September, 2023
The Australian market was not exempt from the decline in global shares. The Real Estate and Information Technology sectors led the market declines given concerns about the impact of higher interest rates for longer. Healthcare and Consumer Discretionary sectors were sold down on worry about the consumer’s ability to tolerate higher inflation and interest rates. The Resources sector proved more resilient given the surprising rise in iron ore prices to US$120 per ton despite a weak Chinese property sector. The only positive sector was Energy on the back of higher oil prices.
The Antares High Growth Shares Fund delivered a return of -3.5% (net of fees) for the month of September 2023, compared to its benchmark’s -2.8% return.
Contributing to performance were overweight positions in Paladin (PDN) and Santos (STO) together with a short position in Orora (ORA). The uranium price rose to a decade high in September and with further increases expected as investors anticipated greater future demand for nuclear energy. PDN’s share price rose by more than 25% in September. The higher oil price helped boost the Santos share price. Early in September, ORA announced the acquisition of global high end wine and spirits glass bottles producer Saverglass for A$2.1bn. Simultaneously it announced it would partially fund this via proposed A$1.3bn institutional and retail equity raisings.
Detracting value were overweight positions in Botanix (BOT), Block Inc (SQ2) and Goodman Group (GMG). During the month BOT announced that the FDA had delayed approval of its Sofpironium Bromide product because the instructions for patients need amendment. While the FDA did not raise any safety, efficacy or manufacturing issues, BOT expects approval is now likely to be delayed until the second half of CY24. SQ2 suffered a small outage in its Square Seller retail point of sale equipment globally which hurt sentiment, while the march up in longer duration interest rates hurt its valuation as discount rates spiked, disproportionately impacting longer duration equities such as SQ2. GMG shares were weaker in September on no particular news. Property related stocks were sold down as bond yields moved higher.
Australia’s economy continues to display significant signs of slowing down with inflation concerns. Retail spending is subdued as consumers struggle with the squeeze from higher prices, rising mortgage interest rates and rents. Consumer annual inflation rose from 4.9% in July to 5.2% in August largely on the back of higher fuel prices according to the ABS monthly indicator. Employment has been a positive surprise with strong job gains in August despite lower vacancies. The Reserve Bank again held the cash interest rate steady at 4.1% but maintained guidance that further interest rate rises may be required to get inflation back to their target range of 2% to 3%.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/fund-profiles-antares-high-growth-shares-fund-2-1.pdfAugust, 2023
Australian shares disappointed in August with a mild decline given concerns over China’s prospects as well as the Australian consumer. The Utilities and Consumer Staples sectors led the market declines given concerns about the consumer’s ability to absorb higher electricity & gas prices as well as rising mortgage interest rates and rents. Information Technology declined in line with a more cautious view after their recent strong gains. Despite a rebound in the iron ore price to above US$110 per ton, the Resources sector posted a -1.8% negative return with concerns over China’s prospects. There were some positives with surprisingly strong gains for Consumer Discretionary and Real Estate on hopes that the Reserve Bank has ceased raising interest rates.
August is also reporting season for most Australian companies and while results were largely in line with expectations, the prospect of rising costs and a slowing economy saw reasonably soft guidance for the FY24 year which flowed through to earnings downgrades. Sector allocation The Antares High Growth Shares Fund returned -3.0% (net of fees) for the month of August 2023, compared to its benchmark’s -0.7% return.
Detracting value were overweight positions in Iress (IRE), Resmed Inc (RES) and Block Inc (SQ2). IRE’s result was accompanied by its fourth material earnings downgrade in 12 months, citing cost pressures and a weaker revenue outlook.
The company also announced that it would suspend its interim dividend. RES’ 4Q result was below market expectations, driven by lower margins and higher costs. There is also some concern that the increased use of Ozempic for weight loss could reduce the prospect of sleep apnoea and subsequent demand for RES’ machines. Compounding this was the release of clinical trial results by Novo Nordisk, the manufacturer of Ozempic that indicated another of its weight loss products, Wegovy, could reduce the risk of serious heart problems and heart-related death by 20%. Having risen by more than 21% in July, SQ2 shares were sold down in August after reporting its 2Q23 results. This was despite the company exceeding expectations and upgrading full year EBITDA guidance. The decline appears to be driven by the outlook provided by management whereby 3Q23 gross margins were decelerating, as well as overall macroeconomic concerns. A material portion of SQ2’s earnings are exposed to transaction volumes Top 10 share holdings (alphabetical order) in small and medium sized businesses, which are adversely impacted by a slowdown in US consumer spending.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/fund-profiles-antares-high-growth-shares-fund-1-1.pdfJuly, 2023
Australian shares made strong gains on lower inflation and hopes that China will pursue more stimulatory policy settings. The energy sector led the market gains as oil prices surged. Financial shares also rebounded with optimism that the Reserve Bank interest rate hiking cycle was coming to an end. Information Technology continued to perform well, fuelled by the mania for AI related shares.
