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
SMA—MODEL PORTFOLIO PERFORMANCE FIGURES
As at 31 July 2019
What is a Separately Managed Account (SMA)?
What’s the benefit of a Separately Managed Account (SMA) to a Managed Fund?
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