really only recently and even today, it's showing signs of instability. So, perhaps Paul to kick us off, give us a bit of a recap and what do you make in the last few months?

Paul Taylor:

Simon, yeah, thank you. And good afternoon to everybody. Hope everyone is doing well at this time. It's good to be talking to everyone. It's obviously been a absolutely fascinating year. Markets, economies, people have been impacted by Coronavirus and I guess if we go back to the start of all this, we were really operating without a lot of data. We didn't really know what was going to happen, we didn't know the impact and when you go back to those times what tends to happen when you don't have a lot of data it's really all about judgement . And that judgement is based on experiences that are similar. As I've talked about many times the Mark Twain quote, "History doesn't repeat, but it rhymes."

Paul Taylor:

And I think that's an interesting one and I think that's why people focus on the heuristics, the rules of thumb, when you don't have a lot of data because that's really all you've got. That judgement , judgement based on experience. And, what experience tells you in those sort of periods is that you've typically got to focus on the second derivative. And, as you talked about, it's quite fascinating to look back at it now because the market turn so we sort of peaked out at about 7,000 on the ASX200. The end of March bottomed at about 4,500, we're sitting about 6,000 today. But that drop from 7,000 to 4,500 at the end of March, it almost coincided almost exactly with the change in the second derivative.

Paul Taylor:

Now, that as I've talked about before, that second derivative is quite important because it's the rate of change as the acceleration or deceleration. And that typically as it moves from acceleration to flattening it's really... I don't know, it's often it just seems to coincide with the point of maximum pain. When governments are taking the most action people are worrying the most and then we saw that play out at the end of March. Now, the interesting thing as we've gone through this year and obviously now almost mid September, we're now getting a lot more data, a lot more information and so we can start to leave the rules of thumb, the heuristics behind and start to focus on actually well, what's the data telling us?

Paul Taylor:

I think that's the interesting place we are now and as we look forward, it's still not perfect by any means, but we got a lot more data now obviously on the economy, on the virus, how people are reacting, but there's still quite a lot of uncertainty. And when we start to talk about the future, we can go through a lot of those points. I guess the government have really tried to take the economy into a hibernation. And as you rightly point out, we've now had two quarters of negative growth, which means we're officially in recession and that's ended our almost 30 years of uninterrupted economic growth. It obviously had to come to an end at some point, but obviously not a good way to end it.

Paul Taylor:

So we've had a very steep, sharp economic downturn, really forced on us by the virus. Governments really try to keep us in a hibernation phase or what they've talked about is hibernation or bridge building. And to me they're both good analogies where we've got this very deep ravine, we're really just trying to get across to it, keep the economy pretty much in place. So that as we start to normalise, the economy has got its best chance of getting back to where we were before. I think the interesting thing as we go forward, obviously there's a lot of government as you talked about as well, we've got a lot of government support in place.

Paul Taylor:

And obviously there's a lot of nervousness around well what happens when that that government support comes off. From a macro perspective, we've got tail winds from both monetary stimulus, so very low interest rates and fiscal stimulus so obviously government's effectively helicopter dropping money on the economy. I think that'll change going forward, but I'll touch on that once again when we start to look at what's going to happen next but yeah, there we are. So, we're still in this ravine, we're now in recession, we've got a lot more data, we're understanding things a bit better although it's not perfect. There's still a few uncertainties primarily around what's going to happen when government support moves away from the helicopter money, from the JobKeeper, and so forth.

Paul Taylor:

But so far, so good, in what is a really difficult environment recovery is on track. Although, I would say it's not a fast recovery, it's a slow recovery. The markets reacting to us getting to the other side and as I've talked about many times before, the market is a forward looking sort of instrument vehicle. And it's already looking at least 12 months ahead. So, it's looking to September next year where we might be in that time and what we now know from all the data. So far, so good. But, still a lot of uncertainties and a lot of interesting twists and turns that could happen.