Resources shares gained on China stimulus hopes. But there was some weakness in the Consumer Staples and Health Care sectors given concerns that the Australian consumer is struggling.
The Antares High Growth Shares Fund delivered a return of 2.9% (net of fees) for the month of July 2023, in line with its benchmark.
Contributing to performance were overweight positions in Block Inc (SQ2), Seek (SEK) and AGL. Despite limited stock specific news, SQ2 shares rallied 21.4% as part of the risk-on trade and more positive sentiment on the resilience of the US consumer. SEK benefited from a shift in thinking about the macroeconomic environment. The market has previously been concerned about SEK’s volumes if the unemployment rate were to increase. AGL has enjoyed recent broker upgrades following the strong recovery in wholesale electricity prices.
Detracting value were overweight positions in IGO Limited (IGO) and CSL together with a short position in Woodside Energy (WDS). IGO provided a strong Q4 production and sales update. However, the company also gave FY24 production and capex guidance, of which the latter disappointed the market as it was significantly ahead of expectations. The 14.2% rise in the Brent Crude USD price during July was reflected in a buoyant performance by WDS shares. CSL’s share price has continued to languish since issuing disappointing FY24 guidance in June following news that margin recovery in its Behring plasma collection division would take longer than the market expected.
Australia’s economy is giving mixed signals with robust jobs growth and moderating inflation being countered by weak retail spending. There were strong employment gains in June as the unemployment rate edged down to 3.5% - essentially a 50-year low. Consumer price pressures also moderated in the June quarter with annual inflation coming in at 6.0%. However, the looming price rises for electricity and residential rents in the new financial year still suggest that inflation is a concern. For consumers, the squeeze on budgets from high inflation and rising interest rates has negatively impacted spending as evidenced by the sharp fall in June retail sales. While the Reserve Bank held the cash interest rate steady at 4.1% in July, it guided that further interest rate rises may be required to reduce inflation.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/fund-profiles-antares-high-growth-shares-fund-6.pdfJune, 2023
Australian shares made mild gains in June given signs that inflation pressures were abating and hopes that China will pursue more stimulatory policy settings.
The Resources sector surged on China growth hopes with strong gains in iron ore prices. The Information Technology sector also made strong gains on the back of investors’ enthusiasm for anything remotely connected with AI. Financials rebounded, reversing May’s weakness with signs of resilience in the Australian economy mitigating credit risks. Healthcare was weak as investors became more cautious about the sector’s prospects.
The Antares High Growth Shares Fund delivered a return of 1.4% (net of fees) for the month of June 2023, compared to its benchmark’s 1.8% return.
Contributing to performance were overweight positions in Paladin Energy (PDN), AGL and Botanix (BOT). PDN performed well as its share price rebounded after being sold-down in late May driven by fears of partial government intervention in its key Namibian asset, Langer Heindrich. It also benefitted from more positive sentiment towards nuclear energy as a genuine option in the global quest to drive down emissions from energy production. AGL increased its earnings guidance for FY23 and provided guidance for FY24 that was well in excess of market estimates. BOT announced an agreement to commercialise its topical ECCLOCK treatment for severe underarm sweating in Korea and added that it was expecting FDA approval for the drug in September. The company also hosted an investor presentation during the month in the wake of increased investor interest.
Detracting value were overweight positions in CSL and TPG Telecom (TPG) and a short position in Fortescue Metals (FMG). CSL provided a trading update indicating currency headwinds would impact its FY23 result. More significantly it noted margin recovery in its Behring plasma collection division would take longer than the market expected, as both donor fees and labour cost inflation remain higher than anticipated. This meant that CSL’s FY24 guidance was below consensus and the stock was sold down. TPG Telecom (TPG) detracted from performance after the Australian Competition Tribunal rejected its proposed deal
with Telstra. In the deal, TPG would have gained access to Telstra’s leading mobile network in regional Australia, thus boosting the range and service coverage of TPG brands such as Vodaphone. Optimism that further stimulus would drive Chinese growth saw the iron ore price spike and so too FMG’s share price.
Australia’s economy has displayed more positive signs with strong jobs growth, a rebound in retail spending and inflation moderating. May saw Australia’s employment expand by a robust +75,900 jobs and the unemployment rate edge down from 3.7% to 3.6%. Consumers were also more willing to raise their retail spending in May but this also reflected promotional activity and sales events according to the Australian Bureau of Statistics. Consumer price pressures moderated in May with annual inflation coming in at 5.6% compared to 6.8% for April. However, the looming strong rises in electricity costs and residential rents in the new financial year suggest a painful squeeze on consumer budgets. The Reserve Bank again surprised with another 0.25% interest rate hike in June taking the cash interest rate to 4.1% in the hope of returning inflation back to its 2% to 3% target range.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/fund-profiles-antares-high-growth-shares-fund-5.pdfMay, 2023
Australian shares fell in May as lower commodity prices, higher interest rates and weak consumer spending cautioned investors. The sharpest falls were in the consumer discretionary and staples sectors given signs of a retail recession for consumer spending. The combination of higher mortgage interest rates, rising rents and stubborn inflation pressures is squeezing purchasing power.
