October, 2023
Realindex Australian Share Value returned -2.63% (net of fees) during October, outperforming the S&P/ASX 200 benchmark which returned -3.78%.
Value stocks outperformed Growth stocks by 1.2% over the month (S&P Australia BMI Value -3.1% vs. Growth -4.3%). Over the past year, Value has beaten Growth with Value outperforming by 1.4%, but lagged on a five-year basis by 0.4% p.a. providing a longer-term performance headwind.
The Australian stock market fell in October, led by large declines in Growth sectors such as IT and Health Care. Rising bond yields had a negative impact across all sectors, with exception to Utilities. Materials was a relative outperformer falling slightly due to the support of higher commodity prices. With inflation still uncomfortably high, and continued tightness in the labour market, the ‘higher for longer’ narrative is likely to continue. Value stocks were less impacted by interest rate sensitivity as they have a shorter equity duration than Growth stocks.
The fund outperformed significantly over the month (+1.15%) driven by both strong cross-sector allocation alpha and strong stock selection between sectors. In terms of allocation effects, the underweight to Health Care contributed the most to performance while Materials contributed the most in terms of stock selection.
The largest stock level contributor was the overweight to Fortescue Metals Group Ltd and the largest stock level detractor was the overweight to AMP Limited. The portfolio offers a valuation discount to the market-cap benchmark, as measured by price-to-sales (28.7% discount), price-to-cashflow (16.7% discount), and price-to-book (4.5% discount), as well as a dividend yield higher than the benchmark (14.7% premium).
Note: Percentage figures in parenthesis show total return in Australian dollars for the month ending 31 October 2023 unless otherwise noted
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Australian-Share-Value-Class-A-Adviser-Flyer-1-1.pdfAugust, 2023
Realindex Australian Share Value returned -0.89% (net of fees) during August, versus the S&P/ASX 200 benchmark which returned -0.73%.
Value stocks underperformed Growth stocks by 0.6% over the month (S&P Australia BMI Value -0.9% vs. Growth -0.2%). Over the past year, Value has beaten Growth with Value outperforming by 3.9%, while on a five-year basis Value outperformed by 0.8%.
The Australian share market traded marginally lower in August, with large cap resources taking a slightly larger hit than industrials. Overall, the equity market (S&P/ASX 200) traded higher by 3.9% over a 3 month look-back period, while for the year it was up 9.6%. The economy showed resilience, with GDP expanding roughly in line with expectations at 0.4% QoQ for the 3 months to June. However, sluggish growth, weak consumer sentiment and a mixed housing market all remain as significant headwinds. The Reserve Bank of Australia (RBA) left the cash rate unchanged in August at 4.1%, although it hinted at the possibility of future rate hikes. Despite the fact that monthly CPI shows declines, inflation is still significantly higher than the target rate, with the RBA expecting it to take at least to late 2025 to reach normalcy. Sector performance for the month was mixed with strong gains in Consumer Discretionary (+5.7%) and A-REIT (+2.3%) while Utilities (-3.8%) and Consumer Staples (-3.2%) posted negative returns.
Fund performance was marginally lower than the benchmark over the month, largely due to individual stock positioning. Specifically, our underweights to CSL Limited and Goodman Group detracted approximately 13bps each from performance while our underweight to RedMed Inc was our largest stock level contributor. From a sector perspective, the largest detractor was the overweight to Communication Services and the largest contributor was the overweight to Financials. Overall, sector allocation detracted around 7bps over the month, whilst with-in sector stock selection added 20bps of performance.
The portfolio offers a valuation discount to the market-cap benchmark, as measured by price-to-sales (31.2% discount), price-to-cashflow (20.6% discount), and price-to-book (7.5% discount), as well as a dividend yield higher than the benchmark (17.8% premium).
Note: Percentage figures in parenthesis show total return in Australian dollars for the month ending 31 August 2023 unless otherwise noted.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Australian-Share-Value-Class-A-Adviser-Flyer-6.pdfJuly, 2023
Realindex Australian Share Value returned +3.23% (net of fees) during July, outperforming the S&P/ASX 200 benchmark which returned +2.88%.
Value stocks outperformed Growth stocks by 2.8% over the month (S&P Australia BMI Value +4.4% vs. Growth +1.6%). Over the past year, Value has beaten Growth, outperforming by 2.5%, while on a five-year basis Value has beaten growth by 0.2% p.a.
Investor sentiment was markedly more positive during the month as macroeconomic conditions improved both domestically and globally. The latest US inflation read is currently at 3% pa – surprising on the downside, making a soft landing scenario look increasingly possible. In Australia, the labour market remains strong with unemployment at 3.5% in June. Whilst headline inflation hovers at 6%, the Reserve Bank of Australia’s forecast is suggesting 3.25% by the end of 2024. Despite this, consumer sentiment remains pessimistic. However, there are signs of improvement in the housing market with the Reserve Bank of Australia putting a pause on rate hikes. Overall, the Australian share market bounced back in July with Energy (+8.8%) and Financials (+4.9%) leading the way. Lagging sectors included Health Care (-1.5%) and Consumer Staples (-1.0%).
We are pleased that the fund outperformed the benchmark due to the strong relative performance of the value style in July. The fund’s underweight to Health Care and in particular to CSL Limited positively contributed to performance. On the other hand, from a sector and stock perspective, the overweight to Communication Services and Fortescue Metals Group were the largest detractors.
The portfolio offers a valuation discount to the market-cap benchmark, as measured by price-to-sales (31.5% discount), price-to-cashflow (20.3% discount), and price-to-book (6.5% discount), as well as a dividend yield higher than the benchmark (18.4% premium).
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Australian-Share-Value-Class-A-Adviser-Flyer-5.pdfMay, 2023
Realindex Australian Share Value returned -3.56% (net of fees) during May, versus the S&P/ASX 200 benchmark which returned -2.53%.
Value stocks underperformed Growth stocks by 1.5% over the month (S&P Australia BMI Value -3.5% vs. Growth -2.0%). Over the past year, Growth has outperformed Value by 1.4%, while on a five year basis Growth has outperformed Value by 0.5% p.a., providing a longer-term performance headwind.
The RBA continues to maintain its restrictive monetary policy, navigating its narrow path to the 2-3% target range. Growth in the March quarter was lacklustre, with concerns over rising rents' impact on inflation while consumer sentiment declined, particularly among renters. On the other hand, job market confidence remains relatively robust.
Australian markets traded lower over the month with disappointing earnings from major banks, mixed economic data, and a surprise increase in local interest rates. Financials and Materials struggled, while retailers reported a slowdown in sales and a deteriorating near-term outlook. However, the Information Technology sector surged, led by Xero and Life360.