Simon Glazier:

Yeah, that's good. And obviously, we're fresh off the back of reporting season and I'm taking a guess as to what some of the conversations were like. But, there's so much uncertainty because a lot of these companies have been supported by JobKeeper, JobSeeker et cetera. And I'm kind of thinking even some of the CEOs and management teams are not quite sure how things are going to play out, but what are some of the key level takeouts of reporting season from your end?

Paul Taylor:

Yes, very interesting reporting season. Once again, well actually the market did reasonably well through August, which I think was great result once again, given the environment. And probably, when you look at reporting season, there's probably more beats than misses, which I think is an interesting fact in itself, but I think that's mainly got to do with the downgrades that came pre-reporting season. So, there was everything thrown at the market, the kitchen sinks thrown at the market and then it actually performed okay. Given some of the points you made, I think some companies actually did extremely well and I think that's the key issue when you're looking at it as well.

Paul Taylor:

It's an environment of extreme winners and losers. So some companies are doing incredibly well, some have gone to pretty much zero revenues and they're being supported by a lot of the government initiatives. But, there's a real split in the market and we'll obviously talk about the market, but it's a funny thing really to say because at the moment there's not really a market. There's so many different companies influenced by so many different trends and I guess the US is the ultimate. I talked about Australia going from 7,000 to 4,500 and recovering to six, but we're still well below our peak. In the US, they were at all time highs.

Paul Taylor:

And, people were looking at that and saying, "Well, what's wrong with the market?" It wasn't really that, it was just that really those big stocks were seen as the winners from a lot of the trends, and I'll talk about the trends coming through that's accelerating under COVID-19. So, it was more just that those sort of super six stocks had done so well and they were so big in the market that they'd lead the market to an all time high. Whereas in Australia, some of our bigger companies like the banks were some of the hardest hit and that's obviously why the Australian index is below what we were pre-COVID. But overall, I'd say it's actually a pretty reasonable reporting season given the circumstances.

Paul Taylor:

Now, if I go through a few stats and I think probably the first interesting one is one of the first things you look to is not only the results, but the guidance from a lot of companies. And effectively, one in three companies that had guidance got rid of that guidance. So, that's the first time point to note, is obviously a lot of uncertainty companies still don't really know exactly what it's going to mean for their business and they're a lot more cautious. So, they've just taken off the table any guidance that they previously had. So that just brings a little bit more uncertainty to things. But, if you look right across the market, we saw earnings decline in that financial year to June 30 by about 20%.

Paul Taylor:

So, earnings down about 20%. Banks, much harder hit, down about 30%. Broad based industrials, which has also been one of the other worst hit sectors, down 25%. Property actually performing a bit better, only down 10% and resources really the standout and resources were pretty flat which is an amazing achievement in that environment. And, I'm sure most people realise that it was really driven by strength in a range of different commodities. So, China first in, potentially first out and the Chinese economy is... Actually the demand coming from the Chinese economy is quite strong. And with the Chinese government undertaking stimulus. So, what we've seen is things like iron ore, I mean, the iron ore price has been incredibly strong and is up which is a phenomenal achievement in this environment.

Paul Taylor:

And it's caused by two things. One, it's demand is strong from China, which is the primary demand market. But also, Australia's key competitor is Brazil and Brazil has been very hard hit by COVID. And China really haven't been getting their iron ore from Brazil so it's been coming from Australia. So, strong demand and supply constrained because of the problems that Brazil is going through. And that's been a bit of a win for the Australian mining sector and a range of companies. So, iron ore prices stayed strong and they're continuing the pace. Also, sectors like gold has obviously been quite strong as countries right around the world undertake the same policy of fiscal stimulus, which typically means effectively printing money.

