Australian United Investment says fear of missing out is driving share prices

The $1.4bn Australian United Investment said low interest rates, the flood of money and fear of missing out by investors is pushing up share prices.

The Charles Goode-chaired Australian United Investment isn’t investing in high-flying tech stocks

Australian United Investment, the $1.4bn listed investment company chaired by former ANZ and Woodside chair Charles Goode, says rallying share prices are being supported by the weight of money, low interest rates and “fear of missing out” by investors.

However, the company added that the local equities market did not appear to be irrationally exuberant, except in the high ­prices being paid for technology stocks.

“The market, to a significant extent, can be summed up in TINA, QUOFs, FOMO. That is – there is no alternative, quantity of funds, and fear of missing out,” AUI said on Tuesday.

“The low interest rates have a lot to do with it, as does the quantity of money and increased savings, and the expected economic recovery from Covid.”

The company, whose directors include Yarra Capital Management boss Dion Hershan, issued its full-year results, which showed a 1.6 per cent fall in net profit to $40.5m, with revenue down 0.9 per cent at $46.1m. AUI declared a final dividend of 19c a share, flat against last year, and payable on September 23.

AUI has a $1.4bn investment portfolio dominated by blue-chip stocks that also have a history of paying rising dividends to shareholders, such as Commonwealth Bank, CSL, BHP, Rio Tinto and Transurban

In its full-year commentary, it said the range of factors supporting higher share prices had led to high price earnings ratios, which it now expected to be supported by rising earnings.

“The market does not appear to be irrationally exuberant, except in the high technology hopefuls,” the company said.

“For our part, we are a long-term, low-turnover, diversified, yield-conscious investor. It is our intention to remain investors in high-quality companies with strong long-term prospects.

“We are underweight in non-dividend-paying high-technology companies and mining exploration companies, as well as cyclical industrial companies.”

For the 2021 fiscal year, AUI said that, excluding special dividends received, the company’s revenue fell 14.6 per cent on last year.

“The company’s investment portfolio has continued to be affected by the Covid-19 pandemic during the financial year,” it said.

“Revenue has been reduced by the fall in dividend and distribution income from the company’s investments, particularly in the first half of the financial year.”

AUI’s net asset backing accumulation performance for the year was a rise of 26.9 per cent, while the S&P/ASX 200 Accumulation Index rose 27.8 per cent. However, it noted its returns were after tax and expenses and the impact of the company’s gearing, for which no allowance is made in the ASX index.

The company’s relative performance for the year was assisted by overweight allocations to Washington H. Soul Pattinson, Reece and Rio Tinto, and underweight holdings in the utilities sector. Relative performance was held back by overweight holdings in Transurban, Atlas Arteria and CSL and underweight allocation to the strong gold sector.

Purchases made in 2021 included Aristocrat Leisure, Link Group, PEXA and Orica.