From a sector perspective, the largest detractor was stock selection within Materials in particular Metals and Mining, resulting in an impact of -36bps to performance. Whereas, the largest contributor was the overweight to Consumer Staples and Utilities. The largest stock level detractor was the underweight to CSL Limited which detracted -25bps while the largest stock level contributor was the overweight to Ampol Limited. Overall, fund performance was largely in line with the Value benchmark.
The portfolio offers a valuation discount to the market-cap benchmark, as measured by price-to-sales (35.3% discount), price-to-cashflow (24.5% discount), and price-to-book (9.7% discount), as well as a dividend yield higher than the benchmark (21.9% premium).
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Australian-Share-Value-Class-A-Adviser-Flyer-4.pdfApril, 2023
Realindex Australian Share Value returned +1.25% (net of fees) during April, versus the S&P/ASX 200 benchmark which returned +1.85%.
Value stocks outperformed Growth stocks by 1.7% over the month (S&P Australia BMI Value +2.7% vs. Growth +1.0%). Over the past year, Value performance has been in line with Growth, but lagged on a five-year basis by 0.5% p.a. providing a longer-term performance headwind.
The Australian share market ended the month mildly higher. Information Technology (+4.8%) and Financials (+3.3%) sectors performed well, while the Materials sector fell by 2.6% due to a 16% drop in the iron ore price. Consumer confidence increased in April due to the RBA's decision to pause on an interest rate increase, but confidence remains largely weak. The unemployment rate is 3.5%, and the inflation rate is 7.8% as of March 2023.
The portfolio’s overweight allocation to the Materials sector resulted in a large detraction from performance, from both a sector allocation and stock selection effect. In particular the portfolio’s 2.2% average overweight to Fortescue Metals detracted 20bps of performance, as did the overweight to BHP Group, detracting 8bps. Compounding the poor performance was the portfolio’s underweight to the Health Care sector. More specifically, the underweight allocation to CSL resulted in a 13bps detraction.
On the flip side, the portfolio’s overweight to the Financials sector was positive for performance with the portfolio’s overweight allocation to three of the four big four banks (ANZ, Westpac, NAB) contributing positively to performance.
The portfolio offers a valuation discount to the market-cap benchmark, as measured by price-to-sales (33.7% discount), price-to-cashflow (23.2% discount), and price-to-book (8.8% discount), as well as a dividend yield higher than the benchmark (19.5% premium).
Note: Percentage figures in parenthesis show total return in Australian dollars for the month ending 30 April 2023 unless otherwise noted.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Australian-Share-Value-Class-A-Adviser-Flyer-3.pdfFebruary, 2023
Realindex Australian Share Value returned -2.17% (net of fees) during February, outperforming the S&P/ASX 200 benchmark which returned -2.45%.
Value stocks outperformed Growth stocks by 1.6% over the month (S&P Australia BMI Value -1.9% vs. Growth -3.5%). Over the past year, Value has beaten Growth with Value outperforming by 5.2%, but lagged on a five-year basis by 0.4% p.a. providing a longer-term performance headwind.
February marked a sharp reversal from the gains in January as investors weighed the possibility of stickier inflation and higher bond yields. The labour market softened as unemployment rose marginally to 3.7% while consumer confidence fell by -6.9% according to the Westpac Consumer Confidence Index. The Reserve Bank of Australia’s hawkishness continued in February with a 25bps increase, with further expectations of rate hikes over the months ahead. Retail sales jumped by 1.9% month-on-month for January with volumes still 12% above pre-pandemic levels, whilst house price declines have levelled off. At the sector level, Utilities (+3.4%) and Information Technology (+2.7%) held up, whereas the Materials sector fell (-6.6%), driven largely by Metal and Mining companies.
The fund outperformed for the month, driven by strong stock selection alpha within the Materials sector. In particular, the underweights to Lithium miners paid off (Pilbara +5bps; Allkem +4bps and Core Lithium +2bps). While, the largest detractor was the underweight to Industrials. The largest stock level contributor was the overweight to Helia Group Limited and the largest stock level detractor was the overweight to AMP Limited.
The portfolio offers a valuation discount to the market-cap benchmark, as measured by price-to-sales (33.6% discount), price-to-cashflow (24.3% discount), and price-to-book (11.3% discount), as well as a dividend yield higher than the benchmark (18.7% premium).
Note: Percentage figures in parenthesis show total return in Australian dollars for the month ending 28 February 2023 unless otherwise noted.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Australian-Share-Value-Class-A-Adviser-Flyer-2.pdfJanuary, 2023
Realindex Australian Share Value returned +5.35% (net of fees) during January, versus the S&P/ASX 200 benchmark which returned +6.23%.
Value stocks underperformed Growth stocks by 2.4% over the month (S&P Australia BMI Value +5.2% vs. Growth +7.6%). Over the past year, Value has beaten Growth with Value outperforming by 7.7%, but lagged on a five-year basis by 1.2% p.a. providing a longer-term performance headwind.
The Australian share market had a strong start, posting a +6.2% increase for January. This growth was largely due to the positive outlook on China's reopening. While investors hoped for inflation to remain contained, stronger than expected CPI print (+8.4% year-on-year to December) by the Australian Bureau of Statistics dashed any hopes for a pause in the Reserve Bank of Australia’s rate hikes. Our markets largely mirrored US equities which also rallied in January on the back of positive investor sentiment, easing labour costs and cooling inflation.
Most sectors rose over the month with Consumer Discretionary (+9.9%), Materials (+8.9%) and REITs (+8.1%) leading the pack while, Utilities fell by -3.0%.
Value struggled throughout the month, with selection alpha detracting from performance across most sectors. From a sector perspective, the largest contributor was the underweight to Health Care and the largest detractor was the overweight to Financials.
Our overweights to Australia and New Zealand Banking Group and Whitehaven Coal and was a performance drag detracting 0.25%, this was cushioned by our underweight to CSL which added 0.15%. Lithium miner Pilbara rallied 26.7% over the month, which further detracted 0.10% to performance, whilst our overweight to Incitec Pivot also detracted 0.10%.
The portfolio offers a valuation discount to the market-cap benchmark, as measured by price-to-sales (32.2% discount), price-to-cashflow (25.3% discount), and price-to-book (13.5% discount), as well as a dividend yield higher than the benchmark (19.2% premium).
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Australian-Share-Value-Class-A-Adviser-Flyer-1.pdfNovember, 2022
Realindex Australian Share Value returned +7.23% (net of fees) during November, outperforming the S&P/ASX 200 benchmark which returned +6.58%.
