September, 2023
The Australian Share Fund had a disappointing quarter, down -2.9%, lagging the benchmark’s -0.8%. The main reasons for the poor relative performance were a strong energy sector, where we are underweight, and a weak quarter by the gaming sector, where we are overweight, as well as disappointing performances by key stocks CSL and Telstra.
Global sharemarkets declined in the September quarter as bond yields rose sharply and investors finally seemed to believe that the Fed and other central banks will keep interest rates ‘higher for longer’. Most markets fell, with the MSCI World Index down -2.4% and the NASDAQ down further, -4.0%, reversing some of its impressive recent gains.
Local markets took a lead from overseas, with the ASX 300 down -0.8 for the quarter. Energy was the strongest sector, buoyed by soaring oil prices, mainly driven by supply cuts from Saudi Arabia and Russia. Healthcare was weakest, dropping -9.0%, as rising 10-year bond yields disproportionately affected its higher valuation multiples.
Many of the fund’s holdings performed well over the quarter including Orica, Suncorp, TPG Telecom, Nine Entertainment and Metcash. Stocks which held back performance included CSL, as explained below, and Telstra which dropped -8.5%, despite posting a strong result, as shareholders reacted negatively to the news it intends to retain its infrastructure business, Infraco. We believe this decision is sensible and in the long-term interests of shareholders.
During the quarter we opened new positions in Viva Energy and Resmed. We bought Viva at a 9% discount after Vitol, its largest shareholder, sold part of its stake. We believe Viva is well positioned in the petrol/refining industry that is structurally better since Covid, with a number of competitors exiting both fuel distribution and refining. Resmed fell 28% over the quarter on concerns that new GLP1 drugs, which are popular for weight loss, will reduce demand for its CPAP sleep apnea products. The market is pricing in a large drop in demand for CPAP devices, which we think is far from certain, hence we started building a position late in September.
Early in the quarter we trimmed our positions in Brambles and The Lottery Company as their share prices had appreciated significantly, and we added to Sonic and Charter Hall Retail REIT over the quarter on share price weakness.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Latest_Update_IMAS-30.pdfAugust, 2023
The Fund was down -0.7% in August, in line with the benchmark ASX 300 which was down -0.8%
Reporting season dominated financial news in August, with mixed results overall. In general, businesses with strong market positions and balance sheets, like those in our portfolios, navigated the difficult economic conditions better.
Several of our holdings were up strongly after reporting better than expected results, including Brambles, Medibank and Ampol. Telstra posted a strong result but dropped on the news it intends retaining its infrastructure business, Infraco. We believe this decision is sensible and in the long-term interests of shareholders.
Reporting season showed that trading conditions remain mixed. Consumer demand is slowing but is still above pre-Covid trends. Inflation has reduced, but significant rises in electricity, gas, insurance premiums and wages mean the RBA can’t be complacent that inflation has been tamed. We continue to act cautiously, focusing on industry-leading companies with strong competitive advantages and recurring earnings that are likely to perform well in a range of economic conditions.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Latest_Update_IMAS-29.pdfJuly, 2023
The Fund was up +0.9%, though it significantly lagged the benchmark ASX 300 which was very strong, rising +2.9%.
The Fund lagged the benchmark partly due to some holdings pulling back after strong recent performances, including Brambles, Aurizon and Telstra. Weaker relative performance was also due to a global rally in more speculative companies, for example unprofitable US tech rose +16% and a US-based ‘Meme ETF’ soared +20%.
Orica was up strongly as investors grew more optimistic about its growth outlook amid a strong month for commodities. Nine Entertainment also performed well, rising alongside other consumer-exposed companies. Aurizon had a poor month, falling -3% after an investor day in Darwin underwhelmed investors on short-term earnings, despite the company detailing a positive longterm growth strategy.
Despite euphoria around a possible 'soft landing', many companies face headwinds. Consumer demand is slowing but is still above pre-Covid trends. Inflation has reduced, but significant rises in electricity and gas, insurance premiums, and services wages mean inflation must still be contained. We continue to act cautiously, focusing on industry-leading companies with strong competitive advantages and recurring earnings that are likely to perform well in a range of economic conditions.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Latest_Update_IMAS-28.pdfJune, 2023
The Australian Share Fund had a solid quarter, returning +1.4%, ahead of the benchmark’s +1.0%. This took the Fund to a solid return for the full financial year of +11.0%. While this is a good annual return it was disappointingly behind the benchmark’s strong return of +14.4%, although this is not unexpected given the significant outperformance by resources companies over the year.
Global markets had a very strong quarter with the MSCI World Index up +6.7%, led by the Nasdaq, +13%. The gains were partly driven by optimism that the rate-rising cycle was near its end, as well as excitement about AI after US chipmaker Nvidia significantly upgraded its forward guidance. This caused a narrow-focused rally, driving markets higher.
The ASX 300 lagged global markets, rising +1.0% for the quarter, as the strong lead from overseas markets was tempered by somewhat unexpected RBA rate hikes which made investors more cautious. Information Technology was by far the strongest sector, rising +18.4% as tech stocks rallied in line with overseas markets. Materials were weaker in line with lower commodity prices and consumer facing sectors also struggled as interest rates continue to bite.
The Fund benefitted from strong performances from Aurizon, as explained below. IAG and Suncorp also were also up significantly amid continuing good trading conditions for the insurance sector. Premiums are increasing significantly (adding to inflation pressures), and investment income is benefitting from higher rates.
CSL was disappointing over the quarter, falling after its guidance for FY24 was below the optimistic consensus. Currency translation has had a large impact and margins are likely to recover more slowly than many were expecting. Amcor also fell after it downgraded its outlook due to food and beverage companies destocking as well as weakening demand from end customers.