Paul Taylor:

Which if any one company would do it, it would mean a devaluation of that currency, but when pretty much most companies are doing it, it's a devaluation of the broad based currency. And, that's seen strength in commodities, but mainly gold and silver and real assets I guess benefit in that sort of environment as well. Now the other thing, and there's been a big focus on dividends through reporting season and then that's been one because obviously a lot of people rely on the dividends coming out of companies. For whether that's their self-funded retirees or people who have just invested for the income as well. And if we look across dividend range, there was about 25% of the market, cut the dividend to zero.

Paul Taylor:

So, that's a big part of the market that's just gone from dividend to no dividend and then about a third reduce their dividend. So, you got over half the market that's either gone to zero or cut their dividend so that's a reasonable reduction. 9% of companies stayed flat and 20% increased their dividend. So then this also highlights, you've got 34% reducing their dividend, 25% down to zero but 20% increasing their dividend just shows you the disparity in the market. That there actually are really very defined winners and losers in this environment. Now, if we go into some of those sort of... Maybe once again, I'll start with sectors and once we look forward, we can talk a little bit more about stocks as well.

Paul Taylor:

But the best performing sectors, some of those sectors that did deliver the dividend increases through the period. Consumer staples was probably the best performing sector and that's essentials. So, in this sort of environment, whether that's supermarkets or other forms of essentials. Demand's actually been stronger, not ticked along but being stronger. Consumer staples have done well, healthcare has done well. Once again, it's an essential of life so you're seeing the essentials. Third was utilities once again an essential. So, consumer staples, healthcare, utilities, all the essentials of life continue to do well. As I talked about materials resources have performed well, and that's backed by earnings, what's happened to earnings.

Paul Taylor:

Consumer discretionary actually did quite well and that's a range of different... Whether that's online because of the online demand or people like Dominoes are consumer discretionary as well. And then finally, technology was the standout. So once again, because of working from home, there's been a big focus on technology, e-commerce, working from home technology. So those companies have done incredibly well. The poor performing sectors through that period, energy was the worst and that was really driven by the oil price collapsing which once again was weakening... So opposite to iron ore, it was weakening demand and increasing supply that caused that oil price shock. That was the worst.

Paul Taylor:

Industrials were the second worst and industrials obviously includes things like Quantas and airports et cetera. Telcos actually surprisingly did poorly as well. So, even though it's an attractive space and a space that people are spending more money on or increased through this environment, it's probably a very competitive environment within the telcos. And probably, because of the NBN there's been a lot of commoditization in that space as well. So, that's been an interesting one. And also, financials have been a poor performing sector. So, the banks have obviously suffered through this period, and obviously they're one of the biggest sectors. So now, if I just quickly talk about some of the really good results that came out or the positive stock market response to the results.

Paul Taylor:

Companies like Coca Cola was a good result. Suncorp actually was a good result. That was more about beating weak expectations rather than actually delivering a really good result but expectations were quite low and they came out quite strongly. CSL continues on its way, Charter Hall in the property space as well as Goodman they're delivering good results and Stockland actually had a good bounce on their results as well. WiseTech in the technology space, Domino's had a very strong bounce on their results as well. I'll talk a little bit about macro, but I might leave that to the future because I think there's a bit of a change as well within that, but that's probably a bit of a roundup of reporting season. And I guess if I'd categorise it, I'd say it actually was pretty good, given the circumstances and the market was up a few percent as well. So, which I think was a good result in the environment.

Simon Glazier:

Yeah, absolutely. And you mentioned earlier Paul, obviously government support both monetary and fiscal. And, if we look across not only domestically but globally, there's been an enormous amount of stimulus pumped into markets and all over the place. So, how do you think that impacts things going forward?

Paul Taylor:

It's obviously been a big tail wind and that has definitely helped markets from a range of different perspectives. So, you're focused on fiscal, but I'll just talk quickly about monetary. Because there's obviously we have very low interest rates, interest rates are going to stay low I think for a long period of time. People keep talking about inflation and that's the eventual result, but I just think that's a long way off. So, very low interest rates. And from an equity market perspective, the equity market is valued off... One of the key inputs into a valuation is a risk free rate, which is at least one or 2%, pretty close to zero which really significantly increases valuations.