Value stocks underperformed Growth stocks by 2.2% over the month (S&P Australia BMI Value +4.6% vs. Growth +6.8%). Over the past year, Value has beaten Growth with Value outperforming by 14.2%, but lagged on a five-year basis by 0.6% p.a. providing a longer-term performance headwind.
The Australian share market continued to rally in November resulting in a 6.0% increase over a 3 month horizon. Inflation has shown signs of easing, with the Australian Bureau of Statistics showing a slowdown in CPI from 7.3% to 6.9% in the twelve months to October. Housing, food and transport exhibited the greatest price movements. This was also reflected globally, with inflation stabilizing in the US and Eurozone. During the month, all sectors posted positive performance; we saw strong performance in Utilities (+20.9%) and Materials (+16.3%) and weaker performance in Communication Services (+2.1%).
From a sector perspective, the largest contributor by far was the overweight to Materials and the largest detractor was the overweight to Consumer Staples. Specifically, stock selection within Metals and Mining contributed positively to the fund’s performance by 0.54%. The largest stock level contributor was the overweight to Origin Energy Limited, which contributed 0.35%, and the largest stock level detractor was the overweight to Elders Limited.
The portfolio offers a valuation discount to the market-cap benchmark, as measured by price-to-sales (33.6% discount), price-to-cashflow (25.7% discount), and price-to-book (16.0% discount), as well as a dividend yield higher than the benchmark (21.3% premium).
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Australian-Share-Value-Class-A-Adviser-Flyer.pdfOctober, 2022
The Realindex Australian Shares Fund returned +5.57% (net of fees) during October, versus the S&P/ASX 200 benchmark which returned +6.04%.
Value stocks outperformed Growth stocks by 4.8% over the month (S&P Australia BMI Value +8.2% vs. Growth +3.4%). Over the past year, Value has beaten Growth with Value outperforming by 11.8%, but lagged on a five-year basis by 0.5% p.a. providing a longer-term performance headwind.
The Australian share market rebounded in October after falling significantly in September, and remains largely flat over a 3 month horizon. Inflation continues to be a problem, with the September quarter headline number at 7.3%. Due to this, the Reserve Bank of Australia continues to tighten policy, albeit at lower 25bps increments. Consumer confidence continues to be muted and the property market remains downbeat due to rate hikes. During the month, we saw strong rebound performance by Financials (+12.2%), REITs (+9.9%) and the continued performance by Energy (+9.5%). On the other hand, Consumer Staples (-0.2%) and Materials (-0.1%) performed largely flat.
From a sector perspective, the largest detractor was the overweight to Materials and the largest contributor was the underweight to Health Care. Specifically, stock selection was a headwind within the Materials sector with the overweight to Fortescue Metals Group Ltd being the largest stock level detractor, detracting -31bps. The largest stock level contributor was the underweight to CSL Limited.
The portfolio offers a valuation discount to the market-cap benchmark, as measured by price-to-sales (32.5% discount), price-to-cashflow (25.6% discount), and price-to-book (17.9% discount), as well as a dividend yield higher than the benchmark (22.4% premium). Note: Percentage figures in parenthesis show total return in Australian dollars for the month ending 31 October 2022 unless otherwise noted.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Australian-Share-Fund-Class-A-Adviser-Flyer-15.pdfSeptember, 2022
The Realindex Australian Shares Fund returned +0.57% (net of fees) during the September quarter, outperforming the S&P/ASX 200 benchmark which returned +0.39%.
Value stocks underperformed Growth stocks by 0.6% over the quarter (S&P Australia BMI Value +0.3% vs. Growth +0.9%). Over the past year, Value has beaten Growth with Value outperforming by 5.7%, but lagged on a five-year basis by 1.8% p.a. providing a longer-term performance headwind.
The Australian share market had a choppy ride as gains earlier in the quarter were largely wiped out in the month of September, with the ASX 200 falling by 6.2%. Small Ordinaries had a tougher time, falling by 11.2%. Annualised year-on-year inflation hovered at 6.8% for August, with local businesses experiencing cost pressures. In response to inflationary concerns, the Reserve Bank of Australia raised the cash rate by 50bps in September and most recently by 25bps in early October to 2.6%. Whilst the labour market remains tight, we are also beginning to see some weakness with the August unemployment rate at 3.5% (a +0.1% increase from July). Consumer confidence continues to be muted and the property market remains downbeat due to rate hikes.
The weak domestic market was also in part driven by international peers, with US inflation remaining higher than expected. Inflation in Europe quickened in September to an annualized rate of 10% on the back of further energy supply disruptions and the alleged sabotage of the Nordstream pipelines. Markets were also rattled by the UK fiscal update with the Pound to Dollar exchange rate sliding to 1.05. China’s insistence on its zero-COVID policy continues to be a headwind, although we are beginning to see some government stimulus. During the quarter, we saw strong performance by Energy (+5.9%) while Utilities (-12.5%), REITs (-6.7%) and Industrials (-5.5%), all posted heavy losses. The month of September was particularly volatile, with REITs falling by -13.6% on the back of continued rate hikes and a weakening housing market.
From a sector perspective, the largest contributor was the overweight to Energy and the largest detractor was the overweight to Materials. The largest stock level contributor was the overweight to Whitehaven Coal Limited and the largest stock level detractor was the underweight to CSL Limited.
The portfolio offers a valuation discount to the market-cap benchmark, as measured by price-to-sales (35.2% discount), price-to-cashflow (28.6% discount), and price-to-book (16.8% discount), as well as a dividend yield higher than the benchmark (20.7% premium)
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Australian-Share-Fund-Class-A-Adviser-Quarterly-2.pdfAugust, 2022
The Realindex Australian Shares Fund returned +1.62% (net of fees) during August, outperforming the S&P/ASX 200 benchmark which returned +1.18%.
Value stocks underperformed Growth stocks by 2.0% over the month (S&P Australia BMI Value +0.5% vs. Growth +2.5%). Over the past year, Value has beaten Growth with Value outperforming by 8.7%, but lagged on a five-year basis by 1.8% p.a. providing a longer-term performance headwind.
The Australian share market made some modest gains in August, against a challenging macroeconomic backdrop. The RBA continues to tighten, with a 50bps hike in August and several more hikes being anticipated. The Labour market in Australia is beginning to show weakness with job ads being negative for the first time this calendar year. Consumer confidence has continued to fall, and is now barely above COVID lockdown 2020 levels. Globally, we continue to see concerns around supply-side driven inflation, subsequent policy hiking and a contracting US economy. Inflation in Europe also remains heightened with 1 month baseload power futures surging in August.
