Prime SMA Performance Summary – November 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

Equity markets in Australia and America were stronger in November in contrast to Europe and China which were predominantly weaker.
The ASX200 traded through 6000 points, a 10-year high and a level not seen since the global financial crisis as strong employment data and rising commodity markets supported the local economy.

The ASX200 Accumulation index extended last month’s gains climbing a further 1.64%

Locally, telecommunications and banks underperformed while the energy sector and REITs were strongest.

Offshore, US equity markets advanced following a strong reporting season and the likelihood of tax reform under President Trump. The S&P500 gained for the 9th consecutive month and Jerome Powell was named as the new Fed Chair.

Iron ore reversed a 2-month losing streak, adding 17% as Chinese imports rebounded. Shipments rose 19% for the month, their fifth highest on record to trade $68/tonne.

Oil prices climbed higher for the sixth straight month, closing out the month at levels not seen for two and a half years with Brent Crude trading $63 and WTI $57. OPECs decision to extend production cuts a further nine months to the end of 2018 underpinned this strength.

Major contributors to portfolios were Crown Resorts (CWN) which rose 6.4%. Having underperformed the index for the previous 3 months, CWN rebounded strongly to post its best monthly gain since the announcement of its special dividend in February.

Woolworths (WOW) Q1 sales figures reported on the last day of the previous month pointed to growth in its food division of nearly 5%, which resulted in a broker upgrade on the first day of November. WOW continues to gain market share from rivals Coles and Aldi as we look towards our $28 target price.

On the negative front major banks ANZ and WBC fell ~5%, while NAB lost 9%. All three banks went ex-dividend during November so much of this negative performance will be recouped by way of these dividends. The government also announced a royal commission into the entire banking sector which we view rather immaterial. We regard the sell-off as an opportunity to add to our existing underweight position in the banks.

Prime’s Growth SMA returned 0.22% lagging the market while the Diversified Income SMA was flat on the month. The Defensive and International portfolios were both in line with their respective benchmarks assisted by strong performance from the Jamieson Coote Active Bond Fund and the recently IPO’d Magellan Global Trust.

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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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