June, 2023
The Fund performed in line with the market in June, and across the June quarter. The best contributors were global insurer QBE, pallet pooler Brambles, and advertising platform carsales.com; not owning resource giants South32 or Rio Tinto also added some value.
Offsetting these however were holdings of resource giant BHP and medical device maker Fisher & Paykel Healthcare, while not owning high tech companies Xero and WiseTech detracted from returns.
The upcoming August reporting season should provide further insights into the extent of the economic slowdown the RBA has tried to orchestrate since the current interest rate tightening cycle started in May last year. The portfolio remains well exposed to companies that have seen better-than-average positive earnings revisions over the last several months. While there is always a risk, especially late in the cycle, that investors look beyond the current earnings environment and focus on a potential future earnings recovery, in our view it is unlikely that we have arrived at that point yet. A more decisive change in monetary policy, a pivot to a more expansive fiscal policy or a more significant fall in earnings that resulted in a “this is as bad as it gets” argument would typically precede such a change in investor sentiment.
For now, however, strong current operational performance should continue to be well rewarded. We see this as being achieved by a mix of portfolio holdings that also reported well in February – companies like Brambles, QBE, Steadfast, Medibank, Orora and Woolworths – as well as some newer positions in companies that have managed through a challenging industry environment and have come through at the other end in a good position to benefit as headwinds ease.
Last month we wrote about building materials manufacturer James Hardie being one of those companies. Despite going through a potentially destabilising management change last year, and even though US mortgage rates have ticked up again, the company appears to have stabilised and be back to delivering above-market volume growth.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/202629748.pdfMarch, 2023
The Fund performed a little better than the market over the March Quarter. The material contributors over the period were quite diverse: gaming company Aristocrat Leisure, health insurer Medibank Private, petrol distributor Viva Energy, packaging company Orora and pallet pool operator Brambles, although these were partially offset by our position in National Australia Bank and not owning gold miner Newcrest.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/201339444.pdfSeptember, 2022
The Fund underperformed the market a little in the September quarter. Positions in lithium producer IGO, health insurer Medibank Private, safety app 360; not owning gold producer Newcrest or gas pipeline APA also helped. The main detractors from returns were Goodman Group, Orora, and not owning lithium play Pilbara Resources, coal miner Whitehaven Coal, and diversified resource companies South 32 and Mineral Resources.
We expect our focus on earnings leadership will steer us through the current difficult macro environment. This sees us positioned relatively defensively at the moment but still well diversified.
While overall earnings risk into 2023 still seems biased to the downside, and this is reflected in the current portfolio positioning, it is in our view important to not get too caught up in the macro and to remain focused on individual company opportunities as well as sectors where the earnings outlook is more positive than a cursory top-down approach might suggest.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/195450394.pdfJune, 2022
The Fund outperformed the market in the June quarter and over the financial year. Positions in petrol distributor Viva Energy, health insurer Medibank Private and global insurer QBE contributed nicely, while not owning financial services company Block Inc (Afterpay) continues to be a boon. On the negative side however was being underweight toll-road company Transurban.
For the financial year, the biggest contributor was not owning Block, followed by good returns from energy exposures Viva (petrol) and Woodside (gas). Miner Lynas Rare Earths also did well, as did QBE. The negatives were much smaller in magnitude, the only meaningful one being not owning Sydney Airport, which was subject to a takeover bid late last year.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/189094304.pdfMarch, 2022
The Fund performed in line with the market in the March quarter. The largest contributors were its holdings in diversified resource companies BHP and South 32, gas companies Santos and Woodside Petroleum, and not owning tech exposures Xero and Block. Offsetting these however were holdings in US building exposures Reliance Worldwide and James Hardie Industries, pathology company Sonic Healthcare, gaming machine maker Aristocrat Leisure, and industrial property developer Goodman Group which fell largely thanks to rising bond yields.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/186557072.pdfJune, 2021
The final quarter of the 2021 financial year saw the Australian market (ASX300 including dividends) continue its upward march, returning 8.5%. Since the initial Covid panic in March 2020 there has been only one negative month, September 2020. Economic news in Australia continued to be positive with unemployment falling back to pre-Covid lows and job vacancy statistics suggesting further improvement lies ahead. While a Covid flare-up late in the quarter puts some risk around the durability of the recovery, we’ve been through lockdowns so many times now it appears that the market doesn’t fear its impact too much, notwithstanding the greater relative scariness of the Delta strain.
The year to June 2021 will go down as one of the better periods for the share market in recent years. At +28%, it ranks alongside some of the very best since the ASX300 was established three decades ago. The average annual return over that period has been 10.4%, with many more ups than downs.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/175160727.pdfMarch, 2021
In the March quarter, the market rose by a pleasing but unexceptional 4% (ASX300 including dividends). Thinking back to this time last year however, in March 2020, the market was in the process of having a full-blown panic attack about what a pandemic might do to the global economy, particularly to corporate earnings which are the key drivers of share prices.
The ASX300 tumbled 37% in the four weeks from its late February 2020 high to a low in the last week of March, the shortest, sharpest bear market we have ever seen. 12 months on from that we are now starting to cycle those panicked times, resulting in some very large numbers showing up.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/170994976.pdfSeptember, 2020
The Fund outperformed over the September quarter. The best contribution to returns came from industrial property play Goodman Group, copper miner Oz Minerals, iron ore miner Fortescue Metals, safety app Life 360, building materials maker James Hardie and not owning either gas producer Woodside Petroleum or infant formula maker A2 Milk. The only detraction of note was from not owning consumer credit provider Afterpay Touch.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/159695217.pdfticker: HOW0019AU
release_schedule: Quarterly
commentary_block: Array
factsheet_url:
https://investmentcentre.moneymanagement.com.au/factsheets/mi/l1l8/alphinity-australian-equity
Right sidebar -> Quick Links -> Provider’s own factsheet
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
manager_contact_details: Array
fund_features:
Alphinity Australian Equity aims to outperform the S&P/ASX 300 Accumulation Index after costs and over rolling three-year periods. Alphinity is an active core Australian equities manager who seeks to identify opportunities across market cycles. Alphinity believes that a company’s earnings growth and expected earnings growth ultimately drive its share price performance and that there is a systematic mispricing of individual shares over the short to medium-term due to under-or-over estimation of a company’s earnings ability.