During the month, resources outperformed relative to Industrials, with the Materials (+4.4%) and Energy (+7.8%) sector rallying significantly over the month. The IT sector has remained largely flat and REITs struggled on the back of continued rate hikes by the RBA and a weakening housing market.
From a sector perspective, the largest contributor was the overweight to Energy and the largest detractor was the overweight to Materials. The largest stock level contributor was the overweight to Whitehaven Coal Limited and the largest stock level detractor was the exclusion of OZ Minerals Limited.
The portfolio offers a valuation discount to the market-cap benchmark, as measured by price-to-sales (36.5% discount), price-to-cashflow (24.6% discount), and price-to-book (15.5% discount), as well as a dividend yield higher than the benchmark (17.2% premium). Note: Percentage figures in parenthesis show total return in Australian dollars for the month ending 31 August 2022 unless otherwise noted.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Australian-Share-Fund-Class-A-Adviser-Flyer-14.pdfJuly, 2022
The Realindex Australian Shares Fund returned +4.55% (net of fees) during July, versus the S&P/ASX 200 benchmark which returned +5.75%.
Value stocks outperformed Growth stocks by 2.2% over the quarter (S&P Australia BMI Value -11.7% vs. Growth -13.9%). Over the past year, Value has beaten Growth with Value outperforming by 5.5%, but lagged on a five-year basis by 1.4% p.a., providing a longer-term performance headwind.
The Australian share market finished the quarter lower due to declining investor confidence along with increasing macro headwinds. Inflation and the reserve bank’s policy response remained at the centre of investor concerns. The RBA raised the cash rate by 50bps to 1.35% in July, which followed 50bps in June and 25bps in May. The board argued monetary stimulus was no longer needed due to the strength of the economy and labour market coupled with inflationary pressures. During the quarter, we also saw a Labor Party win in the Australian Federal election, with Anthony Albanese elected into power. However, the market response to this has been negligible. The macro environment globally continued to be concerning with several head winds. The war in Ukraine sees no viable resolution and the continued surge in energy and commodities prices in the second quarter of this year has hampered sentiment. Moreover, we have not seen China’s zero-Covid policy change materially over the last couple of months, and this has continued to have an impact on global supply chains. Overall, we saw significant rise of inflation rates in developed markets and consequently aggressive cash rate hikes. Similar to Australia, the US labour market saw strength with low unemployment rates (steady at 3.6%) and strong hiring and wage growth. These factors suggest we are in late cycle.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Australian-Share-Fund-Class-A-Adviser-Flyer-13.pdfJune, 2022
The Realindex Australian Shares Fund returned -10.86% (net of fees) during the June quarter, outperforming the S&P/ASX 200 benchmark which returned - 11.90%.
Value stocks outperformed Growth stocks by 2.2% over the quarter (S&P Australia BMI Value -11.7% vs. Growth -13.9%). Over the past year, Value has beaten Growth with Value outperforming by 5.5%, but lagged on a five-year basis by 1.4% p.a., providing a longer-term performance headwind.
The Australian share market finished the quarter lower due to declining investor confidence along with increasing macro headwinds. Inflation and the reserve bank’s policy response remained at the centre of investor concerns. The RBA raised the cash rate by 50bps to 1.35% in July, which followed 50bps in June and 25bps in May. The board argued monetary stimulus was no longer needed due to the strength of the economy and labour market coupled with inflationary pressures.
During the quarter, we also saw a Labor Party win in the Australian Federal election, with Anthony Albanese elected into power. However, the market response to this has been negligible. The macro environment globally continued to be concerning with several head winds. The war in Ukraine sees no viable resolution and the continued surge in energy and commodities prices in the second quarter of this year has hampered sentiment. Moreover, we have not seen China’s zero-covid policy change materially over the last couple of months, and this has continued to have an impact on global supply chains. Overall, we saw significant rise of inflation rates in developed markets and consequently aggressive cash rate hikes. Similar to Australia, the US labour market saw strength with low unemployment rates (steady at 3.6%) and strong hiring and wage growth. These factors suggest we are in late cycle. During the quarter, smaller capitalization names fared worse, declining almost twice as much as large cap names in Australia. Large cap value names with high book-to-market and dividend yields performed well on a relative basis. Momentum and low volatility also showed strong factor performance, whilst Growth and high beta stocks underperformed. Overall, in a late cycle, stability, earnings certainty, and value is preferred over Growth. Within the ASX 200 index, IT was the worst performing sector, declining -27.2% during the quarter. REITs also struggled in a rising interest rate environment falling -17.7% (-10.3% in June alone). Only the Energy and Utilities sector yielded positive returns for that quarter at +1.5% and +1.7% respectively.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Australian-Share-Fund-Class-A-Adviser-Quarterly-1.pdfMay, 2022
The Realindex Australian Shares Fund returned -2.52% (net of fees) during May, outperforming the S&P/ASX 200 benchmark which returned -2.60%. Value stocks outperformed Growth stocks by 3.8% over the month (S&P Australia BMI Value +0.7% vs. Growth -3.1%). Over the past year, Value has beaten Growth with Value outperforming by 6.8%, but lagged on a five-year basis by 2.2% p.a., providing a longer-term performance headwind. April saw the continuation of major themes exhibited in March. Overall, global markets traded lower on the back of greater uncertainty. The Australian market followed suit, trading lower over the month. Key themes driving market uncertainty were: i) persistent inflationary pressures, particularly in the US and Europe; ii) subsequent central bank monetary tightening along with market expectations of an aggressive rate hike trajectory; and iii) supply chain disruptions from both the Ukraine War and Chinese lockdowns.
Australian CPI rose 2.1% quarter on quarter (QoQ) and 5.1% year on year (YoY) in Q1. Whilst this was lower than inflation prints in the US, it still surprised the local market being well above expectations. Price increases for non-discretionary items such as food and petrol contributed to unexpected inflation, as did new dwelling purchases prices and childcare costs. The RBA rate hike at the May Board meeting was largely anticipated by investors in April, with expectations of further hikes later this year. There are some concerns that rates hikes will have an outsized effect versus history given higher household debt levels.
