Founder Evidente. Top rated quantitative analyst, Evidente

Sam Ferraro

Founder Evidente. Top rated quantitative analyst

Evidente

Evidente is an independent financial education firm that delivers innovative financial advice to wholesale investors, including active long only funds, hedge funds, pension funds, and sovereign wealth funds, in Australia and globally.  Drawing on academic research in asset pricing, behavioural finance and portfolio construction, Evidente provides wholesale investors with commercial solutions to stock selection and asset allocation decisions across equities and other asset classes.

Equity Bottom-Up

<ul><li>In this post, Evidente extends its systematic model of earnings certainty to Australian small caps.  The out-performance from large caps with high earnings certainty evident in 2015 was also present amongst small cap stocks.  The top 10 ranked small industrials earnings certainty stocks delivered an annual return of around 8%, well above the stocks with the lowest earnings certainty (-2%).</li><li>The REIT sector dominates the updated top 10 earnings certainty stocks.  The fact that most small cap REITs are trading a significant premiums to book value precisely at a time when commercial rental yields continue to deteriorate suggests that pricing around the sector is becoming increasingly complacent.  I stop short of recommending an outright short position in the sector due to the prospect that commercial rental yields could remain lower for longer thanks to low interest rates and ample liquidity globally.</li><li>I recommend overweight bets in the remaining four top ranked stocks that are not exposed to commercial property: Auckland International Airport, Fisher &amp; Paykel, Sky City Entertainment Group and Brickworks.  These four stocks rank in the top quartile across Evidente's market sentiment signals, which incorporate price momentum and acceleration measures.</li></ul>

In this post, Evidente extends its systematic model of earnings certainty to Australian small caps.  The out-performance from large caps with high earnings certainty evident in 2015 was also present amongst small cap stocks.  The top 10 ranked small industrials earnings certainty stocks delivered an annual return of around 8%, well above the stocks with the lowest earnings certainty (-2%).The REIT sector dominates the updated top 10 earnings certainty stocks.  The fact that most small cap REITs are trading a significant premiums to book value precisely at a time when commercial rental yields continue to deteriorate suggests that pricing around the sector is becoming increasingly complacent.  I stop short of recommending an outright short position in the sector due to the prospect that commercial rental yields could remain lower for longer thanks to low interest rates and ample liquidity globally.I recommend overweight bets in the remaining four top ranked stocks that are not exposed to commercial property: Auckland International Airport, Fisher &amp; Paykel, Sky City Entertainment Group and Brickworks.  These four stocks rank in the top quartile across Evidente's market sentiment signals, which incorporate price momentum and acceleration measures.

Beware Complacency Around Australian Small Cap REITs Risk Exposures

Australia

Charter Hall Long WALE REIT operates as a real estate investment trust. The Company invests in office, industrial, and retail properties that are leased to corporate and government tenants on long-term. Charter Hall Long WALE REIT conducts business in Australia.

Ingenia Communities Group manages, develops and invests in a portfolio of retirement village accomodation housing units.

Charter Hall Retail REIT owns a portfolio of supermarkets and shopping centers located in non-metropolitan areas throughout Australia, New Zealand and the United States.

National Storage REIT is a Real Estate Investment Trust.  The Trust owns self storage facilities in Brisbane, Sunshine Coast and Gold Coast in Queensland, Sydney Western Suburbs in New South Wales, Melbourne and Geelong in Victoria, Adelaide in South Australia, Perth in Western Australia and Hobart in Tasmania.

Growthpoint Properties Australia Limited operates as a real estate investment trust. The Company focuses on office, residential, and industrial sectors. Growthpoint Properties Australia serves customers in Australia.

Growthpoint Properties Australia (GOZ AU)

Arena REIT operates as a real estate investment trust. The Trust owns a portfolio in sectors such as childcare, healthcare, education and government tenanted facilities in Australia.

Cromwell Property Group is a property and funds manager. The Company, through its subsidiary, provides funds management, property transactions, property and facilities management, finance, compliance, debenture issues, and debt management.

Rural Funds Group is a real estate property trust which owns Australian agricultural assets.

Charter Hall Social Infrastructure REIT operates as a real estate investment trust. The Company invests in social infrastructure properties, as well as provides assets and capital management services. Charter Hall Social Infrastructure serves clients in Australia and New Zealand.

Charter Hall Social Infrastructure REIT (CQE AU)

Hotel Property Investments owns a portfolio of properties.  The Company's properties consist of pubs, detached bottle shops and other on-site specialty stores, which are used to generate capital returns for its security holders. Hotel Property Investment's properties are located throughout Queensland and South Australia.

MORI HILLS REIT INVESTMENT CORPORATION is a real estate investment trust (REIT). The Company invests in real estate properties such as commercial and office buildings.

Mori Hills REIT Investment Corporation (3234 JP)

Retail Opportunity Investments Corp. is a fully integrated and self-managed real estate investment trust ("REIT").  The Company specializes in the acquisition, ownership and management of necessity-based community, and neighborhood shopping centers in the western and eastern regions of the United States anchored by national and regional supermarkets and drugstores.

Retail Opportunity Investments Corp. (ROIC US)

SPH REIT is a Singapore-based REIT established principally to invest, directly or indirectly, in a portfolio of income-producing real estate which is used primarily for retail purposes in Asia-Pacific, as well as real estate-related assets.

Comforia Residential REIT, Inc. is a real estate investment trust (REIT). The company invests in leasing city apartments mainly in Tokyo area.

MORI TRUST Sogo Reit, Inc. is a real estate investment trust (REIT), which invests in income producing properties.  The Company mainly invests in office buildings in metropolitan area and local cities.

Getty Realty Corporation owns and leases properties in the Northeastern and Middle Atlantic states. These properties, consisting of service stations, convenience stores and petroleum marketing terminals are leased to Getty Petroleum Marketing Inc. Getty Realty Holding is also a marketer of heating oil in Pennsylvania and Maryland.

Activia Properties, Inc. is a real estate investment trust (J-REIT). The company mainly invests in commercial and office buildings in the Tokyo metropolitan area.

DiamondRock Hospitality Company is a self-advised real estate investment trust. The Company owns, acquires, and invests in upper scale and upscale hotel properties located in North America.  DiamondRock also invests in premium limited-service and extended-stay hotel properties in urban locations.

RLJ Lodging Trust is a self-advised and self-administered Maryland real estate investment trust. The Trust invests primarily in premium-branded, focused-service and compact full-service hotels. RLJ Lodging owns hotels in multiple states and the District of Columbia.

Empire State Realty Trust Inc. is a real estate investment trust. The trust owns, manages, operates, acquires and repositions office and retail properties in Manhattan and the greater New York metropolitan area.

BWP Trust operates as a real estate investment trust. The Trust invests and manages commercial properties. BWP Trust serves customers in Australia.

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Bwp Trust (BWP AU)

Beware Complacency Around Australian Small Cap REITs Risk Exposures

In this post, Evidente extends its systematic model of earnings certainty to Australian small caps. The out-performance from large caps with high...

Sam Ferraro

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52-week Range

Market Cap (USDm)

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