September, 2023
The Fund fell 1.6% in September, compared to the ASX 200 which declined 2.8%.
It was another volatile month with the sell off in bonds being the dominant feature. Australian 10-year bond yields increased from 4% to 4.5% and US bond yields increased from 4.1% to 4.5% - levels not seen in many years.
Energy commodities continued their march higher in September, with Brent Oil prices increasing 9.8% to $95. TECK Resources rallied 4.5% in September driven by rising expectations of global economic activity plus an increasing chance of corporate activity. Santos (+3.0%) and Suncorp (+2.5%) performed well driven by better oil prices and higher short-term rates respectively.
Our detractors were mainly in our defensive companies, CSL (-7.6%), TLS (-4.0%) and HCA Healthcare (-11.1%) as higher rates weighed heavily on these longer duration investments. Fundamentally they remain sound and in fact most of these businesses are well positioned to navigate a trickier economic environment.
We exited Origin Energy on the heightened risk of deal completion and a lower annualised return after a very strong few months. We also increased our exposure to Viva Energy, as insider Vittol sold 16% of the company or approximately 33% of its stake. This provided a great liquidity opportunity at attractive levels.
Equity markets are precariously placed with a higher USD, rising oil prices and rising rates increasing equity and economic volatility. Generally when these factors combine, stresses in the financial system are elevated with the increased probability of something going wrong. On the flip side, the US economy remains extremely resilient to the Fed’s tightening (thus far) and hence we remain in a divisive market. We will continue to deploy our cash into attractive opportunities as they present themselves, but remain wary given the aforementioned risks.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/205394915.pdfAugust, 2023
August was an eventful month, with Australian result releases and some market volatility that saw a significant market pullback before a recovery later in the month. The Fund was down 1.0% for the month, slightly behind the ASX 200 return of -0.7%.
A couple of poor results offset the contribution of a number of strong results. Iress fell 38% after reporting a disappointing result and outlook. Underlying costs are rising faster than expected, which means the net costout benefit we had hoped for has decreased. While we believe Australian/NZ assets will be attractive to a strategic buyer, rising costs and a poor balance sheet have materially reduced our confidence in management’s ability to realise value. The size of the Fund’s position is very modest and remains under review.
ResMed fell 24.0% also on slower revenue growth and some margin weakness. This was coupled with euphoria surrounding new diabetes and weight loss drugs and their ability to disrupt the medical technology industry.
On the positive side we had many good results. Highlights included Carsales (+15.6%), Goodman Group (+13.7%), Monadelphous (+7.7%) and Universal Store (+6.1%) among others.
Through August, there were several companies that we either established new positions in or took much larger positions following weakness post their results. Telstra and Suncorp are a couple of examples.
Over the month, our long equity position increased to 85% and we maintain some derivative protection on top of that. There was a broad degree of caution in company outlook statements and, somewhat unsurprisingly, a lack of future earnings guidance. In our view, the long lag effects of monetary policy mean that economic and behavioural impacts are still ahead of us and hard to quantify. The portfolio is balanced for the wide range of outcomes. As we await more comfort on the economic outlook, we continue to build out a long shopping list of growth businesses to add to the portfolio once they reach more compelling valuations in the coming months.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/204175602.pdfJuly, 2023
Moderating inflation numbers and robust economic growth in July saw the markets doubling down on the “goldilocks” narrative of low inflation and a soft landing. This saw equity markets globally and in Australia push higher. The Fund continued to gain ground and finished up 1.7% for the month.
Within the equity market, robust global economic data saw a rotation away from crowded defensive equities and back into unloved cyclical equities, as equity investors unwound bets on an imminent recession. This was something we had been waiting for after selling our fully valued defensive positions, such as supermarkets and Telstra, in recent months and adding to beaten up and unloved banks and cyclicals. The Australian banks were up 6 to 8% while Telstra and Woolworths Supermarket fell modestly. As this rotation plays out (which typically takes a couple of months) we will reduce bank holdings and add back to defensive equities. We have begun to take profits on banks and add back to defensive equities in moderate size already.
