Prime SMA Performance Summary – December 2017

Portfolio Objective

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

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.

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Portfolio Commentary & Positioning

The Australian equity market rounded out the calendar year on a positive note with the ASX200 adding 1.60% and closing at its yearly highs.

Large caps and small caps rose 1.90% and 2.90% respectively.

Meanwhile international equities continued their rise with US, European and Asian markets climbing as global growth continues to accelerate.

Amongst the sectors locally, energy and miners were strongest, posting monthly gains in excess of 6%. Telcos added 5.5% despite having their worst annual performance since 2000, while utilities dragged on portfolios falling more than 5% on account of rising bond yields.

The US equity market strength was buoyed by Trump’s first major legislative win after the Senate passed his tax reform bill which will provide US$1.5 trillion in tax relief over 10 years.

Commodities strengthened in December as falling inventories gave strength to iron ore and oil prices.

Iron ore rose despite imports falling from the previous month. Full-year shipments rose 5% exceeding last year’s record of 1 billion tonnes as iron ore added 8% to trade $74/tonne.

Oil prices rose again. OPECs decision to extend production cuts will further contribute to balancing out the global supply glut. Brent Crude traded $66/bbl and WTI $60/bbl, the highest end-of-year price since 2013.

The AUD gained against nearly all of our major trading partners, supported by rising commodity prices.

Major contributors to the portfolio’s for December were Oil Search (OSH) +11% and Woodside (WPL) +6.7%.  Rising oil prices and a broker upgrade for OSH were the catalysts for this.

Crown Resorts (CWN) +5.4% continued its recent charge benefitting from the company’s announcement to sell down its stake in Crownbet and boost its balance sheet.

We added BT Investment Management (BTT) to portfolios in December following a sharp selloff in the second half the year. BTT has terrific growth potential and is an exceptionally well run business.

Regis (REG) was the worst performing stock falling 6.80% as weakness amongst its peers Japara (JHC) -8% and Estia (EHE) -8% beset aged care providers.

All four of our SMAs beat the market in December. The Equity Growth returned 2.83%. Prime’s Diversified Income SMA returned 1.24%. The Defensive SMA benefitted from a host of hybrid holdings going ex-dividend while continued success from VGI Partners Global Investment LIC boosted the International SMA.

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Disclaimer: This information has been prepared by Primestock Securities Limited ABN 67 089 676 068, AFSL 239180 (“Prime”). Prime accepts no obligation to correct or update the information or opinions in it. This information does not take into account your objectives, financial situation or needs. Before acting on this information, you should consider whether it is appropriate to your situation. It is recommended that you obtain financial, legal and taxation advice before making any financial investment decision. Prime is bound by the Australian Privacy Principles for the handling of personal information.

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