August, 2023
Shares in SEEK declined as the job listing portal reported lukewarm results for its financial year (FY) 2023. However, it is held for its strong execution track record, proven management team, robust balance sheet and capital light operations. SEEK has a long-term opportunity to continue to lift prices and expand into new markets. Similarly, WiseTech Global slid as the cloud-based end-to-end logistics software provider released lacklustre results. Nevertheless, its sticky and growing customer base and low penetration in a large total addressable market provides ample runway for growth in the future. Private hospital operator Ramsay Health Care’s share price tumbled as its management’s tone shifted noticeably from margin normalisation to uncertainty around margin growth into FY 2024. Nonetheless, Ramsay Health Care has market leading positions in Australia and France, providing leverage during negotiations with private health insurers and solutions for governments that are trying to reduce public waitlists, along with significant procurement benefits. Meanwhile, the lack of exposure to retailer Wesfarmers held back gains as investors responded positively to its FY 2023 results. Shares in Coles Group declined as the food and staples retailer’s results missed expectations. Its investors were cautious amid building cost pressures, subsiding food inflation, and ongoing operational risk associated with the construction and implementation of the Ocado and Witron facilities. On a positive note, the position in Domino’s Pizza gained after the pizza chain operator announced its annual results. Management confirmed that its same store sales growth re-accelerated across Australia, New Zealand, and Europe, which will lead to an improvement in margins across all regions. The foundation of its long-term growth ambitions and viability of its business model is the underlying health of its franchisee base. The holding in global industrial property company Goodman Group advanced following the release of its FY 2023 results.
Goodman Group reported a double-digit increase in earnings along with upbeat guidance for FY 2024. In addition, strong demand for large industrial properties to house stock for online retailers as well as data centre space for cloud computing and artificial intelligence buoyed sentiment. The lack of exposure to infrastructure company Transurban Group added relative value. Its results disappointed investors as management flagged higher corporate costs. Elsewhere, not holding ResMed enhanced relative gains. Its shares slid following its quarterly results, which were underpinned by weak gross margins for the sleep apnoea equipment manufacturer.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/204596457.pdfMay, 2023
The Fund outperformed the index over the month, primarily due to stock selection in financials and materials. Shares in leading insurer Suncorp Group gained on expectations of a handsome dividend post the completion of its asset sale. The sale will sharpen Suncorp’s focus on its core insurance business in terms of improving its risk position, pricing and claims. Clean energy miner IGO’s shares rallied after it reported record profits and operating earnings in the third quarter of its financial year 2023. The lack of exposure to National Australia Bank added relative value as its shares tumbled post its disappointing half yearly results. Its management noted that net interest margin (NIM) had peaked in the December quarter and said that it expects further pressure due to competition in mortgages and deposits, as well as funding headwinds. Similarly, not holding retail conglomerate Wesfarmers enhanced relative gains as its shares declined after management highlighted deteriorating macroeconomic conditions. Conversely, the holding in beverage company Treasury Wine Estates slid as it reported mixed operating conditions in its recent trading update and flagged pressures in sales of its low-margin wine. The position in Ramsay Health Care declined amid weaker than expected results for the third quarter of its financial year 2023.
However, Ramsay Health Care has market leading positions in Australia and France, providing leverage during negotiations with private health insurers and solutions for governments that are trying to reduce public waitlists, along with significant procurement benefits. Elsewhere, the lack of exposure to software company Xero held back relative gains as its shares advanced in line with the IT sector.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/201453989.pdfApril, 2023
The Fund slightly underperformed the index over the month, primarily due to stock selection in financials, healthcare and communication services. Investors took profits in Domain Holdings on worries that vendors may lower their marketing spending on the real estate classifieds portal amid a downturn in the domestic housing market. The position in Ramsay Health Care declined amid concerns over the profitability of hospital operators in France after the Emmanuel Macron government contemplated a healthcare funding reform in the country.
However, Ramsay Health Care has market leading positions in Australia and France, providing leverage during negotiations with private health insurers and solutions for governments trying to reduce public waitlists, along with significant procurement benefits.
The lack of exposure to National Australia Bank pared relative gains as its shares rebounded along with the rest of the financial sector. Meanwhile, the holding in mining major Rio Tinto detracted from performance as its shares slid in line with declining iron ore prices. On a positive note, the underweight allocation to low-grade iron ore miner Fortescue Metals Group added relative value as its shares tracked iron ore prices lower.
