Prime SMA Performance Summary – August 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 were weaker in August as represented by the MSCI World Index which fell -2.2%.

Volatility was again the flavour of the month with the Volatility Index (VIX) rising to its highest level since January.

US equities dropped -1.8% as the US imposed 10% tariffs on the remaining $300bn of imports from China. Fears of a recession rose as the yield curve on 2 and 10-year Treasury notes inverted for the first time since 2007.

China was weaker falling -1.6% as the ongoing Trade War continues to negatively impact business sentiment. China responded to the US by halting purchases of US agricultural products.

UK equities were heavily hit falling -5% as UK PM Boris Johnson shut down Parliament in an attempt to block MPs from blocking a no-deal Brexit.

Locally, the ASX200 Accumulation Index was weaker, falling -2.4% as corporate earnings season got into full swing.

The RBA left the cash rate unchanged at 1% instead opting to wait for the Federal Reserve to meet next month before taking action.

Australian bond yields tightened further with 10-year Government bonds yielding 0.88% at August 31.

Oil was weaker during August with Brent oil falling -8% and WTI falling -5% to trade $59/barrel and $55/barrel respectively. Oil prices have now fallen -20% since a 2019 peak in April, hit by concerns the Trade War would erode demand.

The iron ore price experienced its biggest monthly drop in eight years falling -28% to US$86/tonne as shipments increased to China sparking supply pressures.

Contributors to performance were BWX (BWX) and Afterpay (APT) which added 50% and 16% respectively. Both companies reported full-year results to the market with BWX guiding to 30% EBITDA growth in 2020 whilst also relaunching its Mineral Fusion brand. Afterpay continues to grow reporting underlying sales figures of $5.2bn whilst adding 12,500 new customers per day, far exceeding analyst expectations.

Detractors were Boral (BLD) which fell -18% and IOOF (IFL) which fell -13%. Boral posted disappointing 2020 guidance flagging a -5% to -15% fall in earnings and its fly-ash acquisition Headwaters also missed earnings estimates. Whilst disappointing BLD trades on 11x earnings and generates ~$500m in free cash flow per annum so we believe it remains cheap at these levels. IFLs total funds under management reached $150bn so despite the selloff we believe business activity remains strong. The next catalyst for IFL will be an update on Federal Court proceedings and the ANZ OnePath deal.

The Growth SMA reduced BWX, added to IFL, exited our position in VAS and established a new position in Webjet (WEB) in August. The Diversified Income, Defensive Income and International Growth SMAs went 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 August 2019
Pre-Franking Credits

SMA—MODEL PORTFOLIO PERFORMANCE FIGURES
As at 31 August 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 – July 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 advanced further in July as investors shrugged off the ongoing concerns of the Trade War.

The MSCI World Index added +0.50% in USD terms whilst emerging markets reversed last month’s strength.

The US equity market outperformed with the S&P 500 climbing +1.3% and trading through 3000 points for the first time ever.

The Federal Reserve cut interest rates by -25bps to a range of 2%-2.25% labelling it an ‘insurance cut’ and reversing the interest rate hikes that began in late 2015.

Meanwhile US reporting season kicked off with results mixed – Netflix was a notable miss falling -10% as subscription growth added 2.7 million members against forecasts of 5 million.

The ASX200 Accumulation index advanced for the seventh consecutive month rising +2.94% in July and the RBA mirrored the Federal Reserve cutting interest rates to 1%.

Australian bond yields continue to tighten with the 10-year Corporate Government bonds yielding an all-time low of 1.18% at July 31st.

Oil was largely flat during the July with WTI trading $58/barrel and Brent oil trading $64/barrel.

Iron ore continued to climb higher trading north of $120/tonne for the first time in 5 years.

Contributors to performance in July were Nufarm (NUF) and IOOF (IFL) which added +19% and +12% respectively. NUF announced a placement of $97.5m of preference securities to its largest shareholder and strategic partner Sumitomo. This eased investor concern that NUF were going to raise equity in the market thereby diluting existing shareholders. IFL bounced as its quarterly Funds Under Management and Advice (FUMA) showed June quarter inflows to be the strongest recorded since June 2018 with $150bn under advice.

Amcor (AMC) underperformed falling -4% in July on no specific news. Having endured a sustained period of rising cost inputs we believe this headwind it starting to become a tailwind as falling resin prices and raw materials continue to boost margins. We continue to hold AMC believing the shares are worth closer to $17.