There was also notable weakness in the resource sector given lower coal and iron ore prices on China concerns. Financials also disappointed given the prospect of lower profit margins with higher deposit interest rates and more sedate credit demand. Echoing the US market and the surge of investment interest in anything remotely related to artificial intelligence (AI), the Australian Information Technology sector posted a double-digit gain for May. The Antares High Growth Shares Fund delivered a return of -1.2% (net of fees) for the month of May 2023, compared to its benchmark’s -2.5% return. Sector allocation Contributing to performance were overweight positions in Telix Pharmaceuticals (TLX) and Santos (STO) together with an underweight holding in NAB. TLX held its AGM in May at which the company noted its plans to build on the success of Illuccix, which is used in the detection of prostate cancer and also on the results from its Phase III ZIRCON study of TLX250-CDx in clear cell renal cell carcinoma. Management reiterated their strategy and confirmed $100m in R&D investment for 2023. The onset of cold weather and strong spot gas prices has boosted sentiment for gas producers. Several of STO’s plants that experienced outages early this year, including Moomba and Varanus island, have recovered, removing concerns about production. Supply disruptions for competitor Beach Energy may have been another positive for STO sentiment. NAB shares were under pressure after the bank released its first half results for 2023. Despite some positives, including a lift in dividend, the market reacted to comments from the bank on the impact of lower house prices and volume growth amid increased competition. This was reflected in a $393m credit impairment charge.
File:April, 2023
Australian Shares made solid gains in April given the global share rebound and signals from the Reserve Bank for a pause in raising interest rates. The strongest gains were from the AREITs which benefitted from the lower rates and the Information Technology sector which followed its global peers higher. The Resources sector was dragged down by the Materials stocks as iron ore prices corrected on weak steel demand, but this was partly mitigated by gains in Energy and Gold stocks.
The Antares High Growth Shares Fund delivered a return of 2.2% (net of fees) for the month of April 2023, ahead of its benchmark’s 1.8% increase. Contributing to performance was an overweight position in Telix Pharmaceuticals (TLX) and short positions in Rio Tinto (RIO) and Fortescue Metals (FMG). Shares in TLX enjoyed a stellar month after reporting revenue of A$100m for the first quarter of 2023. Consensus broker estimates of revenue for the full calendar year Sector allocation 2023 were A$360m and following the disclosure of first quarter numbers that consensus forecast was increased to A$470m, an upgrade of 30% which in turn drove the stock price up 35%. Despite some positive economic signals from China, steel demand was weak which saw iron ore and metals prices drop in April – as did both RIO and FMG shares.
File:March, 2023
Australian shares slipped into negative territory in March. The sharpest falls were in the real estate and financial sectors given the turmoil in the global banking system and lower bond yields. However, strength in the resource sector on hopes of a Chinese economic recovery helped limit the downside in Australian share markets. There were also gains for communications, consumer discretionary and consumer staples sectors on hopes that the Reserve Bank would pause on further interest rate increases.
The Antares High Growth Shares Fund delivered a return of 0.8% (net of fees) for the month of March 2023.
Contributing to outperformance was an overweight position in Northern Star (NST) together with decisions not to own NAB and Macquarie Group (MQG). NST shares rallied during the month as the US banking crisis saw gold prices increase by 8%. The company provided an update on its Pogo Operation in Alaska where gold production was halted in order to repair damage to the ball mill motor that was discovered during routine repairs. While the disruption is expected to impact production by 20-40k oz in FY23, the company’s production guidance remains unchanged. The global banking turmoil impacted the sector in Australia and NAB and MQG shares were not exempt.
Detracting value were overweight positions in GPT, Goodman Group (GMG) and APM Human Services (APM). There was no company news from GPT or GMG during the month, although sentiment around the real estate sector was generally negative. Despite announcing several new north American contracts during the month, APM shares have continued to languish.
Australia’s economy still appears to be softening judging by more sedate retail spending. Consumers have become more cautious given high inflation and rising mortgage interest rates. There was only a mild rise in nominal retail spending in February, with the annual gain at 6.4% now failing to keep up with inflation. There were some encouraging signs of labour market resilience with stronger job gains in February and the unemployment rate edged down from 3.7% to 3.5%. Also positive was that consumer inflation appears to have peaked, with the new ABS monthly CPI measure showing annual inflation falling from 7.4% in January to 6.8% in February.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/fund-profiles-antares-high-growth-shares-fund-4.pdfFebruary, 2023
Australian shares slipped into negative territory in February. The sharpest falls were in the resource sector with some disappointments over the profit reports of BHP and Rio. Financial shares also fell with the banks being squeezed by lower net interest margins and concerns over falling house prices. Real estate sector shares were also negatively impacted by rising bond yields. There were some positives with Insurers performing well on positive news from Medibank Private together with a general sector lift as higher bond yields drive high investment income given asset class restrictions for insurers. Utilities also delivered solid gains on a higher than expected (albeit lower) revised bid for Origin from Brookfield. Information technology recovered some ground after the sector was savaged in 2022.