Other stocks that were strong over the month were our small positions in Universal Store (+20.1%), Neuren Pharmaceuticals (+6.4%) and Monadelphous Group (+16.2%). We had added to Universal Store in June as it fell following a poor trading update. The decision to buy was based on our positive medium outlook for the business and we appear to have been rewarded earlier than expected on this investment. Neuren rose after signing a new distribution deal with Acadia Pharmaceuticals for its in-development NNZ-2591 drug for Rett and Fragile X syndromes.
Markets are pricing in optimistic outcomes in the near term for inflation and economic growth. This is probably correct in the near term but becomes a more dangerous prediction as we look into 2024, where we may see broader economic weakness or another inflationary impulse in the US. We are pleased with the Fund’s upside participation as markets move higher, while still taking relatively low levels of absolute risk. In August we look forward to Australian company results, as this tends to always throw up a few opportunities to buy companies that we believe are priced incorrectly following results.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/203264792.pdfJune, 2023
June saw a lot of economic developments globally, while share markets continued to be led by US equities and tech-related stocks. The Australian market rallied 1.7% and the Fund returned 0.6%.
Over the month we saw a wave of Australian-listed retailer downgrades indicating stress is developing with certain cohorts of consumers. Thus far the weakness seems contained to durable goods retailers such as clothing and furniture while spending on restaurants or travel remains robust. This may be the case for a while as durable goods spending is easily deferred post the Covid lockdown binge, while many cohorts still wish (and are able) to travel and eat out. Chinese economic growth continued to disappoint, and stimulus measures so far have been minor and targeted at consumers. The share prices of miners rebounded from recent weakness on hopes of further stimulus, but the market will need to see delivery of larger stimulus or will be disappointed.
It was a relatively quiet month on the stock picking front for the Fund, with little in the way of news flow for our companies. CSL declined 9.5% following an earnings downgrade. Smartpay was strong once again and our insurance companies and miners performed well.
We increased our equity exposure modestly, as the ASX fell sharply later in the month, picking up some unloved banks and a few Real Estate Investment Trusts (REITs) given the reasonable value on offer. We also purchased some call options which worked well as the market recovered into month end. As we approach earnings reports in August, we anticipate further earnings weakness but also opportunities over this period.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Milford_Australian_Absolute_Growth_Fund_Jun23.pdfNovember, 2022
The share market recovery continued in November following on from a strong October. The rally was spurred on by more signs that inflation is peaking and central bankers in both the US and Australia are moving towards a “wait and see approach” to gauge the impact of rate hikes already done. This has seen bond yields back off recent highs as economic growth slows but remains reasonably resilient – a good scenario for equities. The Reserve Bank of New Zealand remains one of the few still pushing ahead with large interest rate hikes. The Australian Absolute Growth Fund returned 3.0% in November compared to 6.6% by the ASX 200 Accumulation index. Over the past year the Fund is up 2.8%.
Our best performer for the month was Origin Energy which rallied 41.1% on the back of a takeover offer from a consortium at $9.00 a share. At the time of writing, Origin remains at a significant discount to that price, trading at near $8.00 a share as it is subject to due diligence and various approvals. We have maintained our position in the company.
Other strong performers included Smartpay (+25.9%) and Virgin Money (+25.6%) which were both up after reporting good results. Resources companies also rallied strongly in the month with gold miners reacting to lower bond yields and iron ore miners buoyed by China walking back restrictions on property and its Covid-zero policies. As this news was priced into BHP’s share price, we significantly reduced our position in the mining company.
Our worst performer for the month was Collins Foods (-18.6%) which declined after guiding to weaker margins at its result. We had fortunately reduced our investment in the business over the past couple of months.
