Diversified Portfolios - Intelligent Investor Equity Income - 30 November 2016

Intelligent Investor Equity Income November Report
By · 1 Dec 2016
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By ·
1 Dec 2016
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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

Income Reinvested


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.

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%

Important Information

While every care has been taken in preparation of this document, InvestSMART Financial Services Limited (ABN 70 089 038 531, AFSL 226435) (“InvestSMART”) makes no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This document has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this document, and see professional advice, having regard to the investor’s objectives, financial situation and needs. This document is solely for the use of the party to whom it is provided. This document has been prepared for InvestSMART by InvestSense Pty Ltd ABN 31 601 876 528, Authorised Representative of Sentry Asset Management Pty Ltd AFSL 408 800. Financial commentary contained within this report is provided by InvestSense Pty Ltd. The information contained in this document is not intended to be a definitive statement on the subject matter nor an endorsement that this model portfolio is appropriate for you and should not be relied upon in making a decision to invest in this product. The information in this report is general information only and does not take into account your individual objectives, financial situation, needs or circumstances. No representations or warranties express or implied, are made as to the accuracy or completeness of the information, opinions and conclusions contained in this report. In preparing this report, InvestSMART and InvestSense Pty Ltd has relied upon and assumed, without independent verification, the accuracy and completeness of all information available to us. To the maximum extent permitted by law, neither InvestSMART, InvestSense Pty Ltd or their directors, employees or agents accept any liability for any loss arising in relation to this report. The suitability of the investment product to your needs depends on your individual circumstances and objectives and should be discussed with your Adviser. Potential investors must read the PDS, Approved Product List and FSG along with any accompanying materials. Investment in securities and other financial products involves risk. An investment in a financial product may have the potential for capital growth and income, but may also carry the risk that the total return on the investment may be less than the amount contributed directly by the investor. Past performance of financial products is not a reliable indicator of future performance. InvestSense Pty Ltd does not assure nor guarantee the performance of any financial products offered. Information, opinions, historical performance, calculations or assessments of performance of financial products or markets rely on assumptions about tax, reinvestment, market performance, liquidity and other factors that will be important and may fluctuate over time. InvestSense Pty Ltd, InvestSMART Financial Services Limited, its associates and their respective directors and other staff each declare that they may, from time to time, hold interests in Securities that are contained in this investment product.

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