The Antares High Growth Shares Fund delivered a return of -3.0% (net of fees) for the month of February 2023. Sector allocation Contributing to performance were overweight positions in Medibank Private (MPL), Aristocrat Leisure (ALL) and not holding a position in NAB. We have maintained our view that the market over-reacted to the potential impact on MPL’s customer retention after its cyber security incident. This was partially vindicated in its half year result as policy numbers stabilised and began to grow again in February, whilst claims inflation was lower than expected. These factors helped support the stock.
ALL held its AGM during the month and reiterated its guidance for 2023 on a reasonably positive outlook. The stock regained much of the ground lost in January. Banks have generally underperformed on concerns about net interest margins peaking amid fierce competition for home mortgages and the prospect of higher bad debts as interest rates increase. Detracting value were overweight positions in Northern Star (NST), Paladin (PDN) and IGO. NST’s results for the six months to 31 December 2022 were generally in line with expectations. But, the decline in the share price was driven by the strength of the US dollar, as US interest rate expectations again began to rise and the subsequent fall in the gold price. A reduction in risk appetite likely contributed to weakness in the PDN share price.
IGO shares reflected the general weakness in resource stocks and the divergence of views on lithium prices. Top 10 share holdings (alphabetical order) Australia’s economy appears to be softening judging by more subdued retail spending and falling house prices. Consumers have become more cautious with high inflation and rising mortgage interest rates. Even the labour market is cooling after the strong jobs growth in 2022 with the unemployment rate edging up from 3.5% to 3.7% in January
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/fund-profiles-antares-high-growth-shares-fund-3.pdfDecember, 2022
Australian shares declined sharply in December. All sectors posted negative returns with the sharpest falls in consumer discretionary and information technology given concerns over growth prospects. Industrials also disappointed given rising interest rates and bond yields. The resources sector was more resilient as iron ore prices rose on China’s recovery hopes. The Antares High Growth Shares Fund delivered a return of -4.0% (net of fees) for the month of December 2022. Contributing to performance was an overweight position in Northern Star (NST) and short positions in Pilbara Minerals (PLS) and Downer EDI (DOW).
NST shares performed well as the gold price continued to increase in December, building on the November gains. Lithium stocks, including PLS, were again weaker in December on concerns about the outlook for lithium prices on falling demand for electric vehicles. In December DOW’s CEO announced his intention to retire in Sector allocation early 2023. A week later the company announced accounting irregularities that saw an overstatement of earnings in its utilities business of some $30m - $40m approximately. This combined with ongoing challenging trading conditions resulted in DOW reducing its earnings guidance. Soon after, ratings agency Fitch announced it was downgrading DOW’s debt rating outlook from stable to negative. DOW shares were sold down sharply.
Detracting value were overweight positions in APM Human Services (APM), Aristocrat Leisure (ALL) and IGO. APM shares dropped sharply in December on the back of mixed news flow. The company announced the acquisition of Everyday Independence, a mobile allied health business which is complimentary to APM’s existing capability and is expected to be EPS accretive from the first year. But a slower than expected ramp up of the UK contract and higher interest costs saw some analyst downgrades and heavy volume traded in the stock. Nonetheless we believe APM is a high-quality operator in a fragmented industry with a history of transitioning successfully through program changes. ALL shares have remained under pressure following the relatively subdued FY23 guidance provided by the company. As well as the general sell down of lithium stocks on fears of falling demand for electric vehicles, IGO announced that a fire in the power station used by its Nova operation would result in production and processing delays. Top 10 share holdings (alphabetical order) Australia’s economy appears resilient judging by solid results for business surveys and the labour market.
Australia’s unemployment rate remained at multi decade lows of 3.4% after the strong job gains in November. However, the dramatic inflation acceleration is concerning with annual inflation running at 6.9% in November. Expected sharp increases in retail electricity and gas prices as well as higher rents and wages suggest that the inflation threat should continue in 2023. The Reserve Bank raised the cash interest rate by a further 0.25% to 3.1% in December and signaled the expectation of further interest rate increases.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/fund-profiles-antares-high-growth-shares-fund-2.pdfNovember, 2023
Australian shares delivered strong gains in November. The sharpest gain was in the Utilities sector given signs that inflation and interest rate pressures were moderating. The Resources sector also surged given the strong rally in iron ore and base metal prices on hopes that China’s economic growth should revive with a less restrictive Covid strategy. There were also solid gains for healthcare, industrials and real estate given lower bond yields. The Antares High Growth Shares Fund delivered a return of 4.2% (net of fees) for the month of November 2022. Contributing to performance was an overweight position in Northern Star (NST), the decision not to own NAB and a short position in Pilbara Minerals (PLS). The gold price enjoyed its strongest rise since May 2021, increasing by over 8.0% during November.
