Fundamentals still count. Shares can rise and fall quickly on a piece of news, and it’s not passive funds that are driving that price action.
Already a subscriber?Australia’s S&P/ASX 200 hit 8000 points recently, despite anxiousness around the direction of the economy and fears that the next interest rate move will be up, not down.
Nvidia, like CBA, has had an incredible year. However, the two stocks and sectors couldn’t be more different. Whereas the US chipmaker has benefited from the rise of artificial intelligence, the banking sector has barely evolved.highlighted that passive funds have done well because Nvidia and the tech sector have grown at the expense of active management.
The concern is that the popularity of passive funds that track a market cap index mindlessly drive up share prices, regardless of fundamentals such as earning growth, balance sheet strength, free cash flow and book value. This creates an opportunity for active managers and market participants who take a different approach.CBA has built a wide economic moat. Its recent gains have coincided with the rally in its global peers following rate cuts in many developed markets where Australia’s biggest bank doesn’t operate.
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