We saw a slight reversal in Resources over the month with ASX 200 Resources falling 4.2%. Similar to other developed markets, we continued to see significant sector dispersion in April. IT continued to underperform falling an additional -10.4%. On the other hand, Utilities rose +9.3% and Energy +2.5% for the month
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Australian-Share-Fund-Class-A-Individual-Flyer.pdfApril, 2022
The Realindex Australian Shares Fund returned +0.25% (net of fees) during April, outperforming the S&P/ASX 200 benchmark which returned -0.85%. Value stocks outperformed Growth stocks by 3.8% over the month (S&P Australia BMI Value +0.7% vs. Growth -3.1%). Over the past year, Value has beaten Growth with Value outperforming by 6.8%, but lagged on a five-year basis by 2.2% p.a., providing a longer-term performance headwind. April saw the continuation of major themes exhibited in March. Overall, global markets traded lower on the back of greater uncertainty.
The Australian market followed suit, trading lower over the month. Key themes driving market uncertainty were: i) persistent inflationary pressures, particularly in the US and Europe;ii) subsequent central bank monetary tightening along with market expectations of an aggressive rate hike trajectory; and iii) supply chain disruptions fromboth the Ukraine War and Chinese lockdowns.
Australian CPI rose 2.1% QoQ and 5.1% YoY in Q1. Whilst this was lower than inflation prints in the US, it still surprised the local market being well above expectations. Price increases for non-discretionary items such as food and petrol contributed to unexpected inflation, as did new dwelling purchases prices and childcare costs. The RBA rate hike at the May Board meeting was largely anticipated by investors in April, with expectations of further hikes later this year.
There are some concerns that rates hikes will have an outsized effect versus history given higher household debt levels. We saw a slight reversal in Resources over the month with ASX 200 Resources falling 4.2%. Similar to other developed markets, we continued to see significant sector dispersion in April. IT continued to underperform falling an additional -10.4%. On the other hand, Utilities rose +9.3% and Energy +2.5% for the month.
From a sector perspective, the largest contributor was the underweight to Information Technology and the largest detractor was the underweight to Health Care. The largest stock level contributor was the underweight to Block, Inc. and the largest stock level detractor was the underweight to CSL Limited. The portfolio offers a valuation discount to the market-cap benchmark, as measured by price-to-sales (33.0% discount), price-to-cashflow (25.1% discount), and price-to-book (15.9% discount), as well as a dividend yield higher than the benchmark (19.0% premium)
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Australian-Share-Fund-Class-A-Adviser-Flyer-12.pdfFebruary, 2022
The Realindex Australian Shares Fund returned +3.89% (net of fees) during February, outperforming the S&P/ASX 200 benchmark which returned +2.14%. Value stocks outperformed Growth stocks by 3.7% over the month (S&P Australia BMI Value +4.1% vs. Growth +0.4%). Over the past year, Value has beaten.
Growth, outperforming by 1.7%, but lagged on a five-year basis by 3.1% p.a., providing a longer-term performance headwind. Multiple themes affected markets and investors in February and the year more broadly. With inflationary pressures continuing, there was a clear shift by central banks positioning themselves towards controlling inflation and away from economic stimulus. The direction of future policy however has been made more uncertain by Russia’s recent invasion of Ukraine. The economic sanctions governments around the world have imposed on Russia, including a freeze of the global payments system into and out of Russia, have increased the risk of an economic downturn. A flattening yield curve and an emerging crisis over oil and gas supplies have heightened fears of a global recession. The result of these events was a sell-off in global equities and a spike in equity volatility. The Australian equity market was one of the few markets to post positive returns when global markets (MSCI ACWI) sold off over 5% in AUD terms. As fears of an economic downturn gave way to managing the risks of a spike in energy and commodity prices more broadly, the cyclically oriented Value sectors.
outperformed Growth-oriented sectors. The resources sector was the main leader in the market with ASX 200 Energy posting over 8.6%; Consumer Staples (+5.6%) and Materials (+5.2%) were also strong performers. The Information Technology (-6.6%) and Consumer Discretionary (-5.0%) sectors were the main underperformers.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Australian-Share-Fund-Class-A-Adviser-Flyer-11.pdfJanuary, 2022
The Realindex Australian Shares Fund returned -4.08% (net of fees) during January, outperforming the S&P/ASX 200 benchmark which returned -6.35%. Value stocks outperformed Growth stocks by 3.3% over the month (S&P Australia BMI Value -4.9% vs. Growth -8.3%). Over the past year, Value has beaten Growth, outperforming by 2.8%, but lagged on a five-year basis by 3.4% p.a., providing a significant longer-term performance headwind. Global equity markets braced for a volatile start in 2022 driven by concerns around tighter Central Bank policy in the US. The growing tensions between Russia and Ukraine and disappointing earnings calls from major US firms also added to global market uncertainty. The result was a large sell off in equity markets that the Australian market was not immune from.
Resource rich economies befitted from the prevailing environment; Australian resources were one of the few pockets of the market which performed during this period. The S&P ASX 200 Energy index returned 7.9%, while IT, Health Care and the consumer sectors all significantly underperformed. Small Caps also underperformed larger companies as investors sought refuge in lower risk, value oriented names; the ASX 100 posting a 6.1% loss for the month versus the ASX Small Ordinaries with posted a 9.0% loss for the month. Materials was the largest contributor for the month driven by the portfolio’s stock selection in Metals and Mining, mainly from its overweight position in BHP (+11.7%).
The portfolio’s underweight to IT which as a sector underperformed in January amidst the global tech sell off, contributed to performance, with the underweight to Afterpay (-19.9%) being a key driver. Most sectors contributed to performance mainly driven by stock selection effects. The main detractor from a sector perspective was the overweight allocation to Consumer Staples. From a style perspective, relative value was rewarded in the market, but so too, low risk stocks as measured by their historical price volatility. Most other styles including momentum and other dimensions of firm quality were shunned by investors.
The portfolio offers a valuation discount to the market-cap benchmark, as measured by price-to-sales (35.7% discount), price-to-cashflow (28.3% discount), and price-to-book (22.5% discount), as well as a dividend yield higher than the benchmark (18.3% premium).
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Australian-Share-Fund-Class-A-Adviser-Flyer-10.pdfDecember, 2021
The Realindex Australian Shares Fund returned +1.64% (net of fees) during the December quarter, versus the S&P/ASX 200 benchmark which returned +2.09%. Value stocks underperformed Growth stocks by 3.2% over the quarter (S&P Australia BMI Value +0.6% vs. Growth +3.8%). This however was driven by the first two months of the quarter as value experienced a strong rebound in December outperforming growth for the month by +1.93% (S&P Australia BMI Value +3.8% vs. Growth +1.9%).
Financials was the largest detractor for the quarter driven by the portfolio’s net overweight to banks, mainly its position in Westpac (-15.7%). Whilst the stock (along with the other banks) outperformed in December this was not sufficient to recover from November’s losses. Stock selection within Materials also detracted from relative performance. This came from very large returns in mid-sized companies not held by the portfolio including Chalice Mining (+50.4%) and lithium producers Lynas (+51.6%), Pilbara Mines (+56.1%) and Allkem (recent changed name from Orocobre (+19.7%).