We used share price weakness to increase our positions in Charter Hall Retail REIT and Fletcher Building and heightened share prices to trim our positions in IAG and exited Southern Cross Media after an attractive off-market offer from ARN Media at a 42% premium to the share price at the time.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Latest_Update_IMAS-27.pdfMay, 2023
The Fund was down -1.4% in May, though ahead of the benchmark ASX 300, which dropped -2.5%.
Many of our key holdings performed well during the month. Our relative performance was buoyed by our low exposure to consumer discretionary retailers, which fell heavily due to the interest rate rise which took some investors by surprise. Aurizon performed strongly for the fund, up 4%, continuing its recent rise as haulage volumes improve. Tabcorp also performed well, up 9%, as confidence increased in its Victorian licence renewal.
Amcor had a poor month falling 8% after it downgraded its outlook due to weakening packaging volumes.
Economies still face significant issues, setting a challenging backdrop for companies. Consumer demand has slowed but is still robust compared to pre-Covid trends. Inflation is proving persistent, with wage gains and house prices ticking up. Further interest rate rises are probable. We continue to act cautiously, focusing on industry-leading companies with strong competitive advantages and recurring earnings that are likely to perform well in a range of economic conditions.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Latest_Update_IMAS-26.pdfApril, 2023
The Fund was up +2.1% in April, ahead of the benchmark ASX 300, which rose +1.8%.
The main reasons for the Fund’s better relative performance were strong performances by many of our key holdings, as well as a poor month for the large iron ore miners which we remain cautious of due to their cyclicality.
Brambles was up 6% in April, after improving its pricing and margins and so upgrading guidance. Telstra rose too after a positive shareholder response to its price rises. Medibank Private, Orica and CSL also performed strongly.
The Lottery Corporation had a disappointing month, dropping slightly after smaller jackpots impacted revenue.
The continuing sharemarket strength implies a belief in a painless retreat from high inflation as well as an early easing of interest rates. There are risks to this scenario, with inflation only likely to fall with consumer belt tightening and a rise in unemployment. The companies in the fund are well-established with competitive advantages and recurring earnings, making them more resilient and likely to perform well in a range of different economic conditions.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Latest_Update_IMAS-25.pdfMarch, 2023
The Australian Share Fund performed well over the quarter, +3.0%, slightly lagging the benchmark’s +3.3%.
The MSCI World Index was up +7.2% for the quarter, similar to the prior quarter. However, it has been a more volatile ride. Markets rose strongly at the start of 2023, then fluctuated as investors’ fears about interest rates, inflation and a slowing global economy waxed and waned. Things came to a head in March as a US regional banking crisis unfolded and spread to Europe, then eased as regulators took steps to calm markets.
The ASX 300 lagged global markets, up +3.3%, with mixed performance at a sectoral level. Most sectors were up, with Consumer Discretionary strongest, up +10.8%, driven by investors’ willingness to take on more risk and some strong individual performances followed by Communication Services (up +9.5%) off the back of Telstra’s strong performance. Financial Services was the weakest, down -2.7%, on worries about the unfolding banking crisis and mortgage competition. Real Estate also was down slightly on concerns of falling commercial property values and rising interest rates.
The Fund benefitted from strong performances from Telstra, Brambles, Medibank and The Lottery Corporation after they announced strong first half FY23 results. Sonic Healthcare also performed well, rising as it reported strong underlying earnings despite its overall revenue dropping as the Covid testing bonanza faded.
Aurizon’s performance held the fund back over the quarter as it announced lower-than expected earnings due to poor weather. Amcor was also down as it reported declining packaging volumes in some categories. We believe the issues for both stocks are temporary and we are confident in their long-term prospects.
We used share price weakness to increase our positions in Aurizon, Sonic Healthcare and Tabcorp and heightened share prices to trim our positions in The Lottery Corporation and Newscorp.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Latest_Update_IMAS-24.pdfFebruary, 2023
The Fund was up slightly in February, +0.3%, well ahead of the benchmark ASX 300, which dropped -2.5%.
The main reasons for the Fund’s better relative performance were resilient performances by many of our holdings, as well as a sell-off in the Resources companies, where we remain cautious.
Many of the Fund’s key holdings rose strongly after announcing positive results in reporting season including Brambles, Medibank and The Lottery Corporation. Aurizon had a disappointing month, sold down after it reported a drop in earnings due to poor weather which affected the amount of coal transported during June to December 2022.
Global markets were weaker during February as inflationary concerns resurfaced and bond markets sold off. We continue to position the Fund in well-established, profitable companies that are well-positioned to perform well in these uncertain economic conditions, while staying alert to any opportunities that the current market volatility brings.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Latest_Update_IMAS-23.pdfJanuary, 2023
The Fund had a solid month in January, up +2.9%, although behind the benchmark’s return of +6.3%.
The Fund’s relative performance was impacted by our lower weighting vs the index in the Resources sector and the major banks, both of which rallied strongly over the month.
Many of the Fund’s holdings performed well such as Coles and Newcrest whereas several other stocks had a disappointing month, pulling back after recent strong months, including Orica, Aurizon and Steadfast.
We remain wary of the recent strong sharemarket rally given that markets seem to now be factoring in an orderly retreat from high inflation and an early easing of interest rate increases. We believe there are risks to this scenario, so we continue to position the Fund in well-established, profitable companies with strong market positions that we believe represent sound long-term value.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Latest_Update_IMAS-22.pdfDecember, 2022
The Australian Share Fund was up strongly over the quarter, rising +7.8%, although it lagged the benchmark’s +9.1%. The main reason for the lag was the very strong performance of Resources companies, where we remain cautious given their cyclical nature. Importantly, the Fund reported a positive result for the calendar year of +3.3%, which compares very favourably to the benchmark’s drop of -1.8%
The MSCI World Index was up +7.5% for the quarter, thanks to strong gains in October-November, although global markets dipped again in December as concerns resurfaced about the global economy slowing in 2023 as interest rates continue rising around the globe.
