Prime SMA Performance Summary – March 2019

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.

Portfolio Commentary & Positioning

Global equity markets continued to climb higher in March with the MSCI World Index rallying for the third consecutive month adding 1.5% to take the annual year-to-date return to 11.5%

The Federal Reserve’s pivot on monetary policy and a possible resolution to the US/China trade war continues to provide investors with an increased appetite for risk.

US 10 year Treasury yields fell to 15-month lows to yield 2.40%.

China was the notable outperformer in March adding 5% following positive developments on a trade deal. Further policy stimulus in the Chinese economy has also boosted its equity market which has risen 24% this calendar year.

The Australian equity market was slightly ahead in March with the ASX200 Accumulation index adding 0.73% and up close to 11% for 2019.

Large amounts of dividend income hit client portfolios in March due to reporting and dividend season the month prior. PRIME continue to advocate holding a little extra cash in the medium term given our view equity markets are appearing fully valued and due a correction in the near term.

Oil rallied for a third consecutive month with Brent rising 1.8% to $68/barrel and WTI to $60/barrel (+5%.)

Contributors to performance in March were Afterpay (APT) +14%, Pendal Group (PDL) +8% and Regis Healthcare (REG) +7%. Surprisingly there was no fundamental news out on any of these individual stocks during the month so in the case of APT we are attributing its strong performance to its 1H financial results released at the end of February which continues to show strong growth in both users and merchants and continued expansion into the US market. PDLs performance was simply due to the stock having been oversold in the backend of 2018 whilst REG saw a few brokers raise their target prices.

Detractors from performance were Nufarm (NUF) and IOOF (IFL) which fell 10% and 7% respectively. NUFs temporary suspension of its interim dividend along with a minor cut to full year guidance was poorly received by investors who marked the share price down. We support management’s decision to preserve the balance sheet and whilst disappointed with the cut to EBITDA guidance remain upbeat about the company’s future prospects, so much so that we used the share price fall to significantly add to positions. IFL was weak on little news flow so we consider this to be a minor reversion of the previous month’s 30% gains.

We were active in March reducing our position sizes in APT and DOW whilst adding to TLS and NUF in the Growth SMA. The Defensive SMA received capital back for the WBCPDs which were redeemed whilst the Diversified Income and International SMAs were unchanged. On a risk profile performance basis our 5-year numbers continue to perform well against their respective benchmarks.

RISK PROFILE PERFORMANCE FIGURES
As at 31 March 2019
Pre-Franking Credits

SMA—MODEL PORTFOLIO PERFORMANCE FIGURES
As at 31 March 2019
Pre-Franking Credits


What is a Separately Managed Account (SMA)?

 

What’s the benefit of a Separately Managed Account (SMA) to a Managed Fund?

 

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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Prime SMA Performance Summary – February 2019

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.

Portfolio Commentary & Positioning

Global equity markets continued their charge higher in February with the MSCI World Index rallying another 5.5%

Global risk sentiment improved on the back of increased optimism a trade deal between the US and China would emerge as the deadline for additional tariffs was extended.

The US equity market added 3% driven by trade talks and a solid Q4 corporate reporting season. More than half of companies that reported exceeded expectations with Apple and Netflix both extending their previous month’s gains.

The USD was stronger against a basket of currencies with the AUD buying 71c at the end of February.

US bond yields snapped a 3 month losing streak rising as risk appetite picked up. US 10 year Treasury yields added 9bps to yield 2.72%

Asian equity markets tracked higher and China soared 13.8% following a possible resolution to the trade dispute. Interestingly Morgan Stanley Capital International (MSCI) announced it will quadruple its weighting of Chinese mainland shares in its global benchmarks which could add $80bn of foreign inflows to the Chinese economy.

The Australian equity market was stronger with the ASX200 Accumulation Index rising 5.98%.

Oil continues to climb higher with Brent rising 8.5% to $66/barrel and WTI to $57/barrel (+6%.)

Australian reporting season was a shade weak with one quarter of companies exceeding expectations and one third disappointing.

Rising cost pressures and stagnant wage growth continue to impact consumer spending which ultimately impacted performance.

Contributors to performance in January were BWX (BWX) and IOOF (IFL) +54% and +30%. BWX responded to recent downgrades reporting $7m in 1H EBITDA but more importantly looks more likely to achieve its revised $28m full year earnings number. On <14x FY20 earnings numbers we continue to think the market has oversold BWX. IFL which had also been heavily sold off following APRAs move to disqualify five executives outperformed the market posting 6% growth in net profit and strong growth in its funds under management and advice business.

The worst performer was Nufarm (NUF) which fell 16%. There was no exceptionally weak day for NUF, rather a steady decline over the course of the month. NUF has been sold-off due to a prolonged Australian drought and concerns around the use of Glyphosate more commonly known as Roundup. We think both these concerns are overplayed and believe there is a substantial opportunity in its development of Omega 3.