The prospect of the Fed moderating the pace of interest rate hikes was supportive and gold producers, including NST rallied. NAB released Sector allocation its FY22 result in November with higher cash profits and dividend. However, the company flagged that competition in housing lending was likely to intensify and that funding costs were expected to rise. Its shares finished down for the month. PLS announced another positive result for its battery material exchange platform (BMX) and indicated it plans to commence paying dividends in FY23. But news that EV registrations in China fell by more than 20% in October month-on-month, saw PLS and other lithium stocks sold down in November.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/fund-profiles-antares-high-growth-shares-fund-1.pdfOctober, 2022
Australian shares made a strong recovery in October.The sharpest gains were in financial sector shares given solid credit demand and assurances from the Reserve Bank (RBA) that business and household balance sheets were in strong shape. The real estate and consumer discretionary sectors also made robust gains reflecting the comforting commentary from the RBA. There was also a favorable performance from the energy sector on continuing concerns about global supply. The resources sector was more subdued with a slight gain given worries about global economic activity prospects. The Antares High Growth Shares Fund delivered a return of 6.6% (net of fees) for the month of October 2022.
Contributing to performance were overweight positions in Westpac (WBC) and Telix Pharmaceuticals (TLX) together with a short position in Fortescue Metals (FMG). Attractive deposit pricing coupled with solid credit demand and some Sector allocation evidence that institutional investors were reducing their underweight to the sector saw double digit rises from the big 4 banks in October.
TLX released an upbeat trading update during October with growing revenue from its Illucix product and a pipeline for further product approvals. FMG shares were weaker as the iron ore price fell sharply to US$82/Mt in October. This was due to higher supply levels from Brazil which coincided with seasonally lower steel demand in China. Detracting value were overweight holdings in Medibank Private (MPL) and CSL together with not holding a position in NAB. MPL shares finished the month down 19.0% after the company announced it was subject to a cyberattack. While the company expects a relatively small impact on its current half year earnings, costs relating to remediation and possible litigation are not included. Investors were also concerned about the potential for loss of customers and brand damage. CSL shares - like others in the healthcare sector - finished down in October. This was despite a positive update on its Vifor business and an AGM speech by its CEO expressing confidence in CSL’s fundamentals and diverse pipeline to build on its track record of sustainable growth for years to come.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/fund-profiles-antares-high-growth-shares-fund.pdfSeptember, 2022
Australian shares proved sensitive to the global market turmoil as well as the Reserve Bank (RBA) raising interest rates. The ASX’s sharp decline was spread across the board, with all industry sectors recording falls. The weakest performances came from the utilities and real estate sectors given their acute sensitivity to rising interest rates and bond yields. Other sectors hit hard included information technology where valuations are also rate sensitive, industrials and consumer discretionary. More resilient but still in the red was the Resources sector which benefitted from the lower Australian Dollar counteracting the slide in key commodity prices such as iron ore and metals. The Antares High Growth Shares Fund delivered a return of -5.2% (net of fees) for the month of September 2022. Contributing to outperformance were overweight positions in IGO Limited (IGO) and ANZ together with the decision not to own Macquarie Group (MQG). IGO Ltd (IGO) has continued to perform well as demand for lithium remains strong. IGO Sector allocation has continued to perform well as demand for lithium remains strong and is reflected in spodumene prices. Further, IGO’s nickel assets also contributed as prices for the base metals strengthened materially. ANZ’s share price has lagged the other majors in calendar 2022 but did considerably better in September. The company described its 3Q result as pleasing with improved margins across all businesses and tight cost management. MQG’s heavy capital markets exposure combined with the adverse impact on investment banking/advisory activity as mergers & acquisition and new listings activity slows has seen the stock out of favour in September.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/191694255.pdfAugust, 2022
Australian shares outperformed most global markets with the S&P/ASX 200 delivering a small gain. Energy shares and Resources led the market given continued strong demand for gas and coal in the wake of Russian supply concerns and the ongoing push for decarbonisation. There were modest gains also for communication shares and industrials. However, the AREITs were weaker given the sensitivity to rising interest rates and bond yields. August is also reporting season for most Australian companies and this year it was better than feared. Pressures from labor shortages, wage inflation and fuel costs were in line with expectations, however some companies showed resilient revenue growth. Outlook statements were generally not as gloomy with some companies demonstrating effective pricing power. The Antares High Growth Shares Fund delivered a return of 1.7% (net of fees) for the month of August 2022. Sector allocation Contributing to outperformance were overweight positions in IGO Limited (IGO), Santos (STO) and Qantas (QAN). IGO Ltd (IGO) performed well in August. While its result was largely in line with its pre-released production report in July, lithium prices surged in July, and IGO was a beneficiary. STO announced a higher dividend and increased on-market share buyback from $250m to $350m. STO is leveraged to domestic gas and global LNG markets and thus is a beneficiary of the very strong gas price. QAN delivered a better than expected FY22 profit result, including strong operating profit guidance into FY23. Pleasingly, its balance sheet repair has moved ahead of schedule and the company also announced a surprise $400m share buy-back, which pleased the market.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/190873774.pdfJuly, 2022
Australian shares recorded strong gains in July with the S&P/ASX 200 delivering a 5.7% return. Leading the market was the robust surge in the Information Technology and Real Estate sectors given a recovery in risk appetite and fall in long term bond yields. Financial shares also benefitted from bond yields. Consumer discretionary posted a strong performance in July with signs of solid retail spending against the tide of higher interest rates and soft consumer confidence. By contrast, there was a weak performance from the Resource sector, weighed down by concerns over global growth prospects.