For the ASX 300, the Utilities sector was the strongest performer, up +28%, due mainly to a $9 a share bid for Origin Energy by Brookfield Asset Management. The Materials sector also rose strongly to finish the quarter up +14.7% as BHP, Rio and Fortescue all had very strong quarters, rising on a stronger iron ore price in hopes that demand for the commodity will increase rapidly as China reopens its economy, reversing its draconian Covid lockdown policies.
The Fund benefited from strong share price gains from Orica and Virgin Money over the quarter, after they both announced strong FY22 results. Steadfast and Suncorp also had a good quarter as investors factored in rising insurance premiums.
SkyCity had a tough quarter, after Austrac announced proceedings against it in relation to AML breaches at its Adelaide casino, while Medibank fell heavily after a well-publicised cyber-attack.
Over the quarter we used the strong price appreciation to trim our positions in stocks such as Amcor, Newscorp, Telstra, The Lottery Corporation, IAG and Incitec Pivot while using share price weakness to increase our holdings in Medibank and TPG as we remain confident of both companies’ long-term prospects.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Latest_Update_IMAS-21.pdfNovember, 2022
The Fund had a strong month in November, up +4.6%, although behind the benchmark’s return of +6.5%.
Many of the Fund’s holdings performed well including Orica and Virgin Money UK, which both announced positive results during November while The Lottery Corporation performed well thanks to a series of large jackpots helping lottery sales.
The Fund’s underperformance was mainly due to our lower weighting in the Resources sector, which rallied strongly on optimism that China may ease its Covid restrictions – although we remain cautious on the sector given it is so cyclical.
Markets were up strongly in November despite many uncertainties. We continue to position the Fund in well-established, profitable companies with strong market positions while looking to buy further good quality companies when opportunities arise.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Latest_Update_IMAS-20.pdfOctober, 2022
The Fund had a strong month in October, up +4.9%, although behind the benchmark’s (ASX 300) return of +6.0%.
Many of the Fund’s holdings performed well including Sky City, Newscorp and Suncorp.
The Fund’s return lagged the index mainly because of our lower weighting in the big 4 banks, which rallied after results from ANZ and Bank of Queensland, released during the month, showed bank profits holding up well. Medibank had a turbulent month, falling heavily after a well-publicised cyber-attack, and we used this as an opportunity to increase our position in the company.
We expect conditions to remain volatile given the continued economic uncertainty as we head into 2023. We will use times of market weakness to add to the Fund’s positions in well-established, profitable companies with strong market positions.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Latest_Update_IMAS-19.pdfSeptember, 2022
The Australian Share Fund had a disappointing quarter, declining -1.4%, behind the benchmark’s return of +0.5%.
The main reasons for the poor relative performance over the quarter were that we are underweight to the Resources sector which held up well, as well as some disappointing performances from some of our core holdings on no material news – such as Orica and The Lottery Company. Also detracting from performance was a sub-par quarter for some of the Fund’s mid cap holdings, including TPG and Sky City, where we believe the investment case still remains positive.
Global markets had a very volatile quarter, up significantly for July and most of August before dropping sharply in September as bond markets sold off as it became clear that the US Federal Reserve - and other Central Banks around the world - would continue to follow through on their commitment to raise interest rates in order to bring inflation back under control.
While both the MSCI World Index and the S&P 500 fell around -5% for the quarter, the ASX300 went against the trend and rose +0.5%. This was partly due to the RBA’s current less aggressive interest rate rises, which contributed to the Aussie dollar falling 7% against the US dollar for the quarter and helped the Resources sector rise.
The Fund benefited from good performances from Brambles and CSL over the quarter, as both companies appear set to record improvements in their earnings in the years ahead despite the uncertain economic outlook.
Over the quarter we increased our holdings in Orica, The Lottery Corporation and Steadfast taking advantage of share price weakness to buy into these high-quality companies at reasonable valuations. We also trimmed our positions in Amcor and Woolworths early in the quarter after their share prices approached full value.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Latest_Update_IMAS-18.pdfAugust, 2022
In a volatile month the Fund managed to eke a positive return of +0.3%, albeit this was below the benchmark’s return of +1.2%.
The main reason the Fund’s performance was lower than the benchmark was the strong performance of the Resources sector over the month, which we have low exposure to due to its high volatility and cyclical nature.
With Central Banks around the world still on the pathway of increasing interest rates to rein in inflation, the Fund remains defensively positioned in good quality companies such as Brambles, Aurizon and CSL.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Latest_Update_IMAS-17.pdfJuly, 2022
The Fund had a strong month in July, up +4.6%, although this was behind the benchmark’s (ASX 300) return of +6.0%. Many of the Fund’s holdings performed strongly in July including well-established, industry leaders like CSL and Brambles. The Fund’s return was lower than its benchmark mainly due to our avoidance of the more speculative Tech and Resources companies, many of which rallied strongly in July as investors hoped the sharemarket had bottomed. We believe sharemarket volatility may return given the many uncertainties and as such we continue to adopt a cautious approach, looking for opportunities to buy high-quality companies at compelling valuations.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Latest_Update_IMAS-16.pdfJune, 2022
The Australian Share Fund had a tough quarter, finishing down -5.1%, though it was significantly ahead of its benchmark’s negative return of -12.2%. Pleasingly, the Fund managed to return a positive result of +1.9% for financial year 2022, despite very challenging investment conditions in the six months to June 2022 which saw the ASX 300 drop -6.8% for FY 2022. Global markets had a very challenging quarter as bond markets sold off heavily and Central Banks all over the world responded to rapidly rising inflation by raising their overnight interest rates. Other major global uncertainties weighing down markets – including the Ukraine-Russia war and the Covid restrictions in China – added further anxiety for investors.