Paul Taylor:

And it's also, I think people have gone to the equity market because there's a lot of cash out there, and you got to put your money somewhere. And the equity market even though dividends have reduced and yield has come back, it's still the best return out there. So, people have I think increasingly seen the equity market as the place to be. So, there's a big monetary stimulus and that's going to stay in place, but the delta has really come on the fiscal side. So, the JobKeeper or government initiatives have played a huge role obviously, in this hibernation bridge building. And I think it's probably the thing that worries most people when they pull them away, what will happen? What will happen to the economy?

Paul Taylor:

Well, two different things. First of all, I don't think the government will pull them away until we get some sort of normalisation anyway. So, they put dates out there that are just to sort of highlight that it's going to be there for a while, but really I don't think they'd be in the position to pull a rug from under the economy until we get some sort of normalisation. Now, that normalisation can come from a vaccine, it can come from just living with the virus or it can come with changes in I guess, social distancing. Either way, we'll move forward at some stage as an economy, as a society as a market. So, I definitely look at this period as a temporary phase, governments are supporting us through that hibernation bridge building. We will come out the other side.

Paul Taylor:

When it is there's still a lot of uncertainty to it, but I just think I look at these sort of equity markets in five year frames, which to me might look much more attractive for that sort of period. Now, the other point I wanted to make on the fiscal is that while I think governments will move away from helicopter money and job keeper, et cetera. As we start to normalise as a society, I think they will continue their fiscal expansion, but I think it'll be much more targeted towards infrastructure. So, I think governments will look and say okay, now we need to build the infrastructure. We need to get the infrastructure in place, we need to create jobs, create economic activity and let's put the infrastructure in place that maybe we've under invested over the years anyway.

Paul Taylor:

So, I still think we're going to see a strong period of both monetary expansion and fiscal expansion. But on the fiscal side, I think it's probably likely to move away from helicopter money and be much more targeted towards infrastructure development as we move forward.

Simon Glazier:

Now, I think that instant asset roll off was a bit of a boost to some industries as well, but I'm just looking abroad for a moment, US at or close to all time highs, how do we make sense of that and those valuations and what's happening over there?

Paul Taylor:

I think the key point now as we start to look forward, I think you got to be much more stock specific. So, you're right, so the most common question I get from people is, well, hang on the US is exactly what you said, is it all time highs. We're still in the middle of COVID, there's still a lot of uncertainties, a lot of government spending. Does that make sense? I don't think you should be looking at it from a market perspective, I think what's basically happened is you've got a whole range of different very big winners and losers. So, if you took away some of those big winners, the market would be down in the US or if you look at Australia for example, where we've got the banks have been some of the losers.

Paul Taylor:

So, our market is still well below. So, it's much more about... I just think it's now a period of being very stock specific and I would encourage people not to take a broad based or just buy the market. It is about picking the right stocks in this environment because there will be big winners and there will be big losers coming out of that. And I think some of those themes were happening pre-COVID, but actually the funny thing is COVID has actually accelerated those themes. And the companies that are linked to those themes have done incredibly well and they've won share and they're increasing dividends, they're giving better capital returns. And if I just think about some of those accelerating themes, obviously e-commerce is top of the list.

Paul Taylor:

And even if I just talk to people within our own firm, I remember when we caught up the other day one of our colleagues said, "Look, I've ordered so many things online, I've actually lost track of what I've ordered." And, I think a lot of people are in the same position. They've gone to it and it's actually they found it enjoyable process. It's an easy process and things just come to your home. I've also talked about this COVID period as being a giant social experiment, and we are currently in a giant social experiment. We're going to try some things and if they work, we're going to keep going with them. So, I think the trend was already there for e-commerce pre-COVID, but we just enjoyed it so much ordering online and buying online it's now a habit that it's not going to go away.