We were active in February exiting our position in MFG and trimming our holdings in AMC, APT, HSO and QUB in the Growth SMA. The Diversified Income SMA likewise booked profits in MFG and exited the holding while the Defensive and International SMAs remained unchanged. On a risk profile performance basis our 5-year numbers continue to perform well against their respective benchmarks.

RISK PROFILE PERFORMANCE FIGURES
AS AT 28 FEBRUARY 2019
PRE-FRANKING CREDITS

*Annualised return. Portfolio inception date 03/07/2012

SMA—MODEL PORTFOLIO PERFORMANCE FIGURES
AS AT 28 FEBRUARY 2019
PRE-FRANKING CREDITS


What is a Separately Managed Account (SMA)?

 

What’s the benefit of a Separately Managed Account (SMA) to a Managed Fund?

 

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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Prime SMA Performance Summary – January 2019

 Prime SMA Performance Summary – January 2019

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.

Portfolio Commentary & Positioning

Global equity markets recovered much of the previous month’s selloff with the MSCI World Index rallying 7.8% in January.

Fears over slowing growth and trade wars abated somewhat in January with global risk sentiment rebounding from a poor final quarter in 2018.

The US equity market added 7.9% on the back of strong earnings and a more dovish Federal Reserve. Better than expected earnings numbers from Facebook and General Electric led to the stocks rising +27% and +34% respectively.

The USD was weaker against a basket of currencies with the AUD buying 72.7c at the end of January.

US bond yields continued their fall in line with the Federal Reserve’s more cautious tone. US 10 year Treasury yields currently yield 2.62%

Asian equity markets followed global equity markets higher in January. Negotiations between China and the US indicated a possible resolution to the ongoing trade dispute.

The Australian equity market was stronger with the ASX200 Accumulation Index rising 3.9%.

Large caps added 2.5% while mid-caps and small caps fared better climbing 4.5% and 5.5% respectively.

Commodities were strong – Iron ore rose 18% to trade $84/tonne, a near 2-year high. Oil reversed a 3-month fall as OPEC cut production by nearly 800,000 barrels per day to stem the oversupply in the oil market. Brent rose to $61/barrel (+13%) and WTI to $54/barrel (+18%.)

Contributors to performance in January were Afterpay (APT) +28% and Magellan (MFG) +21%. APT announced underlying sales in 1H FY19 of $2.2b, up from $918m in the previous corresponding period. We await official 1H earnings numbers in February with confidence. MFG was likewise strong announcing 1H performance fees of $42m, up from $9.6m in the previous period. Meanwhile OSH and WPL both rode the oil price tailwind adding 9%.

The worst performer was Challenger (CGF) which fell 24%. CGF downgraded earnings citing market volatility, softer performance in the Life absolute return portfolio and falling performance fees. Whilst the downgrade indicates growth of 0-3%, well below the previous guidance range of 8-12%, we remain bullish on CGF. The Retirement Income Framework (RIF) is to be introduced in July 2019 and we view CGF as a major beneficiary of this.

Across the SMAs we increased our exposure to CGF in the growth SMA and added CGF to the Diversified Income SMA. The Defensive SMA reduced some of its existing holding in MXT and the International SMA reduced a portion of MGG. On a risk profile performance basis our 5-year numbers continue to perform well against their respective benchmarks.

RISK PROFILE PERFORMANCE FIGURES
AS AT 31 JANUARY 2019
PRE-FRANKING CREDITS
  1 Month 3 Months 6 Months 1 Year 2 Year (PA)* 3 Year (PA)* 5 Year (PA)*
High Growth 2.98% -0.30% -3.71% 0.88% 7.92% 7.73% 8.65%
Growth 2.29% 0.21% -2.17% 1.63% 7.14% 7.07% 7.80%
Balanced 1.87% 0.53% -1.22% 1.99% 6.55% 6.62% 7.16%
Moderate 1.08% 1.06% 0.43% 2.59% 5.50% 5.76% 6.02%
Conservative 0.46% 1.71% 2.10% 3.38% 4.04% 4.66% 4.42%
*Annualised return. Portfolio inception date 03/07/2012

 

SMA—MODEL PORTFOLIO PERFORMANCE FIGURES
AS AT 31 JANUARY 2019
PRE-FRANKING CREDITS
  1 Month 3 Months 6 Months 1 Year 2 Year (PA)* 3 Year (PA)* 5 Year (PA)*
Prime Australian Equity Growth SMA 4.54% -0.83% -7.97% -0.79% 5.86% 6.85% 7.74%
Prime Australian Defensive Income SMA
* Annualised return. Portfolio inception date 03/07/2012
0.48% 1.78% 2.18% 3.49% 4.17% 4.82% 4.55%
Prime Diversified Income SMA 3.08% 0.77% -3.18% -2.61%
Prime International Growth SMA 3.32% -0.66% -3.00% 0.46% 10.42%
*Annualised return. Portfolio inception date 18/02/2016

 

What is a Separately Managed Account (SMA)?