The ASX 300’s heavy fall over the June quarter saw all sectors finish lower except for the Utilities and Energy sectors which both eked out small gains. Particularly hard hit were the Information Technology, Materials and Consumer Discretionary sectors as investors repositioned their portfolios more defensively for the expected softer economic times ahead.
The Fund benefited from strong performances from key stocks such as Amcor, Brambles and APA Group. Tabcorp (which split into a gaming business Tabcorp and a lotteries business The Lottery Corporation) also rallied over the month as investors saw the benefit of its demerger and backed both sides of the business to perform well in the future.
Over the quarter we trimmed our holdings in companies like Ampol and Event Hospitality and Entertainment, taking profits as the share prices of these companies rallied strongly. We used the proceeds to top up positions in high-quality companies like Sky City and Abacus Property, as well as initiating a position in Medibank as we believe these companies should generate very resilient cashflows in the next 3 to 5 years, are well managed, and are attractively priced.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Latest_Update_IMAS-15.pdfMay, 2022
The Fund recorded a -2.0% fall in May which, while disappointing, was better than the benchmark’s (ASX 300) return of -2.8%. The Fund benefited from resilient performances from well-established, profitable companies that are well placed to withstand the current economic uncertainty including Amcor, Aurizon and Brambles.
A few of the Fund’s key holdings were sold down amid concerns around the Australian economy, including Nine Entertainment and Metcash, however we remain confident about these companies’ positioning and longer-term prospects.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Latest_Update_IMAS-14.pdfApril, 2022
The Fund delivered a strong performance in April, up +1.5%, significantly better than the benchmark’s (ASX 300) negative return of -0.8%. The Fund benefited from strong performances from many of the good quality stocks held by the Fund. Our continued cautious approach towards speculative technology companies and the volatile Resources sector also helped our performance. Many of the Fund’s core stocks performed well this month including Aurizon, Amcor, Brambles, and Steadfast.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Latest_Update_IMAS-13.pdfMarch, 2022
The Australian Share Fund delivered a solid return of +2.4% for the March quarter, ahead of its ASX 300 benchmark which was up +2.1%.
The ASX 300’s gain over the quarter was led by the Resource sector which rallied strongly over the quarter as the prices of many commodities soared following the introduction of sanctions on Russian commodity exports following the invasion of Ukraine. The major Banks also performed well on expectations of interest rate rises and the positive flow-on effect this could have on their net interest margins.
The Fund benefited from solid performances from our holdings in companies such as Orica and Incitec Pivot while Aurizon and Ampol also rallied. Origin Energy rose strongly over the quarter given the company’s exposure to LNG and the commencement of an on-market buyback. Tabcorp also rose as investors responded to positive news in relation to the demerger of its lotteries business.
Over the quarter we trimmed our holdings in companies such as Woodside, Origin Energy, Westpac, Incitec Pivot, and Event Hospitality & Entertainment and used the proceeds to top up the Fund’s holdings at times of weakness in good quality companies that we believe continue to offer good value such as Brambles, Pact and Steadfast.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Latest_Update_IMAS-12.pdfFebruary, 2022
The Australian Share Fund delivered a strong return of +2.5% for February, ahead of the benchmark’s (ASX300) +2.1% return. Share price gains in some of the Fund’s core holdings in good quality companies such as Orica, Metcash, Newcrest Mining Tabcorp, and Nine Entertainment drove performance.Holding the Fund in good stead was our caution towards the speculative and concept-driven companies in the Technology sector which had a challenging month.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Latest_Update_IMAS-11.pdfJanuary, 2022
The Investors Mutual Australian Share Fund shed -4.3% in January, which although disappointing was better than the benchmark’s fall of -6.5%. Our focus on investing in stocks that we believe offer both value and quality held the portfolio in good stead, due in part to our zero weighting in speculative and concept driven companies which were badly hit. The portfolio benefited from our holdings in good quality companies such as Orica, Aurizon, AusNet (under takeover), Amcor, Incitec Pivot and Origin which all finished the month higher. Detractors over the month included CSL and Steadfast, which were both caught up in the volatility, however given their position as leaders in their respective industries we remain confident in their mediumterm outlook. Over the month we took part profits in stocks such as AusNet, Incitec Pivot, and Telstra given their strong runs of late and used the proceeds to top up opportunistically in good quality companies such as Brambles, Coles and Aurizon which we believe all offer very strong long-term value.
Central banks around the world seem poised to raise interest rates in reaction to CPI numbers which have reached levels the world has not seen in almost 40 years. Whilst headline inflation levels will eventually normalise, it is now becoming increasingly evident to many investors that the prospect of ultra-low interest rates could soon be a thing of the past. We believe that in this environment, the worst impacted will be many high-flying, concept and often purely speculative parts of the sharemarket – many of which were buoyed in the last few years by speculators using this cheap money.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Latest_Update_IMAS-10.pdfDecember, 2021
The Investors Mutual Australian Share Fund had a positive year returning +17.6% which was slightly ahead of the benchmark’s return. The Fund’s performance was helped in the second half by what we see as the start of a return to more fundamental investing with the prospect of the end of free money looming large. Takeover bids for good quality companies which were trading at very attractive valuations also helped. Our core holdings in Telstra, Tabcorp, AusNet (under takeover), Metcash, Incitec Pivot, Steadfast and Sonic Healthcare all enjoyed a strong year.