After tactically reducing cash levels during the month, we did take the opportunity to sell equities and raise cash again later in the month. Markets have had a good recovery but, as we look forward to 2023, we see increasing economy and earnings risk for companies and as such we continue to focus on capital preservation until these risks are more fully priced into markets.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/193744704.pdfOctober, 2022
Markets recovered in October as once again investors prepared for central banks to back off interest rate hikes. This saw the ASX 200 increase 6.0% for the month. The Australian Absolute Growth Fund returned 1.7% as we had very little in banking shares, which drove much of the ASX rally, and our overall cautious positioning. The cautious positioning has served the Fund well this year with the Fund only down 1.9% year to date in difficult markets, and we believe this remains the correct approach for the uncertain near term.
Our best performers for the month were Smartpay (+15.6%) which reported a strong quarter, Suncorp (+13.8%) which rallied on better bank margins and Santos (+8.6%) on the back of higher energy prices. Our worst performer was Ampol which fell 5.3% after reporting a disappointing earnings update on some surprise logistic cost issues. These issues are relatively short term in nature and Ampol has very attractive cash flows looking forward. Energy companies remain a key exposure in the Fund due to their high cashflow yields and the positive outlook for energy prices on a five-year view. While we may see temporary declines in the oil price, these declines are unlikely to be long lasting as OPEC+ is now cutting supply to manage oil prices. The rest of the Fund is concentrated in defensive businesses, USD earners and select small and mid-cap stock picks we have a positive view on.
Economies have been robust for 2022 but are beginning to slow and company earnings are just starting to falter. This is due to high inflation and interest rates hurting the financial position of both households and businesses. We are approaching the point where central banks will reduce the size of their interest rate hikes but continue to raise rates as the job market remains tight and inflation has not slowed enough. Markets tend to bottom before earnings hit their lows, but we are very early in the earnings downgrade cycle and intend to remain cautious until earnings declines are further progressed, and interest rates are closer to being cut. We had invested some of our cash earlier in the month but took the opportunity to sell some equities back out as the market rallied into month end.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/192499791-2.pdfSeptember, 2022
Equity markets sold-off sharply in September on the back of inflation data that remained too hot resulting in a large sell-off in bonds. With inflation remaining stubbornly high there is limited scope for central banks to ease back from interest rate hikes and bond yields repriced higher as investors digested this reality. This ultimately drove equities to also reprice lower given interest rates are the yard stick used to determine the valuation on equities. It is our belief that we will need to see weakness in job markets before core inflation returns to reasonable levels below 3%. While job market weakness will likely eventuate at some point next year, there is limited sign of it occurring now which is keeping the pressure on central banks to continue tightening. What we may see however is more serious fractures in the financial system that could cause a temporary turnaround in monetary policy which would be positive for markets. That by definition requires more bad news before the good news on policy pivot.
Our cautious positioning meant that as expected the Fund’s decline in September was much less than the market at 3.3% compared to the ASX 200 decline of 6.2%. We did add back some equities into this weakness but only in moderate size as we retain a cautious medium-term view.
Our winner for the month was once again Neuren Pharmaceutical which was up 13.3% in a tough month. Losers were some of our energy names including Santos which was down 10.1%.
As this equity weakness continues, we will begin to establish longer term buy and hold opportunities at attractive prices. Growth and technology stocks have now come off a long way and some of them are approaching reasonable levels (if not yet highly discounted levels). As economic weakness sets in more broadly in 2023 the time will come to buy homebuilders, retailers and other early-stage cyclicals. Until then, we anticipate more volatility both up and down which we intend to navigate with caution and selective buying on weakness.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/191324424.pdfAugust, 2022
The Australian Absolute Growth Fund produced a small 0.3% gain in August and is up 0.9% for the calendar year. Equity markets were strong earlier in the month before pulling back sharply late in the month following Fed Reserve Chairman Jerome Powell’s speech at the Jackson Hole central bankers’ symposium. His comments were clear and concise with the message that the Fed must keep monetary policy tight until they are sure inflation is under control and will sacrifice economic growth and jobs if necessary. This removed the markets view that rate cuts would begin early next year and increased the fear that central banks may continue raising rates into slowing economic growth and falling company profits. Similar messages have been made by the Bank of England and the European Central Bank. Inflation data is now an even more important driver of future monetary policy and markets as central banks have made it clear weak economic data won’t change their policy course while inflation remains too high.
