Prime SMA Performance Summary – October 2018
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
|1 Mth||3 Mths||6 Mths||1 Yr||2 Year (PA)*||3 Year (PA)*|
|*Annualised return. Portfolio inception date 03/07/2012|
|SMA—MODEL PORTFOLIO PERFORMANCE FIGURES
AS AT 31 OCTOBER 2018
|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
|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|
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