Prime SMA Performance Summary – January 2020

Global equity markets began the year on weaker ground with investors taking a risk-off approach to start 2020. A weaker AUD (-4.7%) resulted in positive returns as represented by the MSCI World Index which rose +4.4% in AUD terms.

Tensions between the US and Iran escalated following the US drone strike and assassination of Iran’s major general Qasem Soleimani. Global equity markets largely shrugged off any major concern here following Iran’s somewhat subdued retaliation.

US equities outperformed but still fell (-0.2%) as utilities and tech stocks climbed higher whilst the UK officially exited the EU.

China fell -2.4% following the outbreak of the coronavirus which looks likely to have a material negative impact on global demand.

Locally, the ASX200 Accumulation Index outperformed rising +5% and in turn recorded its best January performance number in 7 years.

January is typically a quiet month for our market with the major focus looking ahead to February’s Half Year reporting season. We remain confident our portfolios are well placed to outperform despite what we expect to be a tricky corporate earnings season.

Australian bond yields tightened with 10-year Government bonds falling back to their lows to yield 0.95% at month end.

Oil sold off heavily down -15% following the slide in US and Iranian relations and the implications the coronavirus will have on global growth and global oil demand.   

Major contributors to performance were Afterpay (APT) and Boral (BLD) which bounced +31% and +11% respectively. There was no specific news to account for the move in both stocks, rather a reversion of some weakness in the previous month. APT did close out its Share Purchase Plan raising $33m while BLD flagged some financial irregularities in its North American Windows business which was disappointing.

Detractors were Webjet (WEB) and Downer (DOW) which were down -10% and -9%. WEB fell on coronavirus fears and the impact Google Flights may have on its underlying business whilst DOW downgraded guidance to reflect weaker performance in its Engineering, Construction and Maintenance division. Both stocks remain core holdings and look oversold at these levels.

We were active across the SMAs in January. The Growth SMA reduced DOW (prior to the downgrade), IFL and CGF and the Diversified Income SMA likewise reduced DOW and IFL. The Defensive Income SMA added to its existing position in Ardea and the International SMA went unchanged. On a risk profile performance basis our 5-year numbers continue to perform well against their respective benchmarks.

Portfolio Performance Figures

Risk Profile Portfolio Performance Figures as at 31 January 2020

Prime SMA – Model Portfolio Performance Figures as at 31 January 2020

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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