Most of our holdings reported their full year results over the month with most reporting reasonable earnings and some having strong gains such as IPH (+11.7%) and Webjet (+7.2%). Energy companies also performed strongly as they reported strong cash flows and energy prices rallied again. TPG declined 15.6% after a poor result but it was fortunately a small position in the Fund. We sold nearly our entire positions in supermarkets Woolworths and Coles as they become overvalued which was fortunate as the companies pulled back sharply after reporting a more uncertain outlook than the market expected. As their share prices declined, we began to buy back into these companies again with a focus on Woolworths rather than Coles due to its better cost outlook.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/190740277.pdfJuly, 2022
Equity markets had a strong recovery in July after suffering through a very tough first half year. The rally was driven by the market view that inflation has peaked, interest rates are near peak and US earnings results not being as bad as feared. The rally gained further momentum as hedge funds aggressively covered short positions and the Federal Reserve's 75bp rate hike was viewed as “dovish”. The Australian Absolute Growth Fund gained 3.3% for the month which pleasingly returns the 2022 calendar year performance to largely flat. Further market gains from here should see the Fund move into positive returns for the year while our defensive positioning will limit the downside if the market sell-off resumes.
Our largest winners over the month were unsurprisingly many of our small company investments. Neuren Pharmaceuticals was a standout which rallied 48.4% and went through 52-week highs as new investors uncovered the potential of this business. Other strong small companies were Paladin Energy (+27.6%) and Universal Store (+19.0%) while our best larger company was Goodman Group (+16.0%)
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/189953284.pdfJune, 2022
Australian shares joined the global share market rout in June as increasing fears of a global recession saw the sectors that had held the ASX 200 up year to date – banks and resources – decline 13.9% and 10.6% respectively. The Australian Absolute Growth Fund declined 3.9% compared to a fall by the ASX 200 of 8.8%. For the calendar year to date the Fund has fallen 3.8% against the ASX 200 decline of 9.9%. In a sharp downturn the Fund is unable to fully protect the value of your investment, but we are doing all we can to cushion the impact of the market decline as shown by the numbers above.
Key to outperforming the market last month was our minimal exposure to banks and the large iron ore miners. We only have 2.5% in Australian banks (through NAB) as we believed the market would increasingly focus on the bad debt risks of RBA interest rate hikes rather than the margin benefits. We are expecting house price declines up to or over 20% in key Australasian capital cities that will test investor convictions about low bad debts in the banks’ mortgage books. While these bad debts may indeed be modest, we expect a larger risk premium to be priced into bank equities when house prices reach such significant declines.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/188809861.pdfMay, 2022
May was a challenging month for equity markets and was really a game of two halves. Early in the month concerns around slower global growth, against a backdrop of rising interest rates and tighter financial conditions weighed on sentiment. Whilst in the second half of the month markets bounced off their recent lows. Our cautious positioning helped the Australian Absolute Growth Fund end with a return of -2.1% compared to the ASX 200 return of -2.6%.
Our top performer was US energy company EOG Resources which rallied 17.3% over the month with strong oil prices. Other energy names such as Santos also did well over the month. Global fund management group GQG, rallied 17.1% on the back of strong performance, solid flows and the inclusion in a global index which supported technical buying. We generally like founder led businesses, and GQG is led by founding Portfolio Manager Rajiv Jain. He has significant skin in the game and much like our approach to investing, is an all-weather manager who should perform through the cycle.
Diversified miner BHP was also a positive contributor, benefitting from a significant shift in sentiment as investors increasingly reflected expectations Chinese stimulus will support steel demand.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/187929499.pdfApril, 2022
April saw early strength in Australian equity markets before commodity volatility led to a sharp sell-off later in the month. The Australian Absolute Growth Fund ended up with a return of 0.7% compared to the ASX 200 return of -0.9%.