Fortescue faces cyclical and structural headwinds, as decarbonisation trends favour high-grade iron ore over low-grade iron. Clean energy miner IGO’s shares advanced after it secured land from the government of Western Australia to build its proposed integrated battery material facility. Management also revealed that Wyloo Metals and IGO are in advanced discussions with a global battery chemical manufacturer that is interested in partnering on the project. Strong gold prices supported the position in gold miner Evolution Mining. It has a strong track record of generating value through the cycle by turning around undercapitalised assets that have been divested by major players in the sector to achieve returns that are above the industry average. Elsewhere, shares in leading vitamins and dietary supplements (VDS) company Blackmores rallied after it received an attractive takeover offer from Japanese company Kirin. The bid clearly reveals the strategic value in Blackmores’ assets perceived by offshore buyers who have an appetite for growth. The attractiveness of its premium brand, product attributes and distribution systems could lead to more bids as the company makes inroads into the China and Southeast Asia markets.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/200448287.pdfFebruary, 2023
The Fund underperformed the index over the month, primarily due to stock selection in the consumer discretionary and materials sectors.
Shares in pizza chain operator Domino’s Pizza Enterprises slid after management reduced its same store sales growth and organic store rollout targets for financial year 2023. However, its established track record of leadership in digital innovation and delivery is expected to drive future growth. Gold miner Evolution Mining declined in line with falling gold prices. Nonetheless, it released in line results and reaffirmed its full year production and cost guidance. A bearish outlook for lithium prices failed to boost sentiment towards miners IGO. The clean energy miner IGO posted mixed half yearly results. Shares in Commonwealth Bank of Australia slid despite reporting strong half yearly results, including a double-digit increase in dividend and another considerable share buyback.
Investors took profits in the bank as its management noted that net intertest margins (NIM) had peaked in October 2022 due to strong competition in both mortgages and deposits. However, CBA remains the safest bet relative to big Australian banks, given its stronger-than-peers core banking franchise, solid brand and specific focus on catering to the youth demographic. The lack of exposure to QBE Insurance Group held back relative gains as its shares advanced in line with the booming insurance sector. On a positive note, the position in insurer Suncorp Group advanced. Investors were buoyed by its market leading positions in general insurance in Australia and New Zealand. Not holding National Australia Bank added relative value as its shares tumbled. Its significant exposure to business loans leaves it relatively more vulnerable than competitors in a deteriorating macroeconomic environment. Leading food and staples retailer Coles Group advanced after it posted solid half-yearly results. Its reported profits, which were boosted by rising food inflation, beat market expectations. The domestic staples sector is well positioned in the current environment and has demonstrated an attractive long-term return profile, driven by its oligopolistic structure, high barriers to entry and strong bargaining power. Elsewhere, Australia’s leading and incumbent infrastructure and mobile services provider Telstra Group gained as inflationbased prices of its services rose amid a stable competitive environment.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/198266260.pdfJanuary, 2023
The Fund delivered strong positive returns and outperformed the index over the month, primarily due to stock selection in the real estate sector.
Indications that the rising interest rate cycle led by the US Federal Reserve may have peaked led to a share price rally in property manager Goodman Group. Its quality assets and strong balance sheet position, coupled with ongoing structural growth opportunities cheered investors. The position in financial conglomerate Macquarie Group added value. Investors were expecting strong income from its commodities and global markets (CGM) division as energy price volatility remained at elevated levels since November. Pizza chain operator Domino’s Pizza Enterprises extended its run and rose in line with the consumer discretionary sector. It has an established track record of leadership in digital innovation and delivery, which is expected to drive future growth. Investors accumulated shares in job listing portal SEEK given its attractive valuations. Market expectations that inflation may have peaked and could now be reducing boosted sentiment. Conversely, the position in leading telecommunication services provider Telstra and private hospital operator Ramsay Healthcare detracted from performance.
However, Telstra continues to enjoy a dominant position with leading market share across all the segments in which it operates. Ramsay’s fundamentals remain intact as it is expected to benefit from a steady recovery in activity levels over the next few years. Suncorp Group declined and gave back some gains from previous months as investors took profits in the leading insurance company. Suncorp’s new initiatives are likely to drive improvements in its core insurance business and accelerate its digital and data driven transformation.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/197215626.pdfDecember, 2022
The Fund delivered strong positive returns and lagged the index over the quarter. Selected positions weighed on relative returns.
Selected materials held back gains Pure-play electric vehicle (EV) battery stock IGO slid on retreating lithium prices. News of a fire incident at IGO’s Nova Power station overshadowed its commercial lithium production milestone. The underweight allocation to BHP Group held back relative gains. Shares in the diversified miner, with a portfolio weighted towards iron ore, advanced in line with rising iron ore prices. Shares in Coles Group tumbled despite reporting third quarter sales that met expectations, as investors remained cautious of rising inflationary cost pressures for the consumer staples sector.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/195927986.pdfNovember, 2022
The Fund outperformed the index over the month, primarily due to stock selection in health care and financials.
Hospital operator Ramsay Healthcare’s positive quarterly trading update buoyed investors. It noted that activity levels are improving across regions as COVID-19 related costs are reducing. Management expects a gradual recovery through 2023 and 2024, with more normalised operational conditions.