Despite the outperformance of growth over value, there was a large range in returns amongst growth stocks. The largest stock contributor by far came from not holding Afterpay (-31.6%) whilst underweights to Aristocrat (-6.3%) and CSL (-0.9%) added to relative performance. Other contributors were largely stock specific and included overweights to Fortescue Metals (+28.4%), South32 (+13.6%) and Seven West Media (+59.3%). The portfolio offers a valuation discount to the market-cap benchmark, as measured by price-to-sales (40.9% discount), price-to-cashflow (25.3% discount), and price-to-book (25.9% discount), as well as a dividend yield higher than the benchmark (22.1% premium).
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Australian-Share-Fund-Class-A-Adviser-Quarterly.pdfNovember, 2021
The Realindex Australian Shares Fund returned -1.32% (net of fees) during November, versus the S&P/ASX 200 benchmark which returned -0.54%. Value stocks underperformed Growth stocks by 1.5% over the month (S&P Australia BMI Value +0.0% vs. Growth +1.5%).
Over the past year, Value has done well, outperforming Growth by 11.6%, but lagged on a five year basis by 3.0% p.a., providing a longer-term performance headwind. Underperformance was largely driven by the underweight positioning in large cap growth stocks namely CSL (+2.4%), Xero (+7.6%) and Macquarie Group (+8.7%). However not all growth stocks did well - an underweight in Dominos Pizza (-15.6%) and not holding the small company Points Bet (-19.1%) and EML Payments (-24.2%) helped to offset some of the losses. From a sector perspective, the largest detractor was Materials. This largely came from an overweight to Fortescue Metals (-6.9%) which struggled as iron ore fell another -9.5% (taking its three month collapse to over -50%). The underweight to gold stocks also detracted after gold rose +1.5%, driven by underweights to Newcrest (+9.9%) and Northern Star (+8.7%). The contributors were largely stock specific. The largest contributor was an underweight to Transurban (-5.1%) whilst overweights to Dicker Data (+18.9%), Seven West Media (+12.4%) and JB HiFi (+10.9%) also added value. The portfolio offers a valuation discount to the market-cap benchmark, as measured by price-to-sales (38.2% discount), price-to-cashflow (21.9% discount), and price-to-book (27.4% discount), as well as a dividend yield higher than the benchmark (21.9% premium). Note: Percentage figures in parenthesis show total return in Australian dollars for the month ending 30 November 2021 unless otherwise noted.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Australian-Share-Fund-Class-A-Adviser-Flyer-9.pdfOctober, 2021
The Realindex Australian Shares Fund returned -0.79% (net of fees) during October, versus the S&P/ASX 200 benchmark which returned -0.10%. Value stocks underperformed Growth stocks by 1.5% over the month (S&P Australia BMI Value +0.0% vs. Growth +1.5%). Over the past year, Value has done well, outperforming Growth by 11.6%, but lagged on a five year basis by 3.0% p.a., providing a longer-term performance headwind. Underperformance was largely driven by the underweight positioning in large cap growth stocks namely CSL (+2.4%), Xero (+7.6%) and Macquarie Group (+8.7%). However not all growth stocks did well - an underweight in Dominos Pizza (-15.6%) and not holding the small company Points Bet (-19.1%) and EML Payments (-24.2%) helped to offset some of the losses.
From a sector perspective, the largest detractor was Materials. This largely came from an overweight to Fortescue Metals (-6.9%) which struggled as iron ore fell another -9.5% (taking its three month collapse to over -50%). The underweight to gold stocks also detracted after gold rose +1.5%, driven by underweights to Newcrest (+9.9%) and Northern Star (+8.7%).The contributors were largely stock specific. The largest contributor was an underweight to Transurban (-5.1%) whilst overweights to Dicker Data (+18.9%), Seven West Media (+12.4%) and JB HiFi (+10.9%) also added value.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Australian-Share-Fund-Class-A-Adviser-Flyer-7.pdfAugust, 2021
The Realindex Australian Shares Fund returned +1.34% (net of fees) during August, versus the S&P/ASX 200 benchmark which returned +2.50%. Value stocks underperformed Growth stocks by 1.9% over the month (S&P Australia BMI Value +1.8% vs. Growth +3.7%). Over the past year, the magnitude of the Value tailwind has been considerable, with Value versus Growth outperforming by 8.4%. However, on a five year basis Value has underperformed Growth by 2.6% p.a., providing a longer-term performance headwind.
The largest detractor came from not holding Afterpay (+39.2%) which surged after receiving a takeover offer by US tech company Square. At $39 billion it is the largest company buyout in Australian history.The underweight to the Healthcare sector also detracted. This was largely driven by CSL (+8.0%, the portfolio’s largest underweight), in addition to smaller caps not held including Clinuval (+37.7%), Nanosonics (+24.9%) and Pro Medicus (+9.5%). Iron ore fell 31.7% wiping out almost all of 2021’s gains. This affected miners Fortescue Metals (-15.7%), Grange Resources (-26.6%) and Mt Gibson (-29.1%), all of which are held as overweight positions in the portfolio.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Australian-Share-Fund-Class-A-Adviser-Flyer-6.pdfJuly, 2021
The Realindex Australian Shares Fund returned +0.85% (net of fees) during July, versus the S&P/ASX 200 benchmark which returned +1.10%. Value stocks underperformed Growth stocks by 2.0% over the month (S&P Australia BMI Value +0.5% vs. Growth +2.5%). Over the past year, the magnitude of the Value tailwind has been considerable, with Value versus Growth outperforming by 11.0%. However, on a five year basis Value has underperformed Growth by 1.8% p.a., providing a longer-term performance headwind.
From a sector perspective, the largest detractor was the portfolio’s net overweight to banks specifically Westpac (-5.0%), ANZ (-1.6%) and NAB (-1.1%). The overweight to Utilities was also negative for the portfolio with AGL (-11.8%) and Origin Energy (-8.9%) detracting from relative performance. The largest sector contribution came from the underweight to Information Technology largely driven by not holding Afterpay (-18.8%) and supplemented by also not holding smaller companies Appen (-17.7%), Megaport (-8.1%) or Altium (-6.5%). Corporate activity continued to be strong with several takeover offers occurring during the month. Amongst the most impactful to the portfolio were an underweight to Sydney Airport (+34.9%, the largest stock level detractor) and a sizeable position in non-benchmark name Australian Pharmaceutical Industries (+26.5%).