Our top performers were supermarkets with Metcash, Coles and Woolworths up 5.5%, 4.4% and 3.4% respectively. Not only did they benefit from investors seeking safe haven companies to own during this uncertainty, but the market is beginning to see inflation appear on supermarket shelves which we expect to be positive for their earnings.
Energy companies and miners were strong for most of the month which we used as a good opportunity to take profits on positions such as Santos, IGO and Oz Minerals. China continues to navigate a difficult environment where Covid lockdowns are pressuring economic growth and policy makers have been reluctant to stimulate the economy sufficiently given debt and currency concerns. Later in the month the building economic pressures appeared to find an outlet in the currency as we saw a rapid depreciation in the Chinese RMB and a rally in the USD. It is typical to see commodities and miners sell-off aggressively when we see these types of currency moves and that is what happened. Following this we are seeing some more convincing intent from the Chinese government to stimulate the economy, so we are buying select resources companies into this weakness. The situation in China will remain fluid and we will remain active in our management of resources positions.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/187139436.pdfMarch, 2022
The Australian Absolute Growth Fund returned 1.8% in March to bring the 1-year return to a pleasing 12.6%. Global equity markets had a very strong recovery in the last couple of weeks of March. Defensive positioning by fund managers led to a strong rally following the Fed meeting as investors dialed risk levels back up.
Australian equities were also aided by strong commodity prices, this drove offshore investors to buy the ASX given its safe-haven status in this environment. Our best performer was IGO which rose 29.4% on the back of strong nickel and lithium prices. Nickel supply out of Russia is expected to be heavily disrupted and the war has increased the need to accelerate the energy transition to renewables which supports both lithium and nickel demand. Our other top performers include Origin Energy (+11.8%), BHP (+10.9%), and NAB (+11.8%) as both resources and Australian financials performed well over the month. Outside of resources our top performer was supermarket Metcash (+10.2%) which is well placed and well-priced for accelerating inflation in Australia.
Our worst performer was Virgin Money (-9.4%) as the UK and global banks did not perform as well as their domestic counterparts due to increasing concerns about global growth. We had trimmed our position recently at high prices but retain a core position given Virgin’s attractive valuation and earnings exposure to higher interest rates.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/186017041.pdfDecember, 2021
December ended up being a relatively strong month for the equity market as fears surrounding the Omicron variant receded with more evidence emerging of less severe symptoms and lower hospitalisation rates. The Australian Absolute Growth Fund ended the month up 1.8%, behind the ASX 200 Index which was up 2.8%. Our best performer over the month was biotech Neuren Pharmaceuticals, which stormed 109.4% after announcing positive phase 3 trial results for its drug Trofinetide. Trofinetide looks likely to be the first FDA approved treatment for Rett Syndrome. We continued to build our position in Neuren after the results given the commercialisation opportunity is significantly derisked
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/182480289.pdfNovember, 2021
November was shaping up as a reasonable month until fears of the Omicron variant saw a late month retreat. The Australian Absolute Growth Fund ended the month down 0.2% while the ASX 200 Index fell 0.5%.
Our best performer of the month was Goodman Group (+12.7%) which rallied to new highs as its profit outlook continued to improve on structural demand for industrial property. Stalwart position Collins Foods (+10.2%) delivered yet another strong result. KFC stores in Australia performed well but the upside surprise was a strong result from their European stores on the back of stronger margins. We also had good contributions from some mining stocks with gold miner Evolution up 11.0%, copper miner Sandfire up 8.1% and nickel and lithium miner IGO rallying 9.3%.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/181275958.pdfOctober, 2021
The Australian Absolute Growth Fund produced a small gain in October while the ASX 200 index ended flat after a sharp decline on the final day of the month. There was no single stand out performer over the month but a collection of solid contributors. Mining service operator Monadelphous rallied 10.3% as sentiment improved towards the outlook for resource activity. The continued boom in green energy related investments supported both lithium miner IGO and Macquarie bank. The lithium price continues to gain as electric vehicle adoption continues to accelerate, particularly in China. This supported the 8.6% gain in IGO which owns Australia’s leading lithium mine. Macquarie (+8.7%) has a large renewables banking and investment operation that will benefit from increased investment and development of renewable energy sources.