Within financials, not holding National Australia Bank added relative value. Its shares tumbled amid concerns over its significant exposure to business loans, which leaves it relatively more vulnerable than competitors in a deteriorating macroeconomic environment. Meanwhile, investors accumulated shares in gold miner Evolution Mining amid an improving outlook for gold prices and slowing rate of interest rate increases as indicated by the US Federal Reserve. It is well positioned to benefit in such an environment, given its robust balance sheet and quality gold exposure. Shares in Rio Tinto, a diversified miner with a portfolio weighted towards iron ore, advanced in line with rising iron ore prices
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/193456482.pdfOctober, 2022
The Fund underperformed the index over the month, primarily due to security selection in the healthcare sector. Shares in specialty biotherapeutics company CSL and private hospital operator Ramsay Healthcare faced selling pressure along with the rest of the sector in the current environment of rising interest rates. However, CSL continues to gain market share by exploiting its sustainable competitive advantage in a highly concentrated plasma market, which exhibits a long runway of secular growth. Ramsay’s fundamentals remain intact as it is expected to benefit from a steady recovery in activity levels over the next few years.
Meanwhile, not holding NAB held back relative gains as its shares advanced in-line with the financial sector. Shares in leading food and staples retailer Coles Group tumbled despite reporting third quarter sales that met expectations as investors remained cautious of rising inflationary cost pressures for the consumer staples sector. The position in mineral sands producer Iluka Resources slid after it reported a decline in both production and sales for its third quarter ended September
On a positive note, shares in IGO gained on the back of record lithium prices. It is a pureplay electric vehicle (EV) battery stock and is strategically positioned to supply metals for the clean energy future. The lack of exposure to low-grade iron ore miner Fortescue Metals Group added relative value. Its shares declined after a sharp pullback in iron ore prices amid concerns over demand in China and increasing supply of the metal.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/192694813.pdfSeptember, 2022
Inflation concerns held back gains
Domino’s Pizza Enterprises slid amid a challenging macroeconomic environment and a tight labour market. However, its financial year 2022 results indicate a reacceleration in sales growth, driven by franchise stores. Leading food and staples retailer Coles Group slid as its management’s outlook was subdued on expectations of rising costs and high capital expenditure. However, it delivered solid annual results ahead of consensus estimates. Financial services provider Suncorp Group was caught amid a mixed market response to its decision to sell its banking operations to Australia and New Zealand Banking Group. Its shares rallied and then declined rapidly post the announcement. Elsewhere, shares in private hospital operator Ramsay Healthcare tumbled after its Board terminated merger discussions with a consortium led by KKR.
Security selection in materials added value
Clean energy focused miner IGO advanced as it reported positive results, followed by a renewed uptrend in lithium prices. IGO’s results were led by a double-digit increase in revenue compared to the previous quarter. Speculation regarding Mineral Resources’ listing of its lithium business separately also buoyed investor sentiment. Meanwhile, the lack of exposure to Newcrest Mining and AVZ Minerals proved beneficial as their shares declined. The former slid in line with falling copper and gold prices. The underweight exposure to Diversified miner BHP Group proved beneficial. Concerns over iron ore demand from China, its top consumer from a country perspective, weighed on its share price.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/191973255.pdfAugust, 2022
The strategy outperformed the index over the month, primarily due to security selection in the information technology (IT) sector. Cloudbased end-to-end logistics software provider WiseTech Global advanced as it delivered promising results and robust guidance. It is a capital light business that enjoys self-funding given its strong cash flows and is underpinned by economies of scale and its strong balance sheet position. Oil and gas producer Santos advanced in line with the broader energy sector. It also delivered financial results that met market expectations. Mining companies IGO and Iluka Resources extended their run after reporting encouraging results. IGO’s earnings were supported by stronger production, lower costs and dividend from its lithium joint venture (JV) in the first year of its ownership. Iluka’s operating income for the first half of the year beat market expectations.
Conversely, the position in diversified miner BHP Group declined. Concerns over iron ore demand from China, its top consumer from a country perspective, weighed on its share price. Nevertheless, it released robust full-year financial results and investors cheered its higher than consensus dividend declaration. Shares in Seek, the leading provider of online employment classifieds in Australia, New Zealand, China and Southeast Asia, declined. Investors remained concerned over its sluggish near-term margins, despite management repeatedly stating that it prefers to invest to create superior value over the longer term rather than to pursue short-term performance. Leading food and staples retailer Coles Group slid as its management’s outlook remained subdued amid expectations of rising costs and high capital expenditure. However, it delivered solid results for its financial year 2022 ahead of market consensus, driven by market share gains.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/190912190.pdfJuly, 2022
The Fund underperformed the index over the month, primarily due to security selection in healthcare. Investors took profits in leading private hospital operator Ramsay Healthcare after its shares jumped on news of an attractive acquisition proposal from a consortium led by KKR. Likewise, financial services provider Suncorp Group was caught amid a mixed response to its decision to sell its banking operations to Australia and New Zealand Banking Group. Its shares rallied initially, before declining rapidly post the announcement. Elsewhere, the lack of exposure to NAB held back relative gains. Its shares rebounded following a heavy sell-off in the previous months. The conviction position in Santos declined as investor sentiment was dimmed after the oil and gas producer narrowed its production guidance, despite releasing robust results. Nevertheless, Santos lowered its upstream production cost guidance, reflecting solid cost control. On a positive note, metals and mining company IGO gained growth momentum after it posted positive fourth quarter results, led by a double-digit increase in revenue compared to the previous quarter.
