Active Stock Portfolio Updates - January 2019

The Equity Growth, Equity Income and Australian Small Companies Fund updates are now available.

By ·
7 Feb 2019 · 5 min read

Intelligent Investor Equity Growth Portfolio

As the new year rolled over the market once again coveted high growth stocks. That’s left our more conservative portfolio a little behind, adding to the underperformance last quarter.

While we should always be focused on the next five to ten years, not the next five to ten months, it’s worth noting that December was the second worst December in history and the quarter was the worst since the GFC. That created the backdrop for a market bounce but, as property prices keep falling, we’re likely to get better opportunities as the year progresses...

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Intelligent Investor Equity Income Portfolio & ASX:INIF

While our recent performance has suffered, we’re happy with the names we’ve been adding to the portfolio. They’ve substantially increased the potential return of the portfolio without adding much risk. You now own several stocks in addition to existing holdings like Audinate and Nanosonics that could increase many times over during the next decade.

Even if these companies are successful, it will take time. As I explained last quarter, this is the price we must pay for superior returns over the long term. Our ability to think long term and act accordingly is our biggest advantage in a world drowning in information and short attention spans.

There are many stocks that we’d love to own at the right price, and we hope reporting season will provide at least a couple of opportunities to add them to the portfolio or at least beef up existing positions...

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InvestSMART Australian Small Companies Fund

January was a busy period for company news. Beginning with the disappointing, Thorn Group announced that its business finance division expects to record a bad debt of as much as $10.5m pre-tax, relating to a single counterparty (Viewble) that has caught out several other finance companies (including Eclipse Group and Flexigroup). The bad debt and a $5.7m intangible impairment will send Thorn to a statutory loss of around $6m, (from an expected profit of $6-8m), shaving NTA by 1% to $1.21.

We’ve been wary of Thorn’s business finance division for some time, as it lends to higher risk customers and lacks a competitive edge. But Thorn’s exposure is small and non-recourse, so even if business finance completely evaporates, Thorn’s net tangible assets would reduce to around $0.94 (which is around 84% higher than the current share price). Risks like business finance bad debts have been baked into the share price for some time...

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InvestSMART Hybrid Income Portfolio

For the month of January the total portfolio return was 0.45% and 1.39% for the three months. The total return of the portfolio is In line with its objective since inception ( the total portfolio return is 4.36%).

January was a low income month, with only one security (NABHA) trading ex-dividend...

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