The Growth SMA used the proceeds from the MHOR Small Cap redemption to invest in the OC Premium Small Companies Fund which has outperformed its benchmark by 5% p.a since its inception in 2000. We also added to Oil Search (OSH) given we thought the market overreacted to its Q2 production numbers. The Defensive SMA increased its allocation in Ardea and the International equity SMA added to existing weights in the WCM Quality Global Growth Fund and the MFS Concentrated Global Equity Trust. The Diversified Income SMA went 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 July 2019
Pre-Franking Credits

SMA—MODEL PORTFOLIO PERFORMANCE FIGURES
As at 31 July 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 – June 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 rebounded strongly in June with the MSCI World Index rising 6.6%.

US central bank dovishness and a dovish turn by the ECB drove equity markets higher.

The US outperformed as a slowdown in economic data led the Federal Reserve to announce a strong bias for easing in the medium term. The market is currently pricing in four rate cuts in the next 12 months.

European equity markets were similarly boosted as weak inflationary data drove the ECB to announce possible rate cuts and a return of QE.

The ASX200 Accumulation index added 3.7% in June and has now climbed higher every month this calendar year.

The disconnect between equities and bonds continued with US 10-year Treasury notes falling below 2% whilst Australian 10-year government bonds tightened 13bps yielding an all-time low of 1.32%.

The weaker USD assisted Emerging Markets with China, Korea, Brazil and Hong Kong equities all advancing.

Oil recovered from the previous month’s selloff as sanctions from the US on Iranian oil continue to drive supply and demand. WTI rallied 9% to trade $58 a barrel while Brent oil bounced nearly 5% to trade $64.

Iron ore climbed higher for the eighth consecutive month adding 4% to trade US$121/tonne. Supply side issues from both Brazil and Australia and rising demand from China and other emerging markets continue to boost the iron ore price.

Contributors to performance in June were BWX (BWX) and Telstra (TLS) which added 10% and 5.5% respectively. BWX traded higher on news UK investment firm Taloman Capital had become a substantial shareholder. We take comfort in this and the consolidation of BWXs share registry and continue to think the shares are worth more. TLS continued to benefit from the ACCCs decision to block the TPG and Vodafone merger, however we feel at these levels is starting to look fully priced.

Detractors from performance were Challenger (CGF) and Regis (REG) which fell 18% and 13%. CGF hosted an investor day and revised guidance to somewhere in the range of $545m-$565m. The current low interest rate environment is impacting CGF returns and whilst disappointed with the announcement, we remain confident CGF will benefit significantly in the longer term from the government’s Retirement Income Framework. REG downgraded its FY20 estimates and we also suspect some tax loss selling prior to EOFY was another reason for its weakness. REG pays a dividend of over 5% and we would look for shares to recover somewhat before considering selling them.

We were very active in the portfolios during June. We exited our position in Qube (QUB) and reduced our weight in TLS. We added to Pendal (PDL), Downer (DOW), Challenger (CGF) and BWX and established a new position in Reliance Worldwide (RWC) which we think has significant upside and now trades at a 2-year low. The Diversified Income SMA reduced some of its TLS and added to PDL, DOW and CGF. The Defensive Income SMA topped up existing holdings Artesian, Pimco and Ardea while the International SMA took up our VG1 rights and bought into the VGI IPO. On a risk profile performance basis our 5-year numbers continue to perform well against their respective benchmarks.

RISK PROFILE PERFORMANCE FIGURES
As at 30 June 2019
Pre-Franking Credits

SMA—MODEL PORTFOLIO PERFORMANCE FIGURES
As at 30 June 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 – May 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

An unexpected breakdown in US/China trade talks saw global equity markets suffer their worst month this calendar year. Investors dumped equities in favour of safe haven assets such as government bonds and raised cash. The MSCI World Index fell -4.27% in AUD.

Global bonds rallied with US 10-year Treasury yielding 2.13% whilst Australian 10-year government bonds tightened 33bps yielding an all-time low of 1.45%.

US (-6.5%) and Chinese (-5.8%) equity markets drove global share markets lower. China’s reported backpedalling on trade terms was met with the Trump Administration’s decision to increase tariffs on US$200b of Chinese imports from 10% to 25%. An Executive Order restricting US companies from transacting with Chinese telco Hauwei further escalated tensions.

The Australian equity market outperformed with the ASX200 Accumulation Index adding 1.71% in May.