Positions in Commonwealth Bank of Australia (CBA) and Macquarie Group regained growth momentum as investors focused on the positive impact that the RBA’s rate hikes will have on financial majors. The rate increase paves the way for improving net interest margins (NIM) on loans for CBA, while its dominant retail franchise continues to steer ahead of its peers given the lead in technology investments and its execution superiority. The outperformance of the broader real estate sector amid expectations of a less hawkish stance by central banks enhanced holdings in industrial property manager Goodman Group. It operates a diversified, global portfolio of supply constrained, urban infill located industrial assets, offering exposure to rising e-commerce penetration.
June, 2022
The Fund lagged the index over the quarter. Selected positions weighed on relative returns. Selected material names held back gains The mining sector was negatively impacted by rising cost inflation, labour shortages and construction delays, due to which the position in copper, nickel and gold miner IGO slid. Similarly, shares in gold miner Evolution Mining declined due to a weaker profit outlook for the company. It revised its production guidance downwards and cited inflationary pressures as it revised its cost guidance upwards. Elsewhere, investors remained cautious of job listing portal SEEK’s high valuations as its shares declined. However, we consider that the currently developing tight labour market and low levels of unemployment present the perfect environment for its core business to grow. High conviction in selected defensive stocks supported returns
Shares in leading private hospital operator Ramsay Healthcare rallied after it was approached by a consortium led by KKR with an attractive takeover bid. Likewise, the conviction holding in food and staples retailer Coles Group proved favourable. Its shares advanced due to a shift in market sentiment towards defensive names with predictable revenue streams and its ability to pass on rising prices to customers in the current inflationary environment. In addition, the domestic staples sector has demonstrated an attractive long-term return profile, driven we believe by an oligopolistic structure, high barriers to entry and strong bargaining power for incumbents. Financial services provider Suncorp Group gained amid speculation that it is preparing to sell its banking operations and focus on the larger and more profitable insurance business.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/189153785.pdfMay, 2022
The Fund underperformed the index over the month, primarily due to security selection in real estate. The sector experienced broadbased weakness given earlier than expected interest rate hikes, which hurt sentiment towards the holding in industrial property developer Goodman Group. Furthermore, Amazon’s intention to sub-lease some of its warehouse space amid a slowdown in ecommerce growth weighed on Goodman’s share price, as it has a long-term leasing contract with Amazon.
Nevertheless, Goodman released a positive quarterly update with an upward revision to its earnings guidance. Food and staples retailer Coles Group was caught in a wider sell off in the sector, led by US retail giant Target’s earnings miss and lowered guidance, amid inflationary pressure and weakening consumer demand. However, the domestic staples sector has demonstrated an attractive long-term return profile, driven by an oligopolistic structure, high barriers to entry and strong bargaining power for incumbents. Meanwhile, investors remained cautious of job listing portal SEEK following bearish reports from a leading broker. However, the currently developing tight labour market and low levels of unemployment present the perfect environment for its core business to grow. The holding in global financial conglomerate Macquarie Group declined amid its conservative near-term outlook, despite releasing robust results. The company’s management continues to under-promise and over-deliver by finding new avenues of growth. On a positive note, selected financial holdings added value.
The holding in GQG Partners advanced after the boutique asset manager announced encouraging net inflows in its latest quarterly update and committed to paying a high dividend pay-out ratio. Lithium and iron ore mining company Mineral Resources gained as investors were upbeat on its margin growth prospects due to rising lithium carbonate prices. The position in oil and gas explorer Santos advanced on the back of strong oil prices. Investor sentiment was also supported by the company’s announcement that its joint venture has been appointed as the preferred tenderer of two new strategic gas exploration programmes by the Queensland government. Elsewhere, urban services business Downer EDI gained after it won multiple contracts, including manufacturing 70 High-Capacity Metro Trains (HCMT) for Melbourne and sewer and water maintenance for South East Water in Victoria, which were well received by investors
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/188153498.pdfApril, 2022
The Fund outperformed the index over the month, primarily due to security selection in the materials sector. Shares in leading private hospital operator Ramsay Healthcare rallied after it was approached by a consortium led by KKR with an attractive takeover bid. The conviction holding in industrial property manager Goodman Group advanced as investors sought to increase their exposure to high-quality real estate names. Its strength is underpinned by ongoing structural growth and encouraging development pipeline. Investors accumulated shares in financial conglomerate Suncorp Group due to attractive valuations and a positive outlook for financials in the rising interest rate environment.