The Antares High Growth Shares Fund delivered a return of 6.7% (net of fees) for the month of July 2022.
Contributing to outperformance were overweight positions in Telix Pharmaceuticals (TLX), Austal (ASB) and Goodman Group (GMG). TLX shares rose by more than 60% in July as the company made a string of positive announcements including Sector allocation the US commercial launch of its prostate cancer imaging product Illucix, completion of a 300 person trial of its kidney cancer imaging trial and appointment of a new CFO; this saw a significant lift in consensus earnings upgrades. ASB shares jumped after the company announced it had been awarded a US$3.3b contract for US Coast Guard patrol boats. It simultaneously announced an upward revision to FY22 EBIT guidance. As a fund manager within the real estate sector, GMG performed very strongly responding positively to the lower bond yields.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/190038301.pdfJune, 2022
Australian shares were weak in June with similar falls to their American and European counterparts. The ASX 200 recorded a sharp price fall of 8.8%. The financial and real estate sectors led the market declines given their sensitivity to rising interest rates. The resource sector also disappointed with a large fall given the slide in iron ore and metal prices. The only island in a sea of red ink was a small gain for the consumer staples sector given its perception as a ‘safe haven’. The Antares High Growth Shares Fund delivered a return of -10.1% (net of fees) for the month of June 2022. Contributing to performance were overweight positions in Aristocrat Leisure (ALL), Telstra (TLS) and CSL. After substantial share price falls, several brokers have been positive on leading gaming technology company ALL. Further, the company’s high percentage of offshore earnings means it is a beneficiary of a lower AUD vs USD. TLS shares outperformed in June as it announced it would be raising prices Sector allocation for its customers – viewed as a sign that the overall mobile market was becoming more rational with positive implications for margins.
There were several positive reports on CSL from sell-side brokers during June as plasma collections return to pre-COVID levels and demand for plasma products remains strong. Detracting value were overweight positions in South 32 (S32), Westpac (WBC) and Independence Group (IGO). S32 shares were weaker following falls in the prices of most metals including copper, nickel and zinc on the back of fears of slowing growth and a possible recession. WBC and other banks were sold down in response to the larger than expected rate hike in June and the prospect of more. Investors are fearful the hikes could see a recession and resultant increases in bad debts and mortgage defaults. The share prices of lithium stocks retreated in June on reports of potential medium-term oversupply of lithium following large increases in its exploration and production facilities. IGO shares were not immune
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/189403597.pdfMay, 2022
Australian shares underperformed other developed markets in May. However, this comes after a more resilient performance compared to global share markets this year. For May, there were notable sharp falls in the real estate and information technology sectors in response to higher bond yields.
Consumer staples and consumer discretionary shares were also weak given concerns that rising inflation and interest rates are squeezing household budgets. The resources sector was more encouraging with a modest gain given the persistent strength in commodity prices. The election of the new Labor Government on May 21st seems to have had minimal immediate impact on Australian share markets. The Antares High Growth Shares Fund delivered a return of -2.8% (net of fees) for the month of May 2022.
Contributing to the Fund’s performance were overweight positions in South 32 (S32) and Westpac (WBC) and a short position in CSR. S32 provided an upbeat business and strategy update in May that flagged volume growth in excess of Sector allocation
20% on the prior year. The positive long-term outlook for its diversified commodities portfolio that has a low carbon focus and the company’s attractive dividend yield helped underpin the stock price in May. WBC reported its half year results during May, which despite being below last year pleased the market. The company announced an increase in dividend and reiterated its commitment to cutting costs, both of which were well received by the market. CSR shares were marked down despite announcing a 20% increase in full year earnings and higher-than-expected dividends. While FY23 earnings are expected to be underpinned by the large backlog of homes yet to be built, some brokers have revised their FY24 earnings forecasts to reflect the headwinds facing the housing market and there are growing concerns about the financial health of the construction industry.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/187900324.pdfApril, 2022
Australian shares performed relatively better than their global market peers to record a mild fall in April. The resources sector slipped on lower iron ore and metal prices given concerns over China’s growth prospects. The information technology sector slumped following the weakness on Wall Street. The bright spots were utilities where revenue is typically tied to inflation and also the industrial sector. The Antares High Growth Shares Fund delivered a return of -1.3% (net of fees) for the month of April 2022.