Paul Taylor:

It's a social experiment that's turned into a habit and we like it so we're going to keep going with it. So that's something that's accelerated and that's going to accelerate more. So, anyone that's linked to that is going to be a big winner going forward. In the same vein, I think digital delivery of food and beverage, so same thing, right? We are in those sort of lockdown periods, it was all about takeaway food. And companies that can deliver our food service and beverage to us were once again big winners. Now that was, and people would have heard me talk about it, that was a big trend pre-COVID that got accelerated by COVID. And even post COVID, it's not as though people are then going to go back the other way once again, it's a habit.

Paul Taylor:

It's habit forming and people like it, and it's worked so they're going to keep going with it. And I think once again, I've talked a lot previously about we think the big winners from this are the sort of vertically integrated firms and Domino's is very well exposed to that. We think they'll be a lot of winners in that space, so some of the aggregators will do well as well, but when you see the vertically integrated has a better offering in that environment. So, that's another key trend that was happening pre-COVID accelerated through COVID and we think will continue even post COVID. Working from home another one. Once again, that was happening pre-COVID, but really that social experiment accelerated through COVID.

Paul Taylor:

Once again, it's been something that we've been forced into and as you can see I'm working in my home office as well. It's one that's worked well, people have enjoyed the technology, whether it's Zoom or Microsoft Teams or Cisco WebEx or Google Meet. And we've had meetings with companies, team meetings, clients of all forms. It's just worked incredibly well and it's been very productive. And once again, on that side maybe they'll be some retreat or maybe even a hybrid, but the move to working from home I think once again is a permanent type one. So maybe rather than working five days, you work two days or three days from home or maybe you get something depending upon the person.

Paul Taylor:

There was an excellent study that was done pre-COVID from Harvard Business School, that basically said the market was sort of 50/50. So, 50% of people, this is pre-COVID, 50% of people wanted to work from home and would work from home and 50% didn't want to work from home. And I think that's where we'll find our spot, post COVID we'll find our spot. And, some people will still want to be in the office, some people want to be at home or some people want to have a bit of a mix of both. The overwhelming desire is for flexibility and I think that's what the work from home technology has brought us and once again, that's a trend that's going to continue. Cashless society, another big trend.

Paul Taylor:

So, the money coming out of ATMs has been on the decline for a very long period of time, through COVID, ATM withdrawals just completely collapsed and we're on that path to being a cashless society. Now, maybe in the short term, there are members of our community that still want... Once we get over COVID, they'll still be some cash, but once again, that trend to a cashless society I think is an inevitable one. And that's benefiting certain companies. Nesting is another trend that's happened through COVID-19. Now, a lot of those companies were key beneficiaries of all of those trends or whether it's investment in infrastructure. All of that will continue post COVID-19 and those companies have been big winners from it.

Paul Taylor:

So, when you look at a market I think it's always interesting to see where the market is, but it's not the whole market that's gone up. We've got large numbers of stocks in Australia that have halved and maybe they should have even more than halved, but they're being a little bit as at some foundation given all the government subsidies that are in place. But other companies that have just taken off because their business model is just perfect for this environment. So, I think it's important to take those sort of things into consideration, but I think the critical point moving forward is I think being stock specific is always important. In this environment, I think it's absolutely critical because the winners and losers it's going to be chalk and cheese and there'll be big divergence through COVID, post COVID.

Simon Glazier:

Yeah, I can't help but think that delivery drivers are probably going to get a few more Christmas cards this year because they've built some relationships, dropping stuff off every day. And just on reporting season and looking at the portfolio a little bit now, have you made any changes during that time?

