Prime SMA Performance Summary – May 2021

In May, the ASX 200 rallied to a new record high emboldened by a stimulatory Federal budget and continued accommodative central bank support. 

The highly supportive macroeconomic environment has nurtured an impressive recovery for corporate earnings and dividends further propelling equity valuations to historically high levels.

The portfolio concluded the month of May up 3.51% compared to the ASX 200 Accumulation Index up 2.34%. Positive contribution for the portfolio was driven by Westpac (WBC) Commonwealth Bank (CBA), and CSL Limited (CSL). Whereas Ramsay Health Care (RHC), Cleanaway Waste Management (CWY) and Santos (STO) weighed on attribution.

A key beneficiary of Australia’s economic restoration has been typified by the retail banks which have delivered the strongest earnings and dividend upgrades. At a portfolio level both Commonwealth and Westpac (Australia’s largest mortgage banks) are well placed to benefit from the momentum in housing loan growth. Moreover, CBA is enjoying the dual benefit of being leveraged to stronger housing market and delivering above-system volume growth. Overall, the mortgage led banks (CBA, SUN, WBC) are in an earnings recovery phase that will restore their appeal to deliver an attractive dividend income stream for investors.

The portfolio has a blend of 3 factor exposures with Quality being the strongest style weighting more than 60% in the portfolio. Woolworths being one of the quality stocks in the fund has been demonstrating its ability to consistently deliver superior returns compared to industry peers. The business is highly cash generative, maintains a strong balance sheet and is the largest supermarket business in Australia. We view WOW as best-in-class with a strong supermarket and liquor footprint as well as a superior online offering compared to domestic peers.

WOW’s supermarket business has continued to materially out-trade Coles, and notably its online grocery sales momentum of +90% compared to Coles +49% in 3Q21 highlights the leverage in its operating model. The different strategic priorities and better execution for online compared to its peers lead to topline outperformance for WOW and increase risk for customer stickiness for its competitors. These have inevitably consolidated WOW’s market leading position and our preference on WOW in the Staples space.

Portfolio Performance Figures

Risk Profile Portfolio Performance Figures as at 31 May 2021

Post-Franking Credits

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

Post-Franking Credits

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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