A Federal Election result that few saw coming boosted returns locally. Having raised cash prior to the Election we are now more optimistic on the strength of the local economy for next year. We are revisiting our longer-term thesis here and considering greater exposure to domestic Australian cyclical businesses that we think will benefit from a local recovery. BLD is a recent recommendation we like even more now.

Large caps performed strongly with the banks rallying heavily following Labor’s proposed abolition of the Liberal Government’s negative gearing and franking credit policies.

Elsewhere, insurers Medibank (MPL) and NIB (NHF) bounced 15-20% as a future cap on premium increases under a Labor Government was avoided.

Oil prices fell sharply with escalations in the trade war and smaller than expected declines in US crude inventories leading to an oversupply. Brent and WTI fell 15% to $61 and $53/barrel respectively.

Iron ore rallied 10%. China’s iron ore imports continue to climb with steel output rising to record levels. Supply side issues in Brazil and Australia also contributed to iron ore trading $105/tonne.

Contributors to performance in May were Boral (BLD) +12% and Telstra (TLS) +8%. BLD rode the tailwind of a Coalition victory with sentiment on the construction sector improving. TLS benefitted strongly from the news that the TPG and Vodafone merger had been blocked by the ACCC.

Detractors were BWX (BWX) -23% and Pendal (PDL) -20%. BWX announced a further earnings downgrade and a new incoming CEO. We are hopeful the restructure and rebasing of earnings expectations can finally translate into improved performance. PDLs 1H results were weak with cash earnings and performance fees falling significantly. PDL pays a 7% dividend and trades at a significant discount to its peers and we believe performance will turn around.

We were active across the SMAs in May. The Growth SMA reduced its position size in APT and exited SEK. We also purchased VAS following the results of the Federal Election. The Diversified Income SMA added BLD to the portfolio and the Defensive SMA reduced some of its MXT exposure to take advantage of the discount on offer in the rights issue. The international SMA went 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 May 2019
Pre-Franking Credits

SMA—MODEL PORTFOLIO PERFORMANCE FIGURES
As at 31 May 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 – April 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 as momentum drove the MSCI World Index up 3.5% in April.

The volatility that plagued equity markets in the December quarter appears to have abated somewhat despite no progress or resolution to the ongoing US/China trade war.

Although global bond yields rallied somewhat throughout the first half of April, they remain comfortably low. US 10 year Treasury yields rose to 2.50%.

The US was the notable outperformer in April rising 4% to all-time highs as stronger than anticipated economic growth gave investors further cause to buy the market.

The Australian equity market also rallied with the ASX200 Accumulation Index adding 2.4% in April.

Oil continues to bounce higher as the US demanded buyers of Iranian oil cease purchases by May or face sanctions. Both Brent and WTI rallied nearly 6% to $71 and $63/barrel respectively.

Iron ore continues to approach the $100/tonne level as supply side shocks from both Brazil and Australia were met with solid demand from China. Iron ore trades $96.50/tonne.

Contributors to performance in April were Afterpay (APT) + 22%, Amcor (AMC) + 4%, ANZ and WBC + 4.5% and 6%. APT trades well with both user and merchant subscription numbers in the US tracking nicely and the upcoming rollout of its UK business exciting the market. AMC announced a 16.8c dividend as it moves towards finalising its acquisition of Bemis whilst the banks were well bid ahead of their upcoming ex-dividend dates in the second week of May.

Detractors from performance were BWX (BWX) and Pendal (PDL) which fell -4.8% and -1.3%. BWX was weaker despite there being no news released in April. We await an update from management detailing whether a turnaround in its key Sukin branded products is occurring. In the case of PDL, April fund flows disappointed with a notable outflow in PDLs higher margin JO Hambro unit. Despite the headwinds facing Pendal, dividend income remains steady and PDL stock trades at a significant discount to its peers. We continue to hold the stock with a keen interest on the next set of FUM flows.

We were less active than normal in April with a Federal Election looming. However, we reduced our position size in NUF and established a new position in Boral (BLD) in the Growth SMA. The Diversified Income SMA exited its position in the Rare Infrastructure fund and used the proceeds to participate in the new Metrics IPO – the Income Opportunities Trust (MOT.) The Defensive SMA likewise participated in the MOT IPO whilst the International SMA sold down its MGG holding. On a risk profile performance basis our 5-year numbers continue to perform well against their respective benchmarks.

RISK PROFILE PERFORMANCE FIGURES
As at 30 April 2019
Pre-Franking Credits

SMA—MODEL PORTFOLIO PERFORMANCE FIGURES
As at 30 April 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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