Paul Taylor:

Yeah, we did. As I'm sure everybody knows, I don't have a sort of high turnover style and the turnover in the portfolio we are typically investing for a five year period. And, if you look at the turnover in the portfolio over the whole... Well, we've now been going for more than 17 years which I'm really, really proud of. That turnover over that whole period is just under 20%, which also tells you that we're taking sort of a five year investment horizon. Which I think has made the fund low cost and tax efficient, as well as hopefully delivering good compounders, good long term returners as well. But I have definitely tweaked it through that period. So, going into COVID, we were very well positioned in, I would say high quality companies, maybe a lot of the larger companies that were in themselves...

Paul Taylor:

The liquidity in those companies is very good and we had good cash position. So, we're well placed going into COVID-19. Through that period, I've probably added to three areas. Now, the first is technology. So once again, when the whole market came down, initially everything got hit and that's typically what happens at the start of some sort of crisis. Whether it's COVID or GFC or whatever, typically what happens at the start is the market is shoot first ask questions later. And because there's so much uncertainty, it doesn't really know who's going to be a winner, who's going to be a loser so it just knocked everything down. And so, some of those businesses that had good long term structural growth got knocked down to very attractive prices and to me we added to companies like Tyro and WiseTech.

Paul Taylor:

Now WiseTech is an interesting one because we bought a lot early. We'd sold it as it went through $35 and then it collapsed back down to being in the tens and we said, okay, well that's our opportunity to buy back into it as well. So, we bought back into WiseTech in the tens. Tryo, same thing, we bought at an IPO, it just took off post IPO so we didn't really chase it. Got above $4 then collapsed back to below $1 in COVID and we took the opportunity to buy it on the same thing. Big beneficiary of the cashless society, good management team, really good long term structural growth and here's an opportunity, that Smack down has given us an opportunity to buy into a long term business. There's a couple of other ones in that area as well, but technology was a great I guess investment for the long term because you're now getting better prices to get into these businesses.

Simon Glazier:

So, is there another couple of tech names you can divulge?

Paul Taylor:

Well, one of the other ones is Seek which is the same, how you think about it. So, Seek is one we've owned for a long period of time. Once again, so it's cyclically negative in that it's linked to online recruitment so obviously jobs and recruitment is not good in this environment. But structurally, everything sort of fits into its long term structural plan. So, while it's negative short term cyclically... Well actually except so they own Zhaopin in China and they're almost back to where they were pre-COVID, which I think is a phenomenal achievement. But, once again, when you think about it, Seek sets its model as there's some sort of disruption in society, and maybe people move through sectors.

Paul Taylor:

So, previously, maybe you're in a job for life so that's therefore one job advertisement for someone's life. Now, in this sort of world we're getting so much disruption, technology's driving massive changes in different sectors. I think the young ones understand that they're probably not going to be in one job for life, but they might be in 10 jobs over their life and probably it might even be 10 different industries and 10 different ways to work. And maybe they go between working, back to study, back to work, back adult education so that's that sort of life changes in this world. Which also Seek is fantastically well positioned because now all of a sudden it goes from one advertisement to 10 advertisements, a multiple of 10.

Paul Taylor:

But also, they've got the Seek Learning as well as Seek Recruitment and they set it up where to me... And this is a discussion all on its own. I just think the tertiary education sector is a really interesting one under COVID and under changes. But I think the education sector, there's going to be a massive move to not sort of a three year degree but more a retraining or getting specific skills on top of your job. And Seek are very good at advertising to people, "Well, you want that job, if you can get this skill you can upgrade to that job. Or, looking at retraining into a different sector." I just think that's going to be a very important part of our economy and of our community going forward and Seek are just the best placed. So, short term cyclical negatives, but long term structural positive given the business model and potentially how our lives and how our careers will change under a much more technology driven world.

Simon Glazier:

Yeah, absolutely. And just conscious of time, Paul, so I might just maybe ask a couple of specific questions and it seems more recently gold is the trade to be on. How sustainable is it and what do you think would stop the music there?