Meanwhile, not holding information technology (IT) services company Block boosted relative returns as its shares tumbled after it reported heavy losses for Afterpay, which it had acquired earlier in the year. The position in mining company Mineral Resources gained after the announcement of increasing its lithium production in response to the unprecedented demand for the metal. Its upsized debt offering was also well received by investors. Conversely, the holding in IGO declined after the battery metals producer increased the price of its takeover bids for nickel producer Western Areas.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/187152401.pdfJanuary, 2022
The strategy slightly underperformed the index over the month. Security selection in real estate sector held back gains. The position in logistics software company WiseTech Global slid amid the wider technology sector correction due to fears of a rise in interest rates. However, the company’s strength is underpinned by its robust end-market growth potential, coupled with market share gains, improving revenue quality due to an increase in on-demand business models, and margin expansion from economies of scale. Meanwhile, not holding energy company Woodside Petroleum held back gains as its share price surged on rising demand and favourable commodity prices. Private hospital operator Ramsay Healthcare slid on news that a shortage of staff was made worse by the pandemic situation early in the month. Additionally, COVID-19 related regulatory restrictions on non-urgent and elective procedures by authorities is likely to negatively impact the hospital operator’s earnings. Real estate classifieds portal Domain Holdings was caught amid a market wide selloff in the property sector, as rising cases of the Omicron variant of COVID-19 dampened investor sentiment. Similarly, investors remained cautious of the pizza chain operator after its US-based parent company said that it expects a manifold increase in its food costs amid rising inflation. On a positive note, the position in clean energy metal producer IGO advanced as it tracked nickel prices higher. A positive report by a leading broker, strong production numbers and an encouraging guidance for lithium further supported the holding.
The allocation to diversified miner BHP Group and mining services company Mineral Resources advanced in light of strong iron ore prices. BHP’s shareholders approved the unification of its shares by withdrawing its dual-listing on the London Stock Exchange (LSE), which was well received by investors. Ongoing investor interest in lithium mining names also supported Mineral Resources. Elsewhere, not holding payment service provider Afterpay enhanced relative gains. Its shares continued to decline before being delisted and merged with digital payment giant Block. The latter’s shares came under pressure amid speculation that US-based technology behemoth Apple may enter the market with its own buy now pay later (BNPL) offering.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/184052964.pdfNovember, 2021
The strategy outperformed the index over the month. Security selection in the real estate sector contributed to returns. Holdings in real estate investment trusts Goodman Group and Charter Hall Group added value. The former gained as it released strong quarterly results and upgraded its earnings guidance, driven by increasing development activity, growing assets under management and strong investment performance. The latter advanced as it upgraded its FY22 guidance, primarily on the back of asset revaluations in two industrial funds that have led to significantly higher performance fees for the company. The position in job listing company SEEK gained as its latest employment report showed record high job advertisement numbers.
The exposure to diversified miner IGO gained following recent deal announcements with titanium explorer Australian Vanadium and nickel miner Impact Minerals. The company will farm into Impact’s Broken Hill nickel-copper-platinum group metals project in New South Wales and will support Vanadium’s project utilising a standalone power system (SPS) to power a bore pump with a target of 100% renewable energy use. Meanwhile, investors favoured mining services company Mineral Resources after it announced its decision to restart operations at its Wodgina lithium mine on improving demand for the metal, which is used to make electric vehicle batteries. Conversely, the lack of exposure to iron ore producer Fortescue Metals held back gains. Its share price rose in line with iron ore prices, which rebounded after China’s recent announcement that it would take measures to support its property sector. Security selection in financial stocks including Suncorp Group and Commonwealth Bank of Australia was unfavourable. Investors remained sceptical of the former’s near-term margin pressure, but its medium-term thesis remains strong given the rational pricing environment with a tailwind to investment income from any increase in cashrates going into 2022
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/181823845.pdfOctober, 2021
The Fund lagged the index over the month. Security selection in the consumer discretionary sector held back gains. Investors took profits in pizza chain operator Domino’s Pizza Enterprises following a rally in its share price in recent months. The position in Australia’s casino operator Star Entertainment Group slid due to concerns around some irregularities in its business operations. The exposure to diversified mining company Mineral Resources undermined gains. Investors rotated away from the stock amid a sharp decline in the price of iron ore and as the company reported a disappointing first quarter update. At its Mt Marion site, Mineral Resources produced and shipped less lithium than the previous quarter due to rainfall and shipment delays. The company was also negatively impacted by COVID-19 travel restrictions over the threemonths ended 30 September. Selected financials also weighed on performance. Financial services company Suncorp Group declined as investors focussed on its natural hazard claims. The recent turmoil in weather, mostly across the east coast of Australia, raised concerns around an increase in insurance claims. The lack of exposure to National Australia Bank held back gains. Its shares advanced on the back of a positive report by a leading broker. Encouragingly, globally diversified financial services provider Macquarie Group added value. It advanced on reports of strong earnings for the first half of FY22; its profit more than doubled compared to the corresponding period last year. The position in Commonwealth Bank of Australia advanced after completing an off-market share buyback.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/181207234.pdfSeptember, 2021
The Fund delivered positive absolute returns and outperformed the index over the quarter. Selected conviction holdings with strong growth prospect contributed to returns. Security selection in the materials sector added notable value.
