Diversified Portfolios - Intelligent Investor Equity Income - 29 February 2016
Intelligent Investor Equity Income Portfolio February Report
After the sharp moves in December and January, with markets pushed around wildlyby global macroeconomic and political factors, February saw the focus return closer to home, with the interim reporting season. Broadly speaking, this went better than expected, with the banks the main culprit for dragging the All Ordinaries into a 1.5% loss for the month, as global concerns continued to fester. This pushed the big fourbanks to losses of 5–10%, although they made it all back in the first week of March.
The Equity Income Portfolio has small (1.7%) weightings in Westpac and Commonwealth Bank, although these are a long way below the market’s weightingsof 8% and 10% respectively. In that context, the portfolio’s 1.1% loss over the month – while slightly better than the benchmark – was a little disappointing.
CBA’s 7% fall was in spite of a decent-enough first-half result, which saw it maintain earnings per share, despite dilution from August’s rights issue. The falls brought thebanks close to the prices are which we might considering buying more, but we’rehappy to hold out for more compelling valuations.
We did, however, take advantage of the weakness to buy a 3% stake in Macquarie Group. The company has been making great strides in building up its ‘annuity-style’ businesses, but the market had still knocked it down 30% since last year’s highs. Since our purchase – at $60.28 – Macquarie’s share price has recovered 7%. We also starteda position in Ansell after a 9% reduction in full-year guidance saw its shares fall around 20%. As things turned out, the interim result a few days later wasn’t as bad as manyhad feared and the stock returned 11% for the month. Making way for these twopurchases were Washington H Soul Pattinson and Servcorp, which have done well for the portfolio (particularly the latter), but which we were happy to sell with their prices now closer to reflecting their underlying values.
The portfolio’s biggest gainer of the month was South 32 which rose 28% due to a recovery in commodity prices and an interim result which, despite a 94% net profitfall, showed the miner is making great strides on the matters within its control.
Other notable performances came from the online classifieds companies, Trade Meand Seek, which rose 11% and 7% over the month after delivering results that demonstrated how recent investments have made their already strong businesses stronger. Monash IVF was another standout, gaining 12% after its interim result showed the assisted reproductive services provider increasing market share from 21%to 23%.
Of the portfolio’s holdings, the most disappointing result came from Computershare, which scored a loss for the month of about 13%. Even though the share registry operator confirmed its full-year guidance (for a fall of around 7.5% in US dollarearnings per share), the endorsement appeared somewhat half-hearted alongside management’s warning of a ‘softening in the operating environment’. The market is also worried about the potential for ‘block chain’ technology to disrupt Computershare’s registry business. We acknowledge these concerns and will watch developments closely, but any implementation looks a long way off and it’s importantnot to jump at shadows.
The portfolio’s worst performer in February, though, was OxForex, which tumbled 39% after warning on full-year profits and advising the market that Western Unionhad failed to come up with a full takeover offer after a couple of months of due diligence. After rising on news of the bid, the stock had got up to a portfolio weighting of almost 6%, so its subsequent fall took 2% off February’s performance on its own.
All up, though, the portfolio continues to perform satisfactorily, gaining 3.7% since it opened its doors to investment on 1 July 2015, compared to a loss of 6.4% for the All Ords, and 12.9% a year since inception back in 2001 compared to 6.9% for the All Ords.
GROWTH OF $10,000
PEFORMANCE SUMMARY TO 29 FEBRUARY 2016
Source: Praemium, RBA. Returns are before expenses and fees. Returns are shown as annualised if the period is over 1 year. * Since Inception (SI) date is 1 July 2015.
|PERFORMANCE TO 29 FEBRUARY 2016||1 MONTH||3 MONTH||6 MONTH||SI* (P.A.)|
|Intelligent Investor Equity Income Portfolio||-1.06%||-2.31%||4.83%||3.69%|
|ASX All Ordinaries Accumulation Index||-1.47%||-4.31%||-3.09%||-6.36%|
|Excess to Benchmark||0.42%||1.99%||7.92%||10.05%|
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