Diversified Portfolios - Intelligent Investor Equity Income - 30 November 2016
Intelligent Investor Equity Income November Report
The US presidential election put markets into a spin at the start of November, but it ended up being a dull month for our Equity Income Portfolio. Only one stock gained more than 10%, but only just and it had little overall impact since it was the portfolio’s smallest holding – Origin Energy.
More significant was Computershare’s gain of just under 10% on hopes that President-elect Donald Trump’s plans to spend heavily on infrastructure at the same time as cutting taxes might eventually drive up interest rates. Computershare earns a substantial portion of its profits from the interest on client cash balances – at least when rates aren’t close to zero.
The prospect of higher infrastructure spending also helped Macquarie Group, which was further boosted by a solid half-year result at the end of October and gained 8%. Crown Resorts also bounced 8% as it continued to recover from the arrest of its Chinese staff in October and the portfolio’s two banks, CBA and Westpac, added 8% and 6% respectively.
At the bottom end of the table, Virtus Health lost 17% after the company warned that it performed 5.9% fewer IVF cycles in the September quarter compared to the prior corresponding period. The overall market performed 3.5% fewer cycles, so Virtus lost market share. It’s slightly disappointing but we’re not overly concerned – we expect low-cost competitor Primary Health Care to continue to take market share, but mainly by expanding the market rather than taking customers from Virtus’s full-service offering.
The next biggest faller was Amaysim, which lost 9% in sympathy with the gloom surrounding the telecoms sector, which was exacerbated by another profit warning from Vocus Communications at its annual meeting on 29 November.
We conducted just two transactions in the month, which was to switch about 1.3% from South32 into BHP Billiton, thereby balancing the weighting for the two at about 4% each. Nothing against South32, but its superior performance meant that our resources exposure had become overly skewed towards it.
All told, the portfolio gained 1.4% for the month, compared to a 2.5% gain for the All Ordinaries Index. So far this financial year it has gained 8.7%compared to 5.5% for the All Ords, and since it began accepting real money for investment in July last year it has returned an annualised 14.3%compared to 5.3% for the All Ords. Since it began life as a model portfolio in 2001, it has returned 13.4% compared to 7.8% for the All Ords.
GROWTH OF $10,000
PEFORMANCE SUMMARY TO 30 NOVEMBER 2016
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 30 NOVEMBER 2016||1 MONTH||3 MONTH||6 MONTH||1 year||SI* (P.A.)|
|Intelligent Investor Equity Income Portfolio||1.41%||-1.52%||3.93%||14.23%||14.33%|
|ASX All Ordinaries Accumulation Index||2.46%||0.63%||3.13%||10.01%||5.32%|
|Excess to Benchmark||-1.05%||-2.15%||0.80%||4.22%||9.01%|
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