The portfolio offers a valuation discount to the market-cap benchmark, as measured by price-to-sales (33.6% discount), price-to-cashflow (17.9% discount), and price-to-book (22.0% discount), as well as a dividend yield higher than the benchmark (19.8% premium). Note: Percentage figures in parenthesis show total return in Australian dollars for the month ending 31 July 2021 unless otherwise noted.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Australian-Share-Fund-Class-A-Adviser-Flyer-5.pdfMay, 2021
The Realindex Australian Shares Fund returned +2.63% (net of fees) during May, outperforming the S&P/ASX 200 benchmark which returned +2.34%. Value stocks outperformed Growth stocks by 0.6% over the month (S&P Australia BMI Value +2.8% vs. Growth +2.1%). Over the past year, Value outperformed Growth by 16.4%, and on a five year basis underperformed by 0.8% p.a. The portfolio’s underweight allocation to the weak Information Technology sector was by far the biggest contributor to performance. This came from stocks not held in the portfolio, led by Afterpay (-21.4%, by far the largest stock level contributor for the month) and supplemented by smaller stocks including EML Payments (-41.9%) and Nuix (-33.1%).
The portfolio’s overweight allocation to Financials was also positive driven by the portfolio’s net overweight to banks, specifically Westpac (+8.2%), whilst overweights to insurance companies QBE (+11.1%) and Suncorp (+5.8%) also added value. Stock selection within Materials was the largest sector detractor coming largely from the underweight exposure to gold stocks (after the base commodity gained over 8% over the month). In addition iron ore stocks were weaker (after extremely strong returns for an extended period of time) with overweights to Fortescue (-0.7%) and Mt Gibson (-7.0%) detracting.
The largest stock level detractor was the underweight to CSL (+7.0%) which was stronger after underperforming for much of the past year. On the positive side underweights to A2 Milk (-23.5%) and Transurban (-2.0%) added to relative performance. The portfolio offers a valuation discount to the market-cap benchmark, as measured by price-to-sales (30.5% discount), price-to-cashflow (15.6% discount), and price-to-book (22.8% discount), as well as a dividend yield higher than the benchmark (17.2% premium).
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Australian-Share-Fund-Class-A-Adviser-Flyer-4.pdfApril, 2021
The Realindex Australian Shares Fund returned +2.81% (net of fees) during April, versus the S&P/ASX 200 benchmark which returned +3.47%. The value rally took a breather during April with value stocks underperforming Growth by 2.8% over the month (S&P Australia BMI Value +2.6% vs. Growth +5.4%). However over the past year, Value has still outperformed by 17.3%, and on a five year basis by 1.7% p.a.
At the sector level the largest detractor to performance was the underweight allocation to Information Technology (+9.7%). This was largely driven by not holding Afterpay (+15.9%, the largest stock level detractor and accounting for a quarter of the underperformance) which bounced after being heavily sold off since mid-February. Also detracting was an underweight to Xero (+11.9%) and not holding smaller cap growth names including Megaport (+29.7%), EML Payments (+16.5%) or Altium (+12.0%).
The communications sector also detracted, driven by an overweight to Telstra (-0.3%) and underweights to internet “growth” stocks REA Group (+11.7%), Carsales.com (+11.7%) and Seek (+8.6%).
Stock selection within Materials was the only significant contributor to performance led by overweights to Fortescue Metals (+13.0%), Mt Gibson Mining (+21.7%) and Grange Resources (+18.7%) which were all stronger after iron ore rallied over 10%. In addition not holding Lynas (-10.7%) added value as the stock retreated after its promotion from the Small Ordinaries to the S&P/ASX 100. At the stock level overweights to AGL Energy (-7.5%) and Qantas (-8.0%) detracted whilst an overweight to Accent Group (+30.7%) and a large underweight to A2 Milk (-7.8%) were amongst the largest contributors.
The portfolio offers a valuation discount to the market-cap benchmark, as measured by price-to-sales (31.4% discount), price-to-cashflow (16.4% discount), and price-to-book (22.9% discount), as well as a dividend yield higher than the benchmark (14.5% premium).
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Australian-Share-Fund-Class-A-Adviser-Flyer-3.pdfFebruary, 2021
The Realindex Australian Shares Fund returned +2.59% (net of fees) during February, outperforming the S&P/ASX 200 benchmark which returned +1.45%. Value stocks again outperformed Growth stocks by 4.7% over the month (S&P Australia BMI Value +4.1% vs. Growth -0.6%). Over the past year Value is now ahead of Growth by 1.6%, much of this occurring since the rotation into value that began in mid November 2020. At the sector lever, the portfolio’s overweight allocation to Financials was the largest contributor. This largely came from the portfolio’s net overweight to banks, specifically Westpac (+12.7%), ANZ (+10.4%) and NAB (+4.7%).
After detracting for much of the past year a large contributor to relative performance came from not holding Afterpay (-11.5%) which had a volatile month, reaching an all-time high of $160.05 before being aggressively sold off in the last week of the month. Also at the stock level the portfolio’s large underweight to CSL (-3.4%, the largest underweight position) was the largest contributor to relative performance. Also adding value was the portfolio’s net underweight exposure to gold stocks (after the commodity fell -6.6%), including Northern Star (-20.5%) and Evolution Mining (-11.2%).
The only significant detractor came from the portfolio’s overweight to utilities including AGL (-14.8%) and New Zealand power companies Meridian Energy (- 20.6%) and Mercury (-15.3%).
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Australian-Share-Fund-Class-A-Adviser-Flyer-2.pdfJanuary, 2021
The Realindex Australian Shares Fund returned +0.75% (net of fees) during January, outperforming the S&P/ASX 200 benchmark which returned +0.31%. Value stocks outperformed Growth stocks by 2.0% over the month (S&P Australia BMI Value +1.5% vs. Growth -0.5%). Over the past year, the magnitude of the Value headwind has been considerable, with Value versus Growth underperforming by 5.3%, and on a five year basis by 1.7% p.a., providing a significant longer-term performance headwind.
From a sector perspective, the portfolio’s overweight allocation to the Financials sector was the largest contributor. This largely came from the portfolio’s net overweight to banks, specifically overweights to Westpac (+9.0%), ANZ (+4.4%) and NAB (+4.2%). After detracting over recent times, the underweight to Healthcare was a large value add to relative performance. This was largely driven by the portfolio’s large underweight to CSL (-4.0%) and supplemented by not holding small caps PolyNovo (-32.2%) and Nanosonics (-14.8%). Travel related stocks were weaker as more contagious strains of Covid spread overseas. Overweights to Air New Zealand (-11.1%) and Qantas (-7.2%) hurt performance but these were slightly offset by underweights to Flight Centre (-11.2%), Sydney Airport (-10.8%) and Corporate Travel (-4.9%) and not holding Webjet (-5.7%).