Paul Taylor:

I think, to me, it is a good trade. So, just as we're printing money and that's going to go on for a while it means real assets increase in value, it just means that side of the equation printed money, fiat money is going up faster. It means real assets are going to appreciate in that environment and gold is probably still what people go to for that. So, we own Evolution Mining which we got a pretty good reasonable position on that. We also own Independence, and Independence is seen often as sort of a nickel play really, which actually we like that sort of nickel copper exposure for the, I guess the decarbonizing world, but they've got a very good and strong gold position as well.

Paul Taylor:

So, we think there's sort of an underappreciated gold play. And now what's going to stop it? Well, these things they don't go on forever, they do stop, they always stop it at some point and it will move. Gold is to a certain extent a sort of psychological asset as well. So, every ounce of gold that's ever been produced is still with us, gold doesn't leave us. So, the supply is continually increasing, because it's not actually used for anything other than aesthetic jewellery in that and a store of value. So, once we get to a point with government stop printing money, you'd have much more pressure on things like gold.

Simon Glazier:

Yeah. And maybe just thinking about getting towards the end of COVID and I think, the whole world is waiting for a vaccine to really signal the end of COVID. How do we leverage a vaccine or the discovery of a vaccine and production of a vaccine in 2021 from an investor's perspective? Given that there's so many options out there and so many kind of people working on a vaccine at the moment, how do you leverage that from an Aussie equity point of view?

Paul Taylor:

So you mean leveraging it from just as the economy once we sort of get over the COVID issue?

Simon Glazier:

Yeah. Do you take a bet on a pharmaceutical because you think they've got a good chance of getting a vaccine or is it better play it more broadly as in just leverage the broader economy as best you can?

Paul Taylor:

For the vaccine, CSL has developed a range of vaccines. It's the main flu vaccine provider in Australia. CSL have also developed a relationship with the University of Queensland. So, University of Queensland people would have seen as one of the sort of institutions at the forefront of developing a vaccine. And that, from it all the sort of experts we talked to there, they seem to have one of the best chances of getting that up. CSL also did that with the University of Queensland when they did the HPV vaccine, which was Professor Ian Frazer's who was at the University of Queensland. So, they've got a well worn path with them. It's positive, but I'm not sure it makes a huge difference.

Paul Taylor:

I wouldn't necessarily be investing in CSL on the belief that you're going to make a huge amount of money from a Coronavirus COVID-19 vaccine. But they would be beneficial to me that probably just adds... It's another reason why you should own CSL. But, I think if that vaccine does get up, I think it does... I think there's real pent up demand in the economy for people to do things. And as soon as they take off restrictions or there's a bit of relaxing, people are out there pretty quickly and it sort of surprised me to be perfectly honest. I think there's definitely pent up demand to do things. I think things will change in the new world, so it certainly won't get back to the same, but there is definitely a pent up demand that people still want to get out and see places.

Paul Taylor:

And maybe they'll still stay a little bit closer to home initially, but there's a lot very strong pent up demand to do stuff. Whether it's tourism or whatever, or get out to a restaurant or just maybe socialise a bit more. I think there is a strong bit of demand so those sort of businesses will benefit from that sort of environment and the good operators will put themselves in a good position going forward as well.

Simon Glazier:

Yeah, you're right. I think we're all challenging that demand with managing obviously the risks and trying to do the right thing for our communities as a whole. But, Paul that brings us to the 45 minute mark, so we might leave it there. So thank you very much for your comments and time today and thank you, obviously everyone for joining in. And again, just a reminder we will have CPD points available. It usually takes about 10 business days to come through after the session so, just give us a few days there to sort that one out.

Simon Glazier:

Paul is also working on our, From a Desk piece that will be out shortly and available after today's session. So keep a lookout for that. And also, in a couple of weeks, we have Kate Hauer joining us for another Fidelity live event. So, please join us for that. And I know there was a few questions we didn't quite get to today, so please reach out to one of your Fidelity team members. But again, thank you for joining us today and with that, thank you. Bye for now.