Investment Solutions


Investment Solutions


Investment Solutions


Key Lessons From The Biggest Investment Stories of 2022

Rene Anthony

Wednesday, December 21, 2022

Wednesday, December 21, 2022

We look at some of the key investment stories from the year, and the overarching lessons for investors.

We look at some of the key investment stories from the year, and the overarching lessons for investors.

In a year dominated by rising interest rates and sky-high inflation, a number of stories became talking points for investors.

Between the highs and lows of major corporate events, and other major stories in 2022, here are some key takeaways for investors.

Stable Leadership Provides Reassurances

What started as a promising year for Elon Musk quickly derailed into something akin to a circus show as the prominent entrepreneur took a leap that, so far, appears questionable.

Musk lodged a bid to acquire Twitter back in April, for US$54.20 per share. What looked like a joke bid soon became a confronting reality as the billionaire was forced to proceed with the purchase, despite trying to back out.

Since it became clear Musk effectively overpaid for Twitter, the effects were felt elsewhere. Tesla (NASDAQ: TSLA) shares lost around 65% in 2022, including nearly 55% since mid-September. Investors were rattled by Musk focus on Twitter, funded by share sell-downs in the EV auto-maker, not to mention the significant controversy he has attracted as Twitter CEO.

The key lesson here is that the investment community can, and often will turn on business leaders when they sense uncertainty, instability, or other matters occupy their attention. Whether Musk can turn things around in 2023 remains to be seen.

The Energy Transition is Gaining Momentum with Corporate Australia

Billionaire Mike Cannon-Brookes made an ambitious pitch this year when he teamed up with Brookfield to acquire AGL (ASX: AGL) at a low-ball price to accelerate the company transition to renewables.

When it became clear the bid was unlikely to see the time of day, Cannon-Brookes took up an 11.3% stake in the business. He would ultimately use this stake to prevent the company from demerging its coal assets into a separate entity, and also put forward four representatives for the Board that were all successfully nominated.

This passage of events suggests the opportunities surrounding decarbonisation are starting to garner increasing support, even as debate rages about the best way to approach the problem. Such is the size of the opportunity at hand, corporate Australia is now onside with the energy transition, particularly as the window for meaningful action narrows. 

For proof of the impetus for change, look no further than Brookfield $18.4 billion follow-up bid for Origin Energy (ASX: ORG), including a commitment to spend tens of billions of dollars in renewables.

Investors Should Always Prepare for Dynamic Risks

Whether it was the buy-now pay-later segment, or casino operators, 2022 was the year that reminds investors about the dynamic nature with which risk can enter the fray.

Whereas Zip (ASX: ZIP) and Afterpay were once considered innovators, that premise has truly deflated as investors shied away from a segment facing increasing regulatory risk. That comes at the same time soaring interest rates and a potential economic downturn threaten to blow out bad debts.It was a year full of controversy for casino operators such as Star Entertainment (ASX: SGR) and Crown, even though the latter was eventually involved in a buyout. Star woes continue, including a new tax hit, adverse findings regarding its casino licences, AUSTRAC proceedings against the company, plus civil action against many of the company current and former directors, and past executives.

While areas such as tech, biotech, and mining are traditionally associated with high levels of investment risk, emerging risks across the BNPL and casino segments highlight the need for investors to conduct due diligence across all types of industries, as well as the importance of diversification. 

Even Central Banks Get it Wrong

Australian investors entered 2022 with confidence that the official cash rate was likely to remain low, with reassurances from RBA Governor Philip Lowe that rates wouldn't rise until at least 2024. 

However, it wasn't long before the Reserve Bank of Australia made the move to raise interest rates for the first time since November, 2020. It lifted the benchmark rate at every monthly Board meeting in 2022, ending the year at 3.1%. 

The RBA repeatedly sought to clarify its comments about the outlook for interest rates, even apologising to those that listened and acted on its guidance. However, communications are a key responsibility for central banks around the world. These events have led to calls for a shake-up at the nation central bank, with a review already underway.

Whatever happens, moving forward, investors shouldn't overlook the messaging of the RBA, however, during uncertain, if not unprecedented times, investors also need to be prepared to pivot in response to a shifting landscape.

Momentum Again Proves to be a Driving Force

The share prices for a number of battery metals stocks may have done little, or even gone backwards in 2022, but that hasn't necessarily represented a downturn in demand for critical minerals.

Both home and abroad, governments have stepped up their support for the sector, viewing critical minerals as a key lynchpin in the path towards electric vehicles, and renewables at large. Momentum is firmly behind the sector at the moment, and Australia appears to be a key beneficiary of what could ultimately be the next commodities boom'.

It was a different story for once-famed fund manager Magellan Financial (ASX: MFG), which saw its share price plunge in 2022. It wasn't the only fund manager to suffer this ignominy either. 

However, the loss of a key mandate for the company at the start of the year set the wheels in motion, with its funds under management depreciating since that point in time. Co-founder and former head investment guru Hamish Douglass' departure only made the task of a turnaround more difficult.

Arguably the biggest showcase for the power of momentum was none other than the crypto sector. Facing numerous controversies and regulatory headwinds throughout the year, and with risk-off sentiment prevailing across markets in 2022, things took a dramatic turn following the collapse of crypto exchange FTX. 

Its demise, and the nature of its demise have clouded the sector in uncertainty, with Sam Bankman-Fried extradition on fraud charges looking as though it could be just the beginning of a period where the asset class is firmly under the microscope.

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