Contributing to the Fund’s performance were overweight positions in Orora (ORA) and Lend Lease (LLC) and a short position in EML Payments (EML). Defensive stocks such as packaging companies like ORA were sought after in April. In addition, ORA hosted an investor day late in the month that was well received. At the end of March, Aware Super announced it had purchased a further 24.9% stake Sector allocation in LLC’s Retirement Living Trust for $490m. The funds will be used to grow the company’s investment platform as well as its development pipeline. EML Payments (EML) shares fell sharply in the last week of April after the company cut its earnings guidance due to problems in its European business
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/187152719.pdfMarch, 2022
Australian shares made strong gains in March. The resources sector surged 9.9% with the benefit of the sharp gains in iron ore and base metal prices. The energy sector made similar gains as oil prices climbed above US$100 per barrel given the Russia – Ukraine conflict. Financial shares also delivered a strong return with continued reassurances from the Reserve Bank that interest rates are likely to remain stable this year. The Antares High Growth Shares Fund delivered a return of 7.0% (net of fees) for the month of March 2022.
Contributing to the Fund’s outperformance were overweight positions in IGO, Sims (SGM) and Incitec Pivot (IPL). IGO is a WA based nickel and lithium producer. With sanctions applied to many of Russia’s industries, certain important metals are now in very scarce supply. Foremost amongst these is nickel, which saw hugely volatile price movements on the London Metals Exchange. Russia supplies Sector allocation around 20% of the world’s premium grade nickel, critical in the use of rechargeable batteries. Hence IGO rallied with the nickel price. SGM also enjoyed a strong month on the back of its better than expected February results. The market is becoming increasingly comfortable with the notion that scrap steel prices will remain elevated for longer as sanctions on Russia impact supplies of iron ore and coking coal. IPL shares reflected the surging global fertiliser prices, some of which reached record highs. These prices were already elevated due to supply constraints and high gas prices but were driven even higher by the Russia -Ukraine conflict (Russia and Ukraine are major players in the global fertiliser markets, and Russia a major supplier of gas).
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/185997152.pdfJanuary, 2022
The Antares High Growth Shares Fund delivered a return of -5.0% (net of fees) for the month of January 2022.1 Australian shares had a disappointing start to 2022 with sharp falls in January. Leading the decline was the Information Technology sector which struggled in the wake of Wall Street reassessing growth prospects. Healthcare and consumer staples were also under selling pressure given that future higher interest rates would reduce their appeal to investors. The few rays of sunshine came from the Resources sector. The energy sector surged given the rapid rise in the oil price towards US$90 per barrel fueled by concerns over Russia – Ukraine political tensions. The big miners were also strongly supported as iron ore prices surged from US$107 to US$137 per tonne with reported shortages of Brazilian supply.
Positives for Fund performance were overweight positions in BHP and Santos (STO) and a short position in Sonic (SHL). BHP and other iron ore producers including RIO performed well as the iron ore price rose on the reported supply shortages. Also significant was BHP’s reunification and end of its London listing on the morning of 31 January which saw very high turnover as its weighting in various indices increased eg from a weighting of around 6% of the ASX 200 to approximately 10%. This means many index and benchmark-aware funds have been and will be buying more of the stock (and consequently have reduced or are reducing their exposure to others). The oil price rose by more than 17% during January. This was reflected in the price of oil stocks including STO. Pathology operators like Sonic have been among the biggest beneficiaries of the pandemic. In January it significantly underperformed the market as the increasing use of Rapid Antigen Tests and evidence that the omicron variant is less dangerous caused investors to realise that PCR testing has likely peaked.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/183169632.pdfSeptember, 2021
The Antares High Growth Shares Fund delivered a return of -0.3% (net of fees) for the month of September 2021. Australian shares declined in September. The resources sector recorded a sharp fall with concern that Chinese property developer Evergrande’s financial woes would weaken future demand for Australian iron ore. (The iron ore price fell by at least 25% for the second consecutive month.) Information technology also disappointed given rising bond yields. Shortages of gas, oil and coal saw energy prices surge and investors looked past ESG concerns to push the sector higher. Consumer Services stocks, including travel and international education that were directly impacted by the pandemic, were also strong as the prospect of re-opening becomes closer.
Contributing to Fund performance were overweight positions in Santos (STO) and South 32 (S32) together with the decision not to own Fortescue Metals (FMG). The rise in energy prices boosted the STO share price. S32’s broad resource exposure to coal, bauxite, alumina and nickel, commodities that have enjoyed substantial price rises, saw its shares perform well during September. In contrast, the 25% fall in the iron ore price saw FMG shares weaker
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/179656473.pdfAugust, 2021
The Antares High Growth Shares Fund delivered a return of 4.6% (net of fees) for the month of August 2021.1 Australian shares delivered a strong return in August. Reporting season was generally positive. The Information Technology sector surged as Square launched a $39b takeover bid for Afterpay. There were also strong gains for the healthcare and financial sectors given the Reserve Bank’s guidance that low interest rates would be maintained. However, resource sector shares were down as iron ore prices slumped by 25% as the Chinese steel industry signaled lower demand.
