Stock Update

Altium Ltd. (ALU:ASX)

12 Jan 2021
Altium Limited develops electronic design automation (EDA) software for the Microsoft Windows operating system. Altium's products facilitate and aid in the design of electronic products such as printed circuit boards. The Group's products are utilized by telecommunications, automotive, defense, science and consumer electronics industries.

ALU has disappointed the market with a soft first half revenue update. ALU has maintained full year guidance but it’s apparent the pandemic continues to have a big impact on the short-term trading and ALU will need a big second half to meet its guidance. This is the second time (following on from the AGM) ALU has warned of the COVID impact it is facing but the company continues to see the impact as transitory and the ambitious $US500m annual revenue target for 2025 remains intact.

Perhaps the bigger short-term issue ALU is facing, as well as other tech stocks, is the changing outlook for long-term inflation and interest rates. High growth stocks have enjoyed a tailwind from low long-term interest rates – making the longer-dated cash flows from tech stocks more valuable – but we continue to feel that governments will keep interest rates low while government debt remains so high. Inflation is a risk to that outlook, but we have seen the US Fed, for example, talk about letting inflation run higher than it would historically be comfortable in doing before adjusting interest rate policy settings.



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Glenn B.


I have not seen any changes to the High Conviction strategy since it started in Nov 19. How there been
any changes that I may have missed?

Does ALU still have a place within the High Conviction strategy?

With Thanks

Shannon Rivkin

Hi Glenn,
The High Conviction portfolio is made up of stocks we like for the long-term. At the moment tech stocks, especially those with high $USD revenue bases, are being sold off. This is also because of long-term bond yields increasing after the recent US election. Neither of these issues are company-specific, and we continue to like the long-term tailwinds for ALU. So, ALU remains a hold in the High Conviction strategy.
Shannon Rivkin

We are glad you liked it

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