Conviction holdings supported performance
Shares in pizza chain operator Domino’s Pizza Enterprises marked a series of all-time highs over the quarter, driven by strong FY21 results despite the pandemic affecting its operations in selected markets. Investors cheered its new store openings, which surpassed its 3–5 year outlook. The rally in financial services company Suncorp Group was supported by an upgrade by a leading broker that believes the company will continue to report growth in its earnings and dividends in the near term. Software specialist WiseTech Global reported robust results and a strong outlook for FY22. It has a long runway for growth, where the pandemicled market disruptions have increased the need for digitalisation and demand for its supply-chain software platform CargoWise.
Positions in miners held back returns
Positions in iron-ore miners BHP Group and Mineral Resources hampered performance as these stocks tracked metal prices lower. The holding in gold producer Evolution Mining also held back gains due to the subdued gold price environment
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/179968577.pdfAugust, 2021
The fund delivered positive absolute returns and outperformed the index over the month. Encouraging earnings supported the performance of conviction holdings. Shares in pizza chain operator Domino’s Pizza Enterprises marked a series of all-time highs in August, driven by strong FY21 results despite the pandemic affecting its operations in selected markets. The company announced a robust increase in global food sales across its network. Investors cheered its new store openings, which surpassed its 3–5 year outlook. Positions in cloud-based end-to-end logistics software provider WiseTech Global and banking and insurance company Suncorp Group were also driven by robust results. Earnings in the former gained on the back of accelerating organic growth, margin expansion and cash generation. Investor sentiment was further supported by management’s expectation for strong growth in FY22, which was higher than market estimates.
The rally in Suncorp Group was supported by an upgrade by a leading broker that believes the company will continue to report growth in its earnings and dividends in the near term. Elsewhere, the holding in engineering and infrastructure business Downer EDI contributed to performance, driven by a positive response to its full year results. Consequently, a leading broker retained the company’s outperform rating. In contrast, selected positions in the materials sector held back gains. Holdings in iron-ore miners BHP Group and Mineral Resources detracted from performance as these stocks tracked metal prices lower
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/179087735.pdfJuly, 2021
The fund delivered positive absolute returns and outperformed the index over the month. Security selection in the materials sector added notable value. The position in diversified mining company Mineral Resources contributed to returns, driven by record iron ore shipments and robust iron ore production in the June quarter. It also reported higher than anticipated lithium production, a metal used in the clean energy space. High commodity prices supported the position in IGO. Its shares gained on news that it has entered into a deal to acquire a stake in Silver Knight, which will give IGO access to its nickel-copper-cobalt sulphide deposits.
The holding in miner BHP Group gained in anticipation of encouraging dividends. Its share price was further supported by a weak Australian dollar, which is favourable for export-oriented BHP Group. In the real estate sector, shares in industrial property manager Goodman Group rallied following a recent upgrade by a leading broker. Investors are optimistic on its growth prospects as the shift to online shopping has been a significant tailwind for the company. Conversely, profit taking in selected holdings that had been trading at high valuation premiums held back gains. These include positions in job listing company SEEK and pizza chain operator Domino’s Pizza Enterprises.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/175739126.pdfJune, 2021
The Fund delivered positive absolute returns and outperformed the index over the quarter. Selected conviction holdings with strong growth prospect contributed to returns. Security selection in the materials sector added notable value.
High iron-ore prices drive materials Selected positions in the materials sector benefited from strong iron ore prices. As a result, holdings in Mineral Resources and IGO supported performance, but avoiding Fortescue Metals Group, held back relative gains.
Conviction holdings supported performance Industrial property manager Goodman Group and job listing company SEEK gained following an upgrade by a leading broker. Investors are optimistic on the former’s growth prospects as the shift to online shopping has been a significant tailwind for the company. News that pizza chain operator Domino’s Pizza Enterprises is expanding into the Taiwanese market via accretive acquisition opportunities was received well by investors.