 

What’s the benefit of a Separately Managed Account (SMA) to a Managed Fund?

 

 

 

 

 

 

 

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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Prime SMA Performance Summary – December 2018

 Prime SMA Performance Summary – December 2018

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.

Portfolio Commentary & Positioning

Global equity markets recorded heavy losses in December with the MSCI World Index falling -7.6%.

Trade tensions between the world’s two largest economies, the withdrawal of liquidity from financial markets, geopolitical issues such as Brexit and rising interest rates led to stock markets suffering their worst calendar year of performance since the GFC.

The US equity market underperformed falling 9% and the Federal Reserve increased interest rates 0.25% as forecast. However, a change in the Federal Reserve’s stance on monetary policy suggests fewer rate rises in 2019.

Volatility was the overriding theme in December with the VIX (Volatility Index) climbing back to its February highs. US bonds pointed further towards investor caution as bond yields fell to near 12-month lows below 2.70%.

The plunge in crude oil prices continued in December with WTI and Brent oil falling a further 10% and 8.5% as OPEC agreed to reduce supply by 1.2m barrels per day. Oil fell more than -20% for the calendar year on account of oversupply fears.

The AUD/USD fell 3.5% in December and nearly 10% for the year as concerns over the impact a US-China trade war may have on Australia saw the currency fall to 70c.

Locally, the Australian equity market outperformed with the ASX200 Accumulation Index essentially flat in December.

Miners were the best performing sector rising 5% as iron ore likewise bounced 10% to trade $71/tonne. Sector weakness was felt across telcos -5%, IT stocks -4% and financials -3%.

Downer (DOW) was the shining light in December rising 7% to reverse some prior month’s weakness. DOW now trades on a 12.5x FY20 PE with a dividend yield in excess of 5% and remains a core holding. We view DOWs road services, transport infrastructure and rail services divisions as likely beneficiaries of a boost to infrastructure spending and a potential sale of its mining services division may pave the way for a capital return to investors.

Detractors from performance were IOOF (IFL) and BWX (BWX) which fell 25% and 50% respectively. IFLs share price has lagged on account of the Royal Commission throughout 2018 but a show cause notice alleging breaches of the Superannuation Industry Act and the disqualification of five senior executives saw investors sell down holdings. We anticipate a new CEO to be duly appointed in time and maintain the acquisition of the ANZ wealth business will continue. IFL remains a hold.

Weakness in BWXs domestic export sales to China and softer sales in its flagship Sukin branded products saw BWX release its second downgrade to earnings numbers in six weeks. In our view the selloff has been overdone with shares now trading on <9x FY20 earnings numbers. It is disappointing but we believe momentum will turn in Sukin products and that the downgrade is seasonal and not systemic.

Activity across the SMAs was relatively subdued in December. The Growth and Diversified Income SMAs went unchanged. The Defensive Income SMA reduced MXT and added the Artesian Corporate Bond Fund which invests in liquid, investment grade fixed and floating rate corporate bonds. The International Growth SMA reduced MGG and added to existing weights in the Platinum Asia and Orbis Global Equity funds. On a risk profile performance basis our 5-year numbers continue to perform well against their respective benchmarks.

RISK PROFILE PERFORMANCE FIGURES
AS AT 31 DECEMBER 2018
PRE-FRANKING CREDITS
  1 Month 3 Months 6 Months 1 Year 2 Year (PA)* 3 Year (PA)* 5 Year (PA)*
High Growth -3.36% -8.40% -4.39% -1.51% 5.63% 5.43% 7.56%
Growth -2.33% -5.90% -2.68% -0.15% 5.41% 5.34% 7.03%
Balanced -1.67% -4.31% -1.62% 0.59% 5.19% 5.23% 6.56%
Moderate -0.52% -1.43% 0.27% 1.93% 4.78% 4.99% 5.76%
Conservative 0.62% 1.31% 2.09% 3.23% 3.97% 4.53% 4.52%
*Annualised return. Portfolio inception date 03/07/2012

 

SMA—MODEL PORTFOLIO PERFORMANCE FIGURES
AS AT 31 DECEMBER 2018
PRE-FRANKING CREDITS
  1 Month 3 Months 6 Months 1 Year 2 Year (PA)* 3 Year (PA)* 5 Year (PA)*
Prime Australian Equity Growth SMA -6.78% -13.76% -8.31% -5.50% 2.70% 3.59% 6.13%
Prime Australian Defensive Income SMA
* Annualised return. Portfolio inception date 03/07/2012
0.65% 1.37% 2.17% 3.32% 4.09% 4.68% 4.66%
Prime Diversified Income SMA -3.19% -6.58% -4.32% -5.21%
Prime International Growth SMA -2.23% -8.85% -4.55% -1.34% 7.83%
*Annualised return. Portfolio inception date 18/02/2016

 

What is a Separately Managed Account (SMA)?