For the final quarter of the year, the Fund posted a return of +1.1%, which lagged the benchmark’s solid return of +2.2%. Our caution to the Resources sector weighed on relative returns although we remain comfortable with this positioning given the high commodity price levels and inherent volatility in the sector - as we saw during 2021 with the iron ore price halving in value. Over the quarter, the portfolio benefited from its holdings in Metcash, Telstra, Crown Resorts (under takeover), Incitec Pivot and Steadfast. Conversely, IAG and Pact Group endured a weaker quarter on short term impositions, and we remain very confident in the long-term outlook for both businesses, especially in light of their attractive valuations and strong positioning in their respective industries.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Latest_Update_IMAS-9.pdfNovember, 2021
The Investors Mutual Australian Share Fund had a lacklustre month shedding -0.6%, in line with the benchmark. The Fund’s limited exposure to the Resources sector, in particular the iron ore majors, held back relative returns, however we remain very comfortable with this positioning given the inherent volatility. IAG’s share price fell following a downgrade to short-term earnings expectations due to an abnormally high number of weather events. While IAG may experience shortterm earnings volatility, in our view the company’s long-term fundamentals remain sound. Orica’s share price retreated, following a strong rise over the past three months, as investors took profits after the company released its FY21 results. These results showed that that the company is on track to record better profits in the years ahead thanks to a combination of improved efficiencies, better product pricing and a recovery to normal volumes post-covid lockdowns. The Fund’s holdings in companies such as Telstra, Steadfast, Nine Entertainment and Crown (which bounced strongly on a $12.50 takeover offer from Blackstone) all enjoyed a strong month.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Latest_Update_IMAS-8.pdfOctober, 2021
Global equity markets rebounded strongly in October with the MSCI World index returning +5%. The gains were led by the US, with the S&P500 gaining +7%, capping its strongest month this year and returning the index to record highs following last month’s -5% pull back. Despite weaker than expected GDP growth and soft results from both Amazon and Apple, given ongoing supply chain disruptions and tightening in the labour market, US Q3 reporting season proved robust with the majority of companies beating earnings expectations. Across the Atlantic the mood was equally buoyant with Europe’s Stoxx50 index returning +5.2%.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Latest_Update_IMAS-7.pdfSeptember, 2021
The MSCI World Index declined -0.3% in a volatile September quarter to record its first loss since the March 2020 quarter. Following a positive start to the quarter, most world sharemarkets fell heavily in September, led by the US S&P 500 which declined -5% during the month. Concerns over inflation rose as energy prices and shipping costs soared. Supply chain disruptions were apparent in several sectors of the global economy which led to price rises as many companies scrambled to offset soaring input costs. Fears of contagion from financial woes at giant Chinese developer Evergrande, and debate about lifting the US debt ceiling to avoid government shutdowns also weighed on investor sentiment.
The Investors Mutual Australian Share Fund enjoyed a strong quarter, returning +4.0%, which was much better than the benchmark’s return of +1.8%. The Fund benefited from the performance of many of its core holdings such as AusNet, Incitec Pivot, Telstra, Amcor, Steadfast, Origin Energy, Woodside Petroleum and Orica. The Fund also benefited greatly from its limited exposure to iron ore companies as we had been wary of the highly elevated level of the iron ore price for some time.
Over the quarter, we trimmed our holdings in stocks such as CSL, Alumina, Sonic Healthcare and Virgin UK as the share prices of these companies rallied strongly while we deployed the proceeds to add to our positions in good quality companies that we believe are very undervalued such as Orica, Origin Energy and Newcrest Mining.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Latest_Update_IMAS-1-2.pdfAugust, 2021
The Investors Mutual Australian Share Fund enjoyed a strong month, returning +4.0%, which was better than the benchmark. The Fund benefited from the performance of many of our core holdings such as CSL, Steadfast, Amcor and Sonic Healthcare which all delivered strong FY 2021 earnings. Additionally, Ampol’s proposed takeover of NZ’s Z Energy and the KKR takeover of Spark Infrastructure also benefited performance. Over the month, we trimmed our holdings in stocks such as CSL and Amcor which rallied strongly over the month while we deployed the proceeds to add to our positions in good quality companies such as Orica and Newcrest Mining, which have underperformed significantly and which in our view are trading at very attractive valuations.
The Australian sharemarket continues to trade at record levels with seemingly very little on the horizon to halt its ongoing rise. Having said this, we continue to steer away from some of the riskier parts of the sharemarket and remain focused on good quality companies which are well-managed, where valuations remain justifiable, and which we believe can do well over the next 3-5 years. To this end we remain very comfortable where IML’s portfolios are positioned.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Latest_Update_IMAS-6.pdfJuly, 2021
Global sharemarkets continued to be well supported in July with the MSCI World index returning +0.7%. US sharemarkets again traded at record highs thanks to the release of strong Q2 earnings, continued low interest rates and increased corporate deal making. US consumer data also highlighted that many cashed-up Americans spent with abandon in the June quarter as vaccination rates increased and lockdown restrictions eased. The US S&P500 index returned +2.4% for the month. Across the Atlantic the Stoxx50 index rose +0.8%, bolstered by strong EU economic data releases and as COVID-19 restrictions continue to ease.