Selected positions held back returns The holding in hospital operator Ramsey Health Care detracted from performance. Its quarterly earnings continue to be impacted by the pandemic to varying degrees across regions. Furthermore, news of its acquisition of a hospital in the UK was not received well by investors.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/174700187.pdfMay, 2021
Australian equities continued to rally in May. Investor sentiment was supported by encouraging earnings and a relatively resilient domestic economy through the pandemic. At the sector level, financials led gains, buoyed by robust earnings updates from banks.
Materials also ended the month higher, driven by gold miners. Prices of gold, a relative safe haven asset, rallied over the month. Meanwhile, the information technology sector lagged as the market factored in concerns over a rise in inflation, which weighed on growth-led technology stocks. Utilities also ended lower.
Towards the end of the month, markets retreated on worries over rising COVID-19 cases in Victoria. The Reserve Bank of Australia (RBA) upgraded its economic outlook and said that it will review its bond buying programme in July. However, it said that interest rates are likely to remain low until at least 2024. In economic news, Australian retailers boasted of yet another month of solid sales in March, while a measure of business conditions surged to all-time highs in April, indicating that the economy was coping well with the end of a government support programme for jobs. Encouragingly, Australia's unemployment rate has fallen to 5.5%. This is the sixth consecutive fall after it peaked in July 2020 at 7.4%. Meanwhile, the WestpacMelbourne Institute Index of Consumer Sentiment fell in May to break a three-month winning streak, representing some disappointment to the government's annual budget. The budget included tax breaks for business and workers, along with more spending on everything from age care to infrastructure.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/173154596.pdfApril, 2021
The strategy delivered positive absolute returns and outperformed the index over the month. Security selection as well as an overweight stance in materials boosted returns as the sector benefited from strong iron ore prices. As a result, holdings in Mineral Resources and IGO helped performance, but avoiding Fortescue Metals Group held back relative returns. In the consumer discretionary sector, leading pizza chain operator Domino’s Pizza Enterprises added notable value given its strong sales momentum and growth in digital platform-led sales revenues.
In the consumer services sector, the holding in job listing company SEEK added value. The company witnessed strong job advertisements, with March registering the highest number of posts in its 23-year history
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/171694350.pdfMarch, 2021
The Fund delivered positive returns, but lagged the index over the quarter. The period witnessed a rotation towards value-led stocks. Consequently, optimism around a rapid vaccination rollout and expectations of a swifter than expected economic recovery weighed on COVID-19 beneficiaries. Profit taking in preferred real estate holdings also held back gains. On a positive note, selected high-conviction holdings and the lack of exposure to some momentum-led stocks added value.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/170432668.pdfFebruary, 2021
The Fund delivered absolute positive returns and outperformed the index in February. Security selection in the materials sector contributed to performance largely driven by encouraging earnings. Preferred positions in iron ore producers Mineral Resources and BHP Group also tracked iron-ore prices higher. The holding in diversified miner IGO gained in light of a notable increase in its cash flows. Furthermore, investors favoured IGO’s long runway for growth given its recent purchase of a substantial stake in the world’s biggest lowcost lithium mine in Australia. Among consumer holdings, a conservative stance in retail conglomerate Wesfarmers proved rewarding as investors took profits following a sharp rise in its share price recently. Conversely, the holding in supermarket operator Coles slid amid concerns about a tough near-term outlook even as the company reported healthy results for the first half of FY21. The exposure to job listings company SEEK detracted from returns. SEEK’s strong results were overshadowed by sale of a part of its stake in the Chinese career platform Zhaopin at a deal price that was viewed as unattractive by the broader market Elsewhere, in the real estate sector, investors rotated out of industrial property manager Goodman Group and property fund manager Charter Hall Group following their strong recent performance. Both companies reported robust results and upgraded their guidance.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/168016827.pdfJanuary, 2021
The strategy lagged the index over the month. Profit taking in preferred real estate holdings weighed on returns. Investors rotated out of industrial property manager Goodman Group and property fund manager Charter Hall Group following their strong recent performance.
Goodman Group remains a beneficiary of strong rental growth stemming from an increase in warehouse demand as ecommerce penetration rises. In the materials sector, iron ore producers tracked metal prices lower. The position in Mineral Resources was also impacted by iron ore and lithium shipments during the quarter.
These losses were partially offset the position in miner BHP Group that gained on encouraging production updates and expectations of strong earnings, driven by lower capital expenditure as its major mineral projects are completed. In the consumer discretionary sector, an underweight position in retail conglomerate Wesfarmers hurt relative returns as its results surpassed estimates. This was partly offset by the highconviction holding in Domino’s Pizza. Shares in the pizza delivery company advanced following an upgrade by a leading broker. Investors favoured its long-term structural growth story, innovative technologies and increasing market share.
The position in real estate classifieds portal Domain Holdings Australia was driven by a positive broker report and rising house prices, particularly in Sydney and New South Wales.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/166022255.pdfDecember, 2020
The Fund outperformed the index over the quarter, led by rewarding security selection notably in the materials sector. Positive news flows around the development of a COVID-19 vaccine dominated investor sentiment and prompted a rotation into value stocks. While, expectations of a swifter economic recovery supported selected high-conviction holdings. Investors took profits in selected holdings that had fared well earlier in the year.
