Portfolio update for October
Similar to our Small Companies Fund, the good performance by our Equity Growth and Equity Income portfolios in October wasn't enough to keep up with a strongly-rising benchmark.
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It was doom and gloom in the media in October, with the month's reputation for market crashes and the 30th anniversary of the one in 1987. But despite that – or perhaps because of it – the All Ordinaries Index raced on by 4.1%.
That move was supported by the larger stocks, with the ten biggest on the market all in positive territory, delivering average returns of 3%. But it was because of the second-liners, with the ASX Small Ordinaries index (the 101st to 300th biggest stocks on the market) returning 6% over the period, driven by the likes of Bellamy's (ASX: BAL) (up 60%), Blackmores (ASX: BKL) (up 35%), A2 Milk (ASX: A2M) (up 35%), Afterpay Touch (ASX: APT) (up 24%) and an old favourite of ours, Platinum Asset Management (ASX: PTM) (up 21%).
Our Equity Growth and Equity Income portfolios haven't been in any of these stocks (although our Small Companies Fund has done well out of Afterpay Touch) and we couldn't keep up, with the Growth Portfolio gaining 1.9% for the month after costs and the Income Portfolio managing 2.0% – each just over 2% behind the market.
| To 31 October | 1 mth | 6 mth | 1 yr | Since incep. (pa) |
|---|---|---|---|---|
| II Growth (%) | 1.9 | 4.6 | 9.5 | 11.8 |
| II Equity Income (%) | 2.0 | 3.9 | 13.2 | 13.5 |
| All Ords Accum. (%) | 4.1 | 2.7 | 15.5 | 8.6 |
The nearest we can get to a racy second-liner is Nanosonics (ASX: NAN), which was the best performer in our Growth Portfolio with a return of 15% for the month, for no particular reason that we can see.
The next best performer in the Growth Portfolio was the downtrodden TPG Telecom (ASX: TPG), which made 11%, about half of it after we increased the holding at $5.14 (the only trade in either portfolio in the month) but again for no obvious reason.
Both portfolios benefitted from an 8% jump in Macquarie Group (ASX: MQG), after it smashed its guidance for the six months to September by 7% and upgraded its full-year guidance from ‘broadly in line' with 2017 to ‘slightly up'. However, the surprise was mostly from unsustainably large performance fees and unsustainably low impairments, and therefore doesn't change our valuation by much. The stock has returned a total of 71% since we bought it for $60.28 19 months ago, but is closing in on our $100 Sell price.
Seek (ASX: SEK), Ansell (ASX: ANN) and Computershare (ASX: CPU) were other notable performers in both portfolios, with gains of 10%, 8% and 8% respectively.
At the other end of the table, both portfolios suffered from a 6% loss in Perpetual (ASX: PPT) after it reported another quarterly outflow – of $0.7bn, mostly from institutional clients in Australian equities. IOOF's (ASX :IOF) quarterly funds statement also disappointed, although there was at least an inflow (of $0.7bn), and the stock fell 3%.
Trade Me (ASX :TME) was also weak, falling 5% as fears continue over Facebook's Marketplace offering and the forthcoming launch of Amazon in Australia.
| Buy /Sell |
Date comp- leted |
Old weight. (%) |
New weight. (%) |
Avg. price ($) |
|
|---|---|---|---|---|---|
| II Growth | |||||
| TPG Telecom | Buy | 20/10/17 | 3.2 | 4.0 | 5.14 |
The Growth Portfolio also suffered losses of 11% in Ainsworth Game Technology (ASX: AGI) and 9% in Fleetwood (ASX: FWD), although the damage was limited by their relatively low weightings, of 2.5% and 2.8% respectively – the latter after we took some of our profits in August.
Since opening for investment on 1 July 2015 the Growth Portfolio has returned 11.9% and the Income Portfolio has returned 13.5%, compared the All Ordinaries' return of 8.9%.
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