It was a different story across the Emerging Markets landscape which slipped -6% for the month. The delta variant continues to impact countries with low vaccination rates, as government-enforced lockdowns and travel restrictions cast a pall of uncertainty over future growth. Additionally, China’s regulatory clampdown weighed on its local bourse, with the MSCI China index shedding -14%, the largest monthly decline in nearly a decade. Fears of regulatory tightening intensified with investorsfretting over the Chinese Government’s ability to burden companies with new rules and regulations. Despite the strong US economic recovery, US 10-year bond prices continued to rally with the yield falling -0.25% to 1.2%, having reached 1.75% back in April, as investors become wary of increased inflationary pressures. Similarly, the Australian 10-year bond yield fell -0.35% to 1.2%. In commodity markets, the iron ore price slid -9% after China recommitted to reducing emissions by cutting steel production. The oil price edged +2% higher despite OPEC’s talks deteriorating early in the month. Copper continued its ascent +4% higher on the electrification of the economy thematic, whilst the gold price rose +4% amidst safe haven buying.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Latest_Update_IMAS-5.pdfJune, 2021
In its 23rd year of operation, the Investors Mutual Australian Share Fund posted a positive return for the financial year of +20.9%, although this was behind the benchmark’s strong return of +28.5%. The market was very volatile over the past year, and the rallies in the more speculative or cyclical sectors such as Technology and Resources held back our market-relative performance. Our portfolio’s positioning in more defensive quality companies weighed on the Australian Share Fund’s market-relative return, although we remain very comfortable with the Fund’s positioning.
The Fund paid a distribution of 12.8660 cents per unit for the June half, taking the total distribution for the financial year to 15.8660 cents per unit representing a full-year distribution yield of 6.15%.
Over the final quarter of FY20, the Fund returned a solid +5.4%, although this was below the benchmark’s strong return of +8.5%. Over the June quarter, the Fund benefited from its holdings in good quality industrials such as CSL, Telstra, Tabcorp, and Steadfast Group.
Over the quarter we trimmed our exposures to stocks such as Commonwealth Bank of Australia, SkyCity Entertainment, and Wesfarmers. We used the funds generated from these sales to top up in good quality companies such as IAG, Incitec Pivot, Origin Energy, and Orica, which in our opinion all represent compelling valuations, especially given their medium to long-term prospects, which the market is yet to appreciate.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Latest_Update_IMIS-10.pdfMay, 2021
Global equity markets finished their fourth consecutive month higher, with the MSCI World Index returning +1.1% as ongoing confidence in the global economic recovery grows as vaccination programmes accelerate. While the US S&P500 Index held on to its gains for the month, returning +0.7%, the tech-heavy NASDAQ Index came under increasing pressure, shedding -1.4% as investors’ inflationary concerns and the prospect of higher bond yields weighed on fullypriced tech valuations. Indeed, US inflation accelerated at its fastest annual pace in over a decade as the economic recovery kicked into gear. Across the Atlantic the mood was similarly positive as economies emerge from lockdowns in time for the summer tourism season, with European bourses enjoying a solid month, the EuroStoxx50 Index returning +2.3%.
Domestically, the mood remained upbeat following the release of the Federal Budget, with government fiscal largesse continuing to aid the post-COVID recovery. Commodity prices were strong through the month, with the iron ore price gaining +7.8% and holding its level above US$200 per tonne despite Chinese overtures about punishing “excessive speculation” in commodity markets. The oil price gained a further +3% as stockpiles built up during the pandemic continue to run down as economies reopen. Increasing inflationary concerns courtesy of the magnitude of economic stimulus and continued low interest rates also helped the gold price gain +7.5% for the month, to finish above US$1,900 an ounce.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Latest_Update_IMAS-4.pdfApril, 2021
Global equity markets enjoyed another strong month, with the MSCI World Index returning +3.7%. The US S&P500 and the tech-heavy NASDAQ indices led the charge, both returning +5.3% and in so doing set new record highs throughout the month. Investors were emboldened following a streak of strong third quarter US company earnings reports, buoyed by record US household disposable income as a result of the passing of President Biden’s American Rescue Plan, which included US$1,400 stimulus payments to US households. Across the Atlantic, the mood was a little less sanguine, with Europe’s Stoxx50 Index returning +1.9%, reflecting investors’ concerns about the continent’s slow rollout of the vaccination programme, which continues to impede economic recovery. The result of the significant amounts of stimulus supporting equity markets is increased inflationary expectations, with many companies across the globe reporting pricing pressures for inputs, which in turn are passing through to customers as price rises. Additionally, it was reported that US labour costs jumped the most in 14 years as companies boost production to cater to pent-up demand.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Latest_Update_IMAS-3.pdfMarch, 2021
Global equity markets enjoyed a strong first quarter of calendar 2021, returning +5.9% thanks to continued investor optimism as the global economy recovers from the turmoil caused by COVID-19 and as vaccines are rolled out around the world. These gains were made despite the headwinds of a substantial selloff in bond markets. The benchmark US 10-year bond rose 0.5% to a 12-month high of 1.7% by the end of March on inflationary fears as a combination of continued strong fiscal stimulus, strong commodity prices and continued record low overnight interest rates stoked investor concerns. Over the quarter President Biden’s US$1.9 trillion stimulus package was approved, with the new President now looking to get a proposed US$2 trillion infrastructure plan approved by Congress, while in Australia the Federal Government unveiled a $1.2 billon tourism support package. The US S&P500 Index recorded fresh record highs in March, pushing through the 4,000 level for the first time. The S&P500’s return of +6.1% for the first quarter marked the index’s best 12-month rolling return since 1936 and a staggering +80% return since the March 2020 lows. Across the Atlantic, Europe’s Stoxx50 jumped +10.7% for the quarter, while Japan’s Nikkei Index returned +6.9%. Encouragingly, we saw the value style of investing as the main driver of quarterly returns, with the frothier end of the market coming under pressure.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Latest_Update_IMAS-2.pdfFebruary, 2021
A surge in bond yields late in the month caused volatility in global equity markets as investors grew increasingly wary about the potential for higher inflation. Yields on US 10-year bonds experienced one of their largest monthly spikes in modern times, rising 0.5% to a 12-month high of 1.4%. There are growing fears that central banks may have to raise interest rates earlier than expected, driven by the recovery in global economic activity, optimism about the COVID-19 vaccine rollout, the passing of President Biden’s US$1.9 trillion stimulus package, and the significant amount of easy money sloshing through the system.
