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Surprises and sour grapes: What we learnt from reporting season

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Although the market is continuing to navigate the uncertainty caused by COVID-19, structural shifts have seen tech stocks shine the brightest while utilities and energy drag.

Of all 270 companies that reported, the overwhelming majority (46%) were in line with expectations, 36% reported surprisingly positive results, and 18% delivered sour grapes.

This explains why the market meandered around and was able to shoot the lights out, and why investors need to focus on picking the right stocks in the right industries if they want to generate above average returns.

afterpay shares

What's really interesting is the companies that outperformed saw revenues rise from people spending more time at home - and smarter investors have been riding those structural shifts.

Looking at some of the companies that brought home the bacon, they were all companies that saw earnings growth in the pandemic.

A dominate outperformer was tech as a result of online shopping, online gambling, and online education thriving in the pandemic, as the world was forced to evolve and change the way we live our lives.

Online shopping

Afterpay (APT) shares soared to a record high after their result, which revealed that their online customers doubled in a year with customers rising by 21,000 from April to June (in the height of the pandemic).

Online gambling

Online sports betting company PointsBet (PBH)'s shares soared to a record high.

Jumbo (JIN) also did well reporting elevated customer spending levels.

Online business

Cloud CRM business Whispir (WSP) delivered much stronger revenue and earnings than expected.

ReadyTech, the online student management company also saw stronger earnings and subscribers than the market expected.

These results were accompanied by some other interesting developments.

Car repairs shone as more people were inclined to drive their cars. With people spending less time on public transport, and more time around their humble abodes, car tinkering was on the up. That's why car parts and servicing business Bapcor (BAP) shone, with sales revving up in May and June and carrying into July. Bapcor also reiterated its five year growth targets with sales surging.

Rubbish cleaned up. Cleanaway Waste Management (CWY) popped to a 12-year high after they delivered a surprisingly pleasing report on the rubbish business. Its costs dropped more than expected, thanks to its employees spending less time driving, which dropped its fuel and overtime costs and increased its margin.

Stocks poised to take advantage of the China recovery thrived.

China's industrial activity increased, along with mining activity and demand for our iron ore. This has helped the iron ore price trade at a year high. That saw stocks like NRW Holdings (NRW) and Mount Gibson Iron (MGX) pack a punch as they also guided for growth to continue in FY21.

On the downside, commercial rent collectors / landlords like Vicinity Centres (VCX) and Dexus (DXS) underdelivered. They were also not really able to give guidance on what FY21 holds given the uncertainty of the COVID-19 pandemic.

Meanwhile, travel business' such as Webjet (WEB) missed brokers expectations given the uncertainty on when flying and travel will resume.

Lessons for retails investors

1. Be aware of the structural trends regardless of what is happening, to help you pick the next potential winning and outperforming stocks.

For example, now we are seeing online retail, online education, online gaming, and remote working thrive. Most travel and hospitality companies are struggling as we are all simply spending more time at home and less time commuting.

2. Observe and think ahead. Think about the companies that are growing their earnings despite COVID-19. Remember the old saying, earnings drives share price growth.

3. Think about investing into companies that are in growing sectors.

4. Take action to help kickstart your financial future. Being idle at times, can delay you achieving your financial goals.

We're cutting through the confusion to help you manage your money during the coronavirus outbreak. Click here for more on how COVID-19 could affect your job, budget, super and investments.

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Jessica Amir is a market analyst and media presenter for Bell Direct, Desktop Broker and Bell Potter Online. She has more than 14 years' experience in financial markets.
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