Positions in materials proved rewarding News that mining and exploration company IGO is considering an accretive acquisition opportunity that would give it access to low cost lithium mines, was received well. Mineral Resources gained amid a surge in iron ore prices underpinned by robust demand from China. Its management’s also plans to scale up iron ore exports. Conversely, not holding iron ore producer Fortescue Metals Group held back returns. Vaccine related news weighed on gold prices, a relative safe haven in volatile markets. The lack of exposure to Newcrest Mining added relative value but gains were partly offset by maintaining a position in gold producer Evolution Mining. Expectations of economic recovery buoyed selected holdings
The position in job listings company SEEK gained amid expectations of opening up of the economy that will be supportive of job listing volumes on its platform. The value rally seen in this period improved sentiment towards Oil Search, which also benefited from improvement in oil prices. Conversely, shares in hospital operator Ramsay Health Care slid following strong performance earlier in the year
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/163762464.pdfNovember, 2020
The Fund delivered strong positive returns but lagged the index over the month. Positive news flows around the development of a COVID-19 vaccine dominated investor sentiment and prompted a rotation into value stocks. Investors were concerned about the growth of businesses that have benefited from pandemic-led demand in a post-vaccine world once conditions normalise. As a result, positions in selected high-conviction holdings in the consumers sectors weighed on returns. These include pizza delivery business Domino’s Pizza Enterprises and supermarket operator Coles Group. Vaccine related news also weighed on gold prices, a relatively safe-haven asset during volatile markets. Consequently, the position in gold producer Evolution Mining detracted from returns. This was partly offset by the lack of exposure to Newcrest Mining. In the real estate sector, Goodman Group held back gains. Investors took profits following its recent strong performance, even as the industrial property manager reported an encouraging operational update for the first quarter of FY21. On a positive note, shares in Suncorp Group, one of Australia’s largest financial services brands, advanced after it reported that the pandemic had a broadly neutral impact on its general insurance portfolio in the first half of FY21. Its management notes that potential business interruption claims and premium waivers have been largely offset by reductions in motor claims. The holding in Mineral Resources gained amid its management’s plans to scale up iron ore exports. The position in job listings company SEEK advanced amid expectations of a swifter than expected global economic recovery once a vaccine is available. An improving economic environment will be supportive of job openings and, ultimately, job listing volumes on SEEK’s platform. Elsewhere, oil and gas exploration and production company Oil Search and power and gas retailer Origin Energy tracked oil prices higher, driven by expectations of a pick-up in demand.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/162519028.pdfOctober, 2020
The strategy delivered positive returns but lagged the index over the month. Shares in selected high-conviction holdings slid following their strong recent performance. These include Suncorp Group, which operates in the general insurance and banking sectors, and hospital operator Ramsay Health Care. Suncorp is expected to benefit from initiatives that will accelerate its digital and data-driven transformation, while Ramsay is well placed for long-term growth. In recent developments, its UK hospitals were allowed to treat private patients again. Elsewhere, holdings in gold producer Evolution Mining and miner BHP Group retreated amid lower than expected quarterly production. On a positive note, selected conviction consumer holdings added value. Domino’s Pizza Enterprises started FY21 on a strong note and reported upbeat sales. Investors also favoured the company’s long-term expansion plans; the company expects to double its current store network by 2033. Shares in supermarket operator Coles rose supported by its encouraging first-quarter update. The company reported robust sales growth, driven largely by consumers’ purchasing in large quantities at its stores in Victoria given lockdown restrictions. Software specialist WiseTech Global’s recent annual report disclosed an increase in revenue, low attrition and reduced dependence on large clients. The pandemic-led market disruptions have increased the need for digitalisation and demand for its supply-chain software platform CargoWise.
File:ticker: FID0008AU
commentary_block: Array
factsheet_url:
https://investmentcentre.moneymanagement.com.au/factsheets/mi/n2q6/fidelity-australian-equities
Title: Fund Performance
release_schedule: Monthly
fund_features:
Fidelity Australian Equity aims to achieve a return (before fees, costs and taxes) that exceeds the S&P/ASX 200 Accumulation Index over a period of five to seven years.
- Invests in the Underlying Fund.
- A core holding which invests in a diversified selection of around 30 – 50 Australian companies.
- Uses a bottom-up stock-selection approach that focuses on undiscovered earnings potential, value and growth.
- Conducts regular company, factory and competitor visits to assess business strength, earnings quality and long-term growth outlook.
manager_contact_details: Array
asset_class: Domestic Equity
asset_category: Australia Large Growth
peer_benchmark: Domestic Equity - Large Growth Index
broad_market_index: ASX Index 200 Index
structure: Managed Fund