Our main loser over the month was Virgin Money which declined 9.7% as UK banks sold-off. We continue to believe that Virgin Money and banks generally are attractive to own as central banks move to increase interest rates
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/180525915-2.pdfSeptember, 2021
The Australian Absolute Growth Fund declined 1.0% in September as the Australian equity market fell nearly 2%. Fears that Chinese property developer Evergrande Group would collapse drove iron ore prices below $100 from over $200 in July. This saw large pullbacks in iron ore miners and other metals. Despite buying some BHP last month, we moved to reduce it again early in September as the outlook for the Chinese property sector and iron ore deteriorated, leaving the Fund with minimal exposure when prices collapsed.
The other headwind for markets was the march higher in long-term bond yields as global central banks moved more hawkish which saw many growth stocks and expensive companies pull back. The Fund has taken a more conservative invested position with cash at 26% and some derivative protection. While we don’t believe China’s Evergrande is a “Lehman moment”, it confirms that China’s economic focus has shifted from stimulating the property market at all costs to investing in future growth sectors such as technology. This may lead to longer term demand issues for iron ore that are not priced into the market expectations. Combine this with short-term headwinds of declining property starts, power outages and steel production curbs ahead of the winter Olympics, we have taken a more cautious stance on iron ore until we see more stimulus from policy makers.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/179491789.pdfAugust, 2021
August was yet another positive month for equities and the Australian Absolute Growth Fund returned 2.7% bringing the returns over the last 12 months to 24.7%. The month was of course dominated by result releases from New Zealand and Australian companies. Overall, we saw strong results from companies but unsurprisingly some uncertainty on the outlook given the COVID-19 lockdowns in much of Australasia. Continually rising shipping costs were singled out as a key headwind for many businesses - some will be able to pass these costs on through price rises, while others will suffer some margins declines. Wage pressure is being felt in the mining industry but is only just beginning to show up in the broader economy. These factors all combine for a good stock picking environment going forward.
DGL was once again a highlight of the month. The dangerous goods logistics and storage business reported a strong result as customers move away from just-in-time inventory management and store more goods domestically with DGL given concerns over supply chains. We believe there is a structural shift where the COVID-19 pandemic and tensions with China will see a higher level of domestic inventories going forward
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/178774260.pdfJuly, 2021
The Australian Absolute Growth Fund returned 0.6% in a relatively quiet July.
The worsening Sydney COVID-19 Delta strain outbreak was the key economic event over the month, but even this had a relatively small impact on the equity market other than some modest weakness in banks and some other cyclicals. Once again, lockdowns in Australia are being met with fiscal support that at a broad level will keep consumer savings at a healthy level until high vaccination rates allow lockdowns to ease later this year.
Our strongest performers over the month were miners BHP (+10.1%), IGO (+22.0%) and industrials Seven Group (+14.3%) and DGL (+18.0%). IGO rallied as it completed its acquisition of lithium assets and the lithium commodity price saw renewed strength.
Seven Group effectively took control of Boral over the month which was taken positively by the market. And recent IPO DGL continues to attract new investor interest as the opportunity in chemicals logistics is appreciated by more market participants. DGL is a well-managed New Zealand business that has expanded to have significant operations in Australia.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/175595981-1.pdfMay, 2021
May was a volatile but still productive month for the Australian Absolute Growth Fund which gained 2.3% over the month. This brings the return for the calendar year to 12.9%.
At the beginning of May, the ASX 200 had a strong rally driven by a lot of the cyclical names we have favoured this year, including banks and miners. With signs of some short-term overheating in commodity markets we used this opportunity to trim our position in miners BHP, RIO, IGO and Oz Minerals. We also sold out of CBA as the bank climbed sharply towards $100 a share. Overall, the Fund retains significant positions in miners and banks through NAB, Westpac and Virgin Money UK where we have a positive medium-term view.