Despite shedding -3% in the final week of the month, the MSCI World Index still finished the month up +2.4%. Similarly, the US S&P500 Index finished the month +2.7% higher, setting a new record high before inflationary fears sent ripples through the market. The tech-heavy NASDAQ Index finished the month only slightly higher after shedding -7% during a difficult final week of the month.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Latest_Update_IMAS-1-1.pdfJanuary, 2021
After starting the year in positive fashion, global sharemarkets came under pressure in the back half of January, and the MSCI World Index finished the month in negative territory. The US S&P500 Index retraced from record highs to finish -1.0% lower, while Europe’s Stoxx50 Index shed -1.9% as bond yields around the world rose on expectations of higher economic activity and inflationary expectations as the COVID-19 vaccine rollout continued across the globe. Market sentiment was also affected as some high-profile short squeezes of US stocks such as GameStop and AMC Entertainment saw the share prices of these companies balloon after retail punters charged in en masse. This reminded investors about the speculative excesses abounding in some sections of the sharemarket as zero interest rates, Central Banks money printing via QE and continued fiscal stimulus programmes have encouraged excessive risk-taking by many market participants.
Commodity prices were mixed over the month. The oil price gained a further +7% following a surprise production cut from the Saudis, acting independently from OPEC, to help support the oil price amid faltering global demand. The iron ore price came under pressure following a near +40% rise in the final quarter of 2020, with increased supply coming online from Brazil, coupled with China’s scrap steel market reopening and China importing scrap steel from Japan as China endeavours to reduce its reliance on Australian iron ore. The Australian sharemarket, as measured by the ASX300 Index, suffered a similar fate to its global peers, selling off in the latter part of the month to finish January flat. The Resources sector came under pressure late in the month, finishing January -0.6% lower, largely as a result of a cooling iron ore price, with miners such as Fortescue Metals ending them month down -7%. Within the Industrials segment sector performances were mixed over the month. The REITs sector fell -4% in sympathy with the uptick in bond yields, while the Consumer Discretionary sector rallied +5% over the month off the back of solid trading updates from the likes of JB Hi-Fi and Super Retail Group, which have continued to benefit from the current surge in consumer spending. The Consumer Staples sector also had a strong month, benefiting from strong share price performance from supermarket operators, which continue to enjoy positive sales momentum. Telstra also had a good month, gaining +5% as the firm’s 5G network continues to be rolled out across Australia and as investors look forward to more rational pricing in the mobile sector following public comments from the recently appointed Optus CEO about Optus’ desire to achieve better returns.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Latest_Update_IMAS-1.pdfDecember, 2020
The Investors Mutual Australian Share Fund had a disappointing calendar year 2020, recording a total return of -7.3%, compared with the benchmark’s return of +1.7%. While the Fund did hold up better than the benchmark during the March quarter’s selloff, the Fund did not keep up with the significant recovery which occurred over the remainder of the year. While many of our core holdings in well-managed, good quality industrial companies such as Metcash, AusNet and Coles all contributed positively over the year, our low weightings to sectors which finished the year strongly such as the Resources, Banking and IT sectors, impacted our relative performance.
For the final quarter, the Fund posted a solid gain of +10.2%, although this was behind the benchmark’s return of +13.8%. Our caution to the highly cyclical sectors such as the Tech and Resources sectors held back our relative performance as these sectors rallied significantly over the final quarter. Although our positioning in good quality companies such as Tabcorp and Telstra contributed positively to returns.
Over the quarter we reduced our exposure to Link Group as its share price jumped on takeover news. We also trimmed our holdings in the major Banks into strength given the increasing challenges the Banks will face in light of lower net interest margins. In addition, we took advantage of the strong performances in the share prices of stocks such as Coles and Shopping Centres Australasia to lock in some profits over the quarter. We deployed this cash to top up on our holdings in companies such as AusNet, Brambles, Sonic Healthcare and Orica on weakness, thereby building our positions at attractive valuations in what we assess to be high calibre companies that will do well over the next 3 to 5 years. Telstra (TLS) had a strong quarter as investors responded positively to the company’s announcement at its November investor day that it will split its business into three separate businesses: infrastructure divisions named ‘InfraCo Towers’ and ‘InfraCo Fixed’, and an operating division ‘ServeCo’. In our view this will help realise the value of Telstra’s extensive portfolio of infrastructure assets which have been underappreciated and undervalued in the past.
The restructure is expected to be completed by the end of 2021. Telstra also reiterated its full year guidance and upgraded its return on invested capital target for 2022.
Insurance Australia Group’s (IAG) share price was weak this quarter, following a surprise loss on its first business interruption insurance test case in November, which has since been appealed. Following the judgement, IAG announced an $865m post tax top-up provision and a $750m capital raising, Although business interruption test cases will take time to resolve, we believe that IAG has been considerably more conservative than its peers and has overprovisioned in response to the November court decision. Metcash (MTS) reported strong results in December for the 6 months ended October 2020 for its food, hardware and liquor businesses.
The ongoing strength reflects a move to shop local, dine at home and DIY home improvement. The standout for us was the hardware division where the company posted very strong result and encouraging commentary on its recent acquisition of Total Tools, a business focussed on high quality tools for professionals. We have been adding to our position in Metcash over calendar 2020 as we believed was attractively priced given the company’s prospects for the next few years
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Latest_Update_IMAS.pdfNovember, 2020
Global equity markets enjoyed one of their strongest months on record, surging on optimism about Joe Biden’s US Presidential Election victory and a series of breakthroughs in the development of a COVID-19 vaccine. The MSCI World Index returned +11% over the month, driven by strong gains in the US S&P500 Index, which reset fresh record highs following weakness in October, and the Dow Jones Index, which pushed through the 30,000 level for the first time in its history and enjoyed its strongest month since 1987. Across the Atlantic, the mood was even more effervescent, with Europe’s Stoxx Index returning +19%, catching up some of its recent relative underperformance compared with US indices. Despite record numbers of COVID-19 cases across the world, investor optimism was buoyed by signs that President-elect Joe Biden will make a relatively smooth transition into the White House, as well as positive vaccine news from Pfizer/BioNTech and Moderna.