By far the largest detractor came from not holding Afterpay (+14.5%) which again reached an all-time high, becoming the 14th largest company in the Australian market (bigger than established names such as Coles, Woodside and Brambles). Also detracting was not holding Afterpay rival ZipPay (+37.4%). On valuations these returns continue to look extreme for companies that are not expected to make a profit for at least the next 3 years. The portfolio offers a valuation discount to the market-cap benchmark, as measured by price-to-sales (29.2% discount), price-to-cashflow (18.4% discount), and price-to-book (11.4% discount), as well as a dividend yield higher than the benchmark (12.0% premium).
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Australian-Share-Fund-Class-A-Adviser-Flyer-1-1.pdfDecember, 2020
The Realindex Australian Shares Fund returned +17.88% (net of fees) during the December quarter, outperforming the S&P/ASX 200 benchmark which returned +13.70%. Whilst the market returns were positive in each of the three months nearly all the return came in November when the Australian market delivered its best month in over 30 years (S&P/ASX 200 +10.2%). Within this strong market was a prominent rotation into Value and domestic cyclical stocks. As a result Value stocks strongly outperformed Growth stocks by 8.3% over the quarter (S&P Australia BMI Value +18.8% vs. Growth +10.4%).
The portfolio has been positioned in value companies with solid fundamentals that have been neglected or lagged in the strong growth-oriented market of recent times. Whilst uncomfortable, we have often said that it is prudent to be patient as there is typically very little warning when thematics reverse - the rotation into value mid-quarter was one of these moments. After detracting over recent times, the underweight to Healthcare was the standout performer at the sector level. This was largely driven by the portfolio’s large underweight to CSL (-1.3%) and was supplemented by a large bounce in beaten up value stocks in the aged care industry including Japara (+59.0%), Regis Healthcare (+81.7%) and Estia (+21.7%). The portfolio’s overweight allocation to the Financials sector was also a large contributor to relative performance. This largely came from the portfolio’s net overweight to banks, specifically overweights to ANZ (+34.2%) and NAB (+29.1%). Materials also added value with the portfolio’s large underweight to gold stocks adding to performance (although gold was only down -0.4% for the quarter), including Newcrest Mining (-17.5%) and St Barbara (-20.8%). The large overweight to Fortescue (+43.7%) was a large contributor as the stock continued to set all time price highs as the Iron Ore price surged (+28.6% over the quarter). The only significant sector level detractor was the portfolio’s underweight to Information Technology. This mostly came from not holding Afterpay (+47.5%) which again reached an all time high, becoming the 14th largest company in the Australian market (bigger than established names such as Coles, Woodside and Brambles).
On valuations these numbers seem extreme for a company that is not expecting to make a profit for at least the next 3 years. The portfolio offers a valuation discount to the market-cap benchmark, as measured by price-to-sales (30.8% discount), price-to-cashflow (19.5% discount), and price-to-book (11.8% discount), as well as a dividend yield higher than the benchmark (12.5% premium).
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Australian-Share-Fund-Class-A-Individual-Quarterly.pdfNovember, 2020
The Realindex Australian Shares Fund returned +13.15% (net of fees) during November, outperforming the S&P/ASX 200 benchmark which returned +10.21%.
The Australian market delivered its best month in over 30 years with a prominent rotation into value and domestic cyclical stocks. As a result Value stocks strongly outperformed Growth stocks by 8.3% over the month (S&P Australia BMI Value +14.7% vs. Growth +6.5%).
The portfolio has been positioned in companies with solid fundamentals that have been neglected or lagged in the strong growth-oriented market of recent times. Whilst uncomfortable, we have often said that it is prudent to be patient as there is typically very little warning when thematics reverse - the rotation into value in November was one of these moments.
The standout performer at the sector level was the portfolio’s overweight allocation to the Financials (+16.1%) sector which was the largest contributor to performance. This largely came from the portfolio’s net overweight to banks, specifically overweights to NAB (+24.8%), ANZ (+22.6%) and Westpac (+14.3%).
After detracting over recent times, the underweight to Healthcare was also a large contributor to relative performance. This was largely driven by the portfolio’s large underweight to CSL (+3.4%) and was supplemented by a large bounce in beaten up value stocks in the aged care industry: Japara (+94.8%) Regis
(+69.4%) and Estia (+27.8%).
Travel related stocks were strong on positive news of vaccine developments. Overweights to Qantas (+28.4%) and Air New Zealand (30.6%) were large contributors to performance and more than compensated for underweights to Webjet (+65.3%), Flight Centre (+52.0%) and Sydney Airport (23.1%).
The underweight to gold stocks also benefited as gold fell -5.4% in line with the risk-on market conditions. Amongst the contributors were underweight positions in Northern Star (-15.1%) and Evolution Mining (-10.3%).
The Consumer Staples sector detracted some performance, coming mainly from companies that were more resilient during the market uncertainty this year. This included overweights to Coles (+0.6%), Metcash (+0.0%) and Woolworths (-3.1%).
The portfolio offers a valuation discount to the market-cap benchmark, as measured by price-to-sales (39.2% discount), price-to-cashflow (27.3% discount), and price-to-book (11.9% discount), as well as a dividend yield higher than the benchmark (14.4% premium).
Note: Percentage figures in parenthesis show total return in Australian dollars for the month ending 30 November 2020 unless otherwise noted.
ticker: FSF0976AU
release_schedule: Monthly
commentary_block: Array
factsheet_url:
https://www.firstsentierinvestors.com.au/au/en/adviser/our-funds/realindex-investments.html
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fund_features:
The Realindex Australian Share invests in Australian shares by selecting and weighting companies based on fundamental measures of company size.
- Realindex forms a universe of Australian companies based on accounting measures.
- Factors such as quality, near – term value and momentum are applied to form a final portfolio of companies.
- The resulting portfolio has a value tilt relative to the benchmark and provides the benefits of being lower in cost, lower turnover and highly diversified compared to traditional active investment strategies.
- The investment objective is io provide capital and income growth by investing in Australian shares and outperforming the S&P/ASX 200 Accumulation Index over rolling five year periods before fees and taxes.
manager_contact_details: Array
asset_class: Domestic Equity
asset_category: Australia Large Value
peer_benchmark: Domestic Equity - Large Value Index
broad_market_index: ASX Index 200 Index
structure: Managed Fund