Some notable performers over the month were CSL, which rallied 7.0% as evidence emerged of improving plasma collection in the US. Tractor manufacturer CNH Industrial rallied 15.6% after reporting a strong result earlier in the month. And our gold miners were notable performers with Northern Star up 11.3% and Evolution Mining up 16.8%.
The gold price has recovered to ~US$1,900/oz from its April lows of under US$1,700/oz. We think the current inflation pressures around the world may drive further demand for gold as an inflation hedge over the next couple of months that may see gold climb back above US$2,000/oz. However, this is no sure thing as any hawkish moves from the US Federal Reserve will likely see a stronger US Dollar and lower gold price. We plan to reduce our gold mining exposure ahead of key US Fed meetings over the coming months
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/172664940.pdfApril, 2021
The Australian Absolute Growth Fund returned 3.4% in April bringing returns over the last year to 26.3%. We had a diverse mix of businesses drive our performance over the month.
Lithium miner Galaxy was our strongest performer during the month (+55.3%), rallying on the back of an announced merger with Orocobre. In our view the deal makes a lot of sense creating a globally relevant scaled Lithium producer with significant growth opportunities, that can capture the accelerating demand for Electric Vehicles. We also had a material contribution from diversified miner Independence Group, which benefitted from positive sentiment around energy transition materials, supplemented by the announced divestment of its Tropicana Gold mine.
Other standout performers during April included youth retailer Universal Stores (+27.1%) on the back of a strong retail backdrop, and a positive trading update flagging same store sales growth of 28% over the previous year. Our largest negative performer over the month was explosive and fertiliser manufacturer Incitec Pivot, which sold-off on the back of plant turnaround issues at Waggaman plant.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/171115951.pdfNovember, 2020
The Fund had a very strong month as positive vaccine news saw share markets rise sharply. The Fund’s 5.1% return in November brings the calendar year return to 6.1%. While our defensive investments such as gold miners and Woolworths had declines over the month, we made large gains in our cyclical and value investments which included the banks, Sydney Airport, Sealink Travel and Bluescope. The positive vaccine news has large implications for our economic and market expectations over the coming few years which has resulted in portfolio changes over the month.
Firstly, we materially reduced our gold miners as the improved economic certainty means a large gold hedge is not required. We have retained a smaller position as gold may do well again if inflation concerns flare up during the recovery. We continued to pick up more cyclical and value investments as we see more upside from these companies despite strong gains this month. These include Virgin Money UK, insurer IAG, toll road business Atlas Alteria and miners BHP, Rio Tinto and Fortescue Metals. These companies are priced at an attractive discount to our valuation and we expect this discount to close as the economic recovery progresses. This results in a more fully invested portfolio weighted toward beneficiaries of the economic recovery and a cash holding of 7.3%. We are comfortable with this given the improved risk outlook and investment opportunities available following the vaccine developments.
The ASX 200 index remains near 6% below its February highs given its large weighting to cyclical and COVID-19 impacted companies. We expect the economic recovery will have setbacks along the way as emergency fiscal stimulus is withdrawn, although the coming vaccine will help consumers and businesses look through these setbacks.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/163156513.pdfticker: ETL8155AU
release_schedule: Monthly
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factsheet_url:
Right sidebar -> Quick Links ->Provider’s Own Factsheet
https://investmentcentre.moneymanagement.com.au/factsheets/MI/qefa/milford-australian-absolute-growth-w
asset_class: Domestic Equity
asset_category: Australia Large Blend - Absolute Return
peer_benchmark: Domestic Equity - Absolute Return Index
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structure: Managed Fund
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fund_features:
The Fund aims to provide an absolute returns with an annualised return of 5% above the RBA Cash Rate while seeking to preserve investor capital. Diversified fund that primarily invests in Australasian equities, complemented by selective exposure to international equities, fixed interest securities and cash.