Looking beyond the headlines

The headlines are certainly ominous: "Japan Faces Threat of Nuclear Disaster," "Defiant Gaddafi Refuses to Quit," "Euro-Zone Debt Woes Rising Once Again." Two regime changes, ongoing civil unrest, a deepening sovereign debt crisis, a massive earthquake, a tsunami and a still-unfolding nuclear disaster make it unlikely the past quarter will be forgotten anytime soon.

As disruptive events occur, it's easy to get emotionally wrapped up in the headlines. Following the recent earthquake in Japan, investors ran for the exits, indiscriminately selling Japanese stocks regardless of their quality.

But we've found it's the stories behind the headlines that can have the more profound impact on markets and economies over the long-term. In addition to seeing the event for what it is, our investment professionals look at the derivative results to understand the impact on individual companies. Doing so gives us the benefit of insight into future disruptive events and the investment opportunities that emerge from them. To illustrate, our recent research has centred on questions such as the following:

  • The inflationary impact of government regulations mandating energy savings or more costly alternative energy sources as nuclear energy becomes less politically palatable following the Fukushima incident.
  • How the Australian dollar may be affected by potentially diminished commodity demand in China and a manufacturing slowdown in Japan based on supply disruptions resulting from the earthquake.
  • Whether European countries may be forced to turn back to Gazprom as Middle Eastern sources of natural gas become increasingly unstable.

And the list goes on. Sometimes investment convictions can be profoundly shaped through disruptive world events – it just requires a look beyond the headlines.

Please join our search for unconventional insight.

If you would like more information or support, please contact our distributor, Pinnacle Investment Management, on 1300 010 311.