January provided a rough start to 2017 for the Intelligent Investor Equity Income Portfolio, with a profit warning from Virtus Health on the last day of the month knocking it and competitor Monash IVF down by around 20%.
Frustratingly, we had already started selling Monash – to provide funds to buy Flight Centre and to reduce our weighting to IVF – but the order was only partially completed when the profit warning came. You avoid floods not by predicting rain but by building arks, and when the waters rose ours sadly still had a few leaks.
Individual shocks are why you diversify, though, and the portfolio’s losses for January were limited to 1.7%, although that was 0.9% behind the loss of 0.8% for the All Ordinaries Index. So far this financial year, the portfolio has gained 10.2%, just ahead of the 9.1% return of the All Ords.
Since it opened for direct investment in July 2015 it has returned 13.7%, compared to 7.0% for the All Ords; and since it began life as a model portfolio in 2001, it has returned an annualized 13.4% compared to 7.9% for the All Ords.
Carsales.com was another weak performer in January, losing 8% after announcing that well regarded chief executive Greg Roebuck (who co-founded the company in 1997) will be retiring in March. The good news is that he will be replaced by a strong internal appointment: Cameron McIntyre, who joined the company as chief financial officer in 2007 and became chief operating officer in 2014.
On the plus side of the ledger, Origin Energy and BHP Billiton gained 10%and 6%, respectively, as commodity prices continued their rally. Computershare added another 3.5% as markets factored in higher long-term interest rates following Donald Trump’s election as US President.
During the month we sold the portfolio’s holding of about 3% in Monash IVF and replaced it with Flight Centre. We also took the opportunity to sell our holding of just under 2% in Origin Energy, which has suspended its dividend and rallied 40% since November.
GROWTH OF $10,000
PEFORMANCE SUMMARY TO 31 JANUARY 2017
Source: Praemium, RBA. Returns are after fees and before expenses. Returns are shown as annualised if the period is over 1 year. * Since Inception (SI) date is 1 July 2015.
|PERFORMANCE TO 31 JANUARY 2017||1 MONTH||3 MONTH||6 MONTH||1 year||SI* (P.A.)|
|Intelligent Investor Equity Income Portfolio||-1.73%||2.76%||2.63%||17.36%||13.65%|
|ASX All Ordinaries Accumulation Index||-0.77%||5.92%||2.65%||17.09%||6.95%|
|Excess to Benchmark||-0.97%||-3.15%||-0.02%||0.27%||6.70%|
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