Reporting season is over and it was a very interesting one. Here are some of my takeaways from it:
Most blue chips were disappointing
Australia's share market index is dominated by the big four banks like Commonwealth Bank of Australia (ASX: CBA), resource businesses like BHP Billiton Limited (ASX: BHP), retailers such as Wesfarmers Ltd (ASX: WES) and a few others.
However, sadly, most of those blue-chip businesses delivered (at-best) low growth and some revealed profit contraction.
Result seasons like the one that just occurred re-iterate my belief that holding Australian 'blue-chips' and portfolios heavily weighted to them is a poor decision in the current environment.
There were a couple of highlights like CSL Limited (ASX: CSL) that show what re-investing into the business – instead of huge dividends – and what decent international expansion can do.
Hot gets hotter
Some of Australia's top growth shares delivered pleasing impressive profit numbers such as Altium Limited (ASX: ALU) and WiseTech Global Ltd (ASX: WTC).
However, the share price growth response was even more incredible considering the already-high valuations.
There is a lot of capital looking for a home in Australia and it seems this reporting season has sent even more of it to ASX technology businesses. Maybe in a year from now those valuations will seem less extreme?
Decent growth is key
Any business that is predicting profit growth of less than 10% over the coming year seems to have been punished by the market. It's true to say that rising interest rates should hurt valuations, however interest rates are still low and haven't moved too much in the grand scheme of things.
Foolish takeaway
One thing is for sure – many quality Australian businesses are now trading lower despite revealing higher profits and expectations for more growth in the coming years.