This news drove a strong rotation into companies that were deemed to be well-positioned for the reopening of economies and the much hoped for return to normality, while many concept and fad stocks lagged the market. The Energy sector within the S&P500 enjoyed its best month on record, surging by +34%, while airlines, airline manufacturerssuch as Boeing as well as cruise line and theme park operatorssuch as Disney all had a very strong month. Domestically, the Reserve Bank of Australia cut the cash rate by a further 0.15% in early November, taking the cash rate down to a new record low of 0.10%, while also announcing a further $100 billion in bond purchases as part of its quantitative easing programme. Commodities experienced a very strong month off the back of the vaccine breakthrough. Oil was the standout, gaining +27% as investors repositioned for the likelihood of greater oil consumption as economies reopen. Iron ore also firmed by a further +11% to the $130/tonne level. As a result of the strength in commodity prices, the AUD had a strong month, gaining +5% against the USD as it rallied to the 74-cent level. This was despite continued concerns about the diplomatic stoush between Australia and China which has led to the hiking of trade tariffs by the Chinese, most notably on our wine exports.
The strong rally in global equities saw the Australian sharemarket, as measured by the ASX300, produce its best month on record, returning +10.2% in November. The Resources sector gained a further +10%, the driving force being the Energy sector’s +30% return in line with the higher oil price. Financials led the way within the Industrials segment of the market, gaining +16%, with the major banks benefiting from an uptick in bond yields and the amount of loans on deferral continuing to decline sharply. Communication Services had a buoyant month, returning +14%, largely supported by Telstra, as its share price jumped +15% following the company’s announcement that it will split its business into operating and infrastructure divisions, something IML strongly supports.
Telstra also reiterated its full year guidance and upgraded its return on invested capital target for 2022. The Technology sector, which has benefited immensely this year given the mania for “anything tech”, came off the boil, with several overhyped names such as Afterpay, Megaport, NextDC and several ‘buy now pay later’ providers finishing in negative territory. Defensive sectors such as Consumer Staples, Healthcare and Utilities all lagged the market rise as investors rotated into more economically exposed sectors. Particularly hard-hit over the month was Treasury Wine Estates, which fell as the trade dispute between China and Australia escalated with the announcement from China that Australian wine exports would face tariffs of up to 200%.
The Investors Mutual Australian Share Fund had a strong month, returning +10.7%, which was better than the benchmark’s return of +10.2%. Many of our holdings benefited from the rotation back into quality companies trading on attractive valuations, such as Telstra, Tabcorp, Event Hospitality & Entertainment, Brambles, and Woodside Petroleum. Over the month, we used strength in the share prices of Fletcher Building, NAB and Virgin UK to trim our positions. We added to our positions in good quality companies such as Orica and Woolworths, which we believe remain attractively priced given their prospectsfor the next few years.
Continued record low interest rates, government stimulus and the recovery in many parts of the Australian economy, as lockdowns cease and interstate borders open up, has led to a sweet spot for the Australian equity market, with many companies’ share prices rallying strongly over the past month. Having said this, the outlook for 2021 remains relatively uncertain given the many imbalances in the economy as things normalise. We continue to focus on companies that, in our view, have a strong franchise, experienced and capable management, and a resilient business that can continue to generate healthy cashflows over the next few years.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Latest_Update_IMIS-1-1.pdfOctober, 2020
The Investors Mutual Australian Share Fund had a solid month, gaining +0.7%, although this was below the benchmark’s return of +1.9%. Many of our core holdings had a lacklustre month with Telstra, Amcor, Orica, and Brambles all under pressure. We remain comfortable with all these holdings and used share price weakness to increase our holding in these very good quality companies at what we believe are very attractive prices. Our lower weighting to the major banks also held back our relative performance, however, we remain comfortable with this positioning given the slowing credit growth and continuing squeeze on bank margins as lower interest rates feed through. The local IT sector continues to be significantly overvalued in our view and we continue to find much better value elsewhere.
Over the month we used the Fund’s cash to selectively add to our holdings in good quality companies such as Brambles, Orica, Aurizon and Tabcorp at what we believe are very attractive long-term prices and where we believe the outlook for the next 3 to 5 years is positive going forward.
We continue to focus on companies that, in our view, have a strong franchise, experienced and capable management and a resilient business that can continue to generate healthy cash flows over the next few years. While the Fund’s performance has lagged the sharemarket in recent times, we remain comfortable with the overall quality of the stocks in the portfolio and the Fund’s positioning.
ticker: IML0002AU
commentary_block: Array
factsheet_url:
https://iml.com.au/files/Latest_Update_IMAS.pdf
release_schedule: Monthly
fund_features:
The Investors Mutual Australian Share Fund provides exposure to an actively managed portfolio of quality Australian shares listed on the ASX. The Fund aims to provide to provide a rate of return (after fees and expenses and before taxes) which exceeds the return of the Fund’s Benchmark on a rolling four-year basis.
- Applies IML’s conservative quality and value investment philosophy with a long term focus and aims to deliver consistent returns to clients.
- Conducts detailed in-house research and valuation as part of its overall investment process and applies a Bottom-Up approach to identifying and valuing quality companies.
- Asset allocation range : Australian equities (90% – 100%), Cash (0% – 10%).
- Considered to be a medium to high risk investment.
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