 

What’s the benefit of a Separately Managed Account (SMA) to a Managed Fund?

 

 

 

 

 

 

 

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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Prime SMA Performance Summary – October 2018

 Prime SMA Performance Summary – October 2018

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.

Portfolio Commentary & Positioning

Global equity markets sold off heavily in October as fears of slowing growth, trade wars and higher interest rates caused panic amongst investors.

The US equity market fell 7%, with technology stocks the worst losing 9%. Market darlings Netflix (NFLX) and Amazon (AMZN) both fell 20% while Google’s parent company Alphabet was down 10%.

The pain was widespread with Hong Kong’s Hang Seng falling 10% and China’s Shanghai Composite down 8%. Asian stock markets struggled under the weight of a slowdown in China and the ongoing fears US tariffs may have on Chinese exports.

Locally, the Australian equity market was weak too with the ASX Accumulation Index falling 6%.

Large caps fell 5% while mid-caps and small caps fared worse falling 7.5% and 9.5% respectively.

Commodities were mixed – Iron ore rose 8% to trade $76/tonne, its highest level since March. However, oil fell 10% following increased output from the Saudi’s and Russia and weaker forecasts for global demand.

Unsurprisingly, IT stocks were the weakest sector on the ASX falling 11%, while the rout in the oil price saw energy stocks fall 10.5%.

The major positive contributor in October was Healthscope (HSO) which rose +0.5%. HSO has been a takeover play for much of this year and we were thrilled to see another bid emerge at $2.36 per share. We have and continue to maintain that the fair value of HSOs shares remains closer to $2.50 and continue to hold the stock hopeful of a higher competing offer (which eventuated after month end.)

The worst performers were Afterpay (APT) and BWX (BWX) both falling 30%. In the case of APT, the announcement of an inquiry into payday lenders and the nature of its correlation with the Nasdaq index was the reason behind the fall. We have become used to APTs volatility and remain comfortable shareholders as the business continues to grow strongly.

BWX cut guidance on the back of business disruption and weak momentum following Bain’s failed takeover bid. We believe there is significant upside in the share price now with the market undervaluing the strength in its key Sukin product brand.

We were active in October increasing weights in the Growth SMA in APT, DOW, SEK and BWX. We booked profits in Vocus (VOC) having made ~50% gains on our investment and bought a new position in Nufarm (NUF) which we think has great upside. The Diversified Income SMA added DOW which yields 5% and is well positioned to benefit from an uptick in infrastructure spend. We sold the Jamieson Coote Bond fund in the Defensive Income SMA to fund the upcoming listing of Qualitas and added to Platinum Asia in the International SMA. On a risk profile performance basis our 5-year numbers continue to perform well against their respective benchmarks.

RISK PROFILE PERFORMANCE FIGURES
AS AT 31 OCTOBER 2018
PRE-FRANKING CREDITS
1 Mth 3 Mths 6 Mths 1 Yr 2 Year (PA)* 3 Year (PA)*
High Growth -5.38% -3.42% 0.38% 4.26% 9.97% 6.70%
Growth -3.94% -2.37% 0.74% 4.00% 8.56% 6.15%
Balanced -3.03% -1.74% 0.91% 3.68% 7.59% 5.77%
Moderate -1.41% -0.62% 1.20% 3.16% 5.87% 5.06%
Conservative 0.07% 0.39% 1.48% 2.41% 3.60% 4.12%
*Annualised return. Portfolio inception date 03/07/2012

 

SMA—MODEL PORTFOLIO PERFORMANCE FIGURES
AS AT 31 OCTOBER 2018
PRE-FRANKING CREDITS
1 Mth 3 Mths 6 Mths 1 Yr 2 Year (PA)* 3 Year (PA)* 5 Year (PA)*
Prime Australian Equity Growth SMA -9.09% -7.20% -1.04% 2.50% 8.38% 6.22% 7.34%
Prime Australian Defensive Income SMA
* Annualised return. Portfolio inception date 03/07/2012
0.07% 0.39% 1.53% 2.45% 3.70% 4.24% 4.47%
Prime Diversified Income SMA -4.44% -3.92% -0.71% -2.01%
Prime International Growth SMA -5.20% -2.35% 0.64% 5.07% 12.98%
*Annualised return. Portfolio inception date 18/02/2016

 

What is a Separately Managed Account (SMA)?

 

What’s the benefit of a Separately Managed Account (SMA) to a Managed Fund?

 

 

 

 

 

 

 

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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