Prime SMA Performance Summary – January 2021

“The economic recovery is well under way and has been stronger than was earlier expected. The board will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range. The board does not expect these conditions to be met until 2024 at the earliest.” Dr.Philip Lowe – RBA Governor

The Australian economy is rebounding much quicker than expected. Australia’s success in suppressing COVID-19 has resulted in materially better economic outcomes notably in employment, export receipts (iron ore) and housing markets. Indeed, the Reserve Bank (RBA) has reinforced its eagerness to further support risk assets by its forward guidance that a record low 0.1 per cent cash rate will now be maintained to at least 2024. 

As the RBA anchors interest rate expectations Australian corporate profits remain well positioned to stage a V-shaped recovery. Earnings for the ASX 200 are forecast to grow by ~20% through the 2021 calendar year. Notwithstanding this, much of the expected good news for an earnings rebound is now reflected in share market valuations, with the ASX 200 trading on a 20 times 12-month forward PE. A more complex path for global vaccine distribution may also weigh on sentiment.

At a portfolio level, we remain resolute in our preference for companies that are industry leaders with demonstrable earnings resilience and balance sheet strength, epitomized by the calibre of CSL, Cleanaway, Wesfarmers, and Woolworths.  

We also find valuation support in companies that will benefit as the economy further reopens, such as Ampol (fuel retailing), Qube Holdings (Logistics) Ramsay Health Care (elective surgery), with each sharing the hallmark of being industry leaders in their prospective fields.

Portfolio Performance Figures

Risk Profile Portfolio Performance Figures as at 31 January 2021

Prime SMA – Model Portfolio Performance Figures as at 31 January 2021

About the Portfolio

Portfolio Objective
To achieve capital growth with moderate tax-effective income via franked dividends through investment in listed Australian securities.

Model Portfolio
The Model Portfolio is managed by selecting primarily those securities with moderate growth potential but robust cash-generating capacity. These securities are expected to deliver an above-market average income yield, together with a relatively moderate level of capital growth. The portfolio benchmark is the S&P/ASX200 Accumulation Index.

The information in this article contains general advice and is provided by Primestock Securities Ltd AFSL 239180. That advice has been prepared without taking your personal objectives, financial situation or needs into account. Before acting on this general advice, you should consider the appropriateness of it having regard to your personal objectives, financial situation and needs. You should obtain and read the Product Disclosure Statement (PDS) before making any decision to acquire any financial product referred to in this article. Please refer to the FSG for contact information and information about remuneration and associations with product issuers. This information should not be relied upon as a substitute for professional advice, and we encourage you to seek specific advice from your professional adviser before making a decision on the matters discussed in this article. Information in this article is current at the date of this article, and we have no obligation to update or revise it as a result of any change in events, circumstances or conditions upon which it is based.


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