BUDGET, BUDGET, BUDGET!
Investors couldn't escape the news last week that Treasurer Joe Hockey delivered a federal budget that excited small business owners, relieved working parents, worried self-funded retirees, and scared (not really) big business.
To quickly recap; here are some of the major points that Foolish writer Mike King took out of the budget:
- An estimated 326,000 self-funded retirees will lose part-pension benefits as the means testing for asset limits falls from above $1 million to $823,000.
- The ATO is targeting 30 multi-national companies suspected of diverting profits from Australia. If found guilty, the companies will be liable to pay double the amount of tax they owe, plus interest.
- Work-related car expense claims are also being targeted, with the government aiming to save $845 million over the next 3 years
- An additional $1.6 billion is going towards new and amended listings on the Pharmaceutical Benefits Scheme (PBS).
- Small businesses with less than $2m in turnover will see their tax rates cut to 28.5% from 30%. Sole traders will also get a 5% tax discount of up to $1,000. Small business can claim an immediate tax deduction for each and every item they purchase up to $20,000. It can be written off to reduce tax liability. That is estimated to help more than 2 million businesses.
Big Winners
A number of analysts, including us at the Motley Fool, made some predictions about companies set to benefit. Well, which companies have actually outperformed over the last week as a result of the budget (note the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) is up only 20 points over the last week)?
Childcare providers have underperformed: Affinity Education Group Ltd (ASX: AFJ) is down 1%, while G8 Education Ltd (ASX: GEM) is up 1%
Leasing groups have done well: FlexiGroup Limited (ASX: FXL) is 6% higher and Silver Chef Limited (ASX: SIV) is up 3%.
After an initial bounce, retailers have struggled: JB Hi-Fi Limited (ASX: JBH) is flat, while Harvey Norman Holdings Limited (ASX: HVN) is nearly 2% LOWER!
What's the Lesson?
The lesson here is that for every short-term catalyst that moves a share price, there's the rational assessment of the company's long-term earning ability to consider. If the budget's measures were sure to boost earnings then share prices would have pushed even higher.