Contributing to Fund performance were overweight positions in Afterpay (APT) and Wisetech (WTC) and a short position in Fortescue Metals (FMG). US tech giant Square’s $39b bid for Afterpay valued APT at $126.21 per share - a premium of 25% to APT’s previous undisturbed market valuation. WTC’s result delighted investors as margins expanded on lower costs. Earnings forecasts for FY22 were also upgraded. WTC has had its doubters with various offshore short-sellers targeting the business on the basis of its acquisition strategy but this result put paid to those doubts and saw short sellers covering their positions. Shares in iron ore producer FMG were impacted by the drop in the iron ore price despite a record profit and dividend announcement.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/178658641.pdfJuly, 2021
The Antares High Growth Shares Fund delivered a return of -0.1% (net of fees) for the month of July 2021.1 Australian shares made slight gains in July. The resources sector performed well given higher metal prices and a weaker Australian Dollar. The industrial sector, utilities and consumer staples also performed solidly given RBA’s guidance of low interest rates. However, the information technology sector lost ground after a strong June.
Contributing to Fund performance were overweight positions in IGO Limited (IGO) and BHP and a short position in Appen (APX). A strong rally in lithium prices was reflected in IGO’s share price. The market has increased confidence that IGO will be a beneficiary of the drive to electric vehicles following its successful acquisition of a share of the Greenbushes lithium mine and associated downstream processing assets. Materials was the best performing sector during June as base metals prices increased and investors considered the prospects of higher dividend announcements. BHP shares performed well. There was no particular news for APX during the month with its shares reflecting the overall weakness in IT stocks
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/175715355.pdfJune, 2021
The Antares High Growth Shares Fund delivered a return of 2.4% (net of fees) for the month of June 2021.1
Australian shares delivered strong returns in June. The information technology sector made robust gains reversing its slump in May. Communications, consumer staples and consumer discretionary sectors also made strong gains with optimism on the Australian economic recovery. The only negative sector performance came from financials but this follows the sector’s strong 20% gain over the past six months. Contributing to Fund performance were overweight positions in Afterpay (APT) and Telix Pharmaceuticals (TLX) and the decision not to own NAB.
APT announced it had entered into a series of agreements with major US online retailers such as Amazon and Nike. While this announcement is significant, the stock was already enjoying a strong month, rebounding as fears abated that inflation would force an early and sharper rise in longer term bond rates globally, which affects the valuation of longer duration growth stocks like APT. TLX launched a new gallium wave website as part of a campaign to build investor awareness. The company also revealed that the first patient had been treated in the first phase of a clinical study. NAB shares were not exempt as financial shares fell in response to lower bond yields, albeit after a strong run
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/174919606.pdfMay, 2021
The Antares High Growth Shares Fund delivered a return of 3.0% (net of fees) for the month of May 2021.1
Australian shares made healthy gains in May. Bank shares delivered strong returns given solid profit results for the half year on low funding costs and declining debt impairment costs. Consumer discretionary and healthcare also made solid gains with consumer optimism on the Australian economic recovery. Sectors that disappointed included information technology which essentially reversed all of the previous month’s gains. Utilities also fell sharply.
Contributing to Fund performance were overweight positions in Aristocrat Leisure (ALL), Westpac (WBC) and Northern Star (NST). ALL pre-announced a 12% increase in its 1H21 profit after tax. This was driven by very good gaming product performance and buoyed by stronger than expected consumer sentiment and economic conditions in the US and Australasia. The upbeat announcement was viewed very positively by the market. All the major banks provided trading updates in May, with lower impairments driving earnings upgrades across the sector. The gold price rose by more than 8% in May, possibly as a reaction to rising inflation. NST also announced increased gold reserves and resources and an increased share in the central Tanami project.
Detracting value were overweight positions in Afterpay (APT) and Wisetech (WTC) and an underweight position in CBA. There was no particular news from APT but technology stocks were sold down heavily in early May, possibly in response to the market positioning for higher bond yields on the back of strong inflation data especially in the US. The sector regained some of the ground lost as the month progressed, but APT and WTC shares still finished down.
Australia’s economic data suggests promising prospects for 2021. Strong results for business and consumer surveys suggest that Australia’s economic recovery has considerable momentum. Car sales and housing construction activity are showing exceptional strength. The Federal Budget announced a lower budget deficit for 2020/21 with better than expected economic activity. The Budget also provided extended tax benefits for low and middle income earners, incentives for business investment and increased spending measures for health care and infrastructure. The Reserve Bank’s monetary policy settings also remain highly supportive with guidance that interest rates should remain steady until 2024. The latest spate of coronavirus cases in Victoria appears to have driven more widespread vaccine uptake.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/173406834.pdfApril, 2021
The Antares High Growth Shares Fund delivered a return of 4.0% (net of fees) for the month of April 2021.1
Australian shares made strong gains in April. The resource sector returned 5.4% boosted by the surge in commodity prices including iron ore (20%) and copper (13%). The information technology sector also performed well partly buoyed by strong results from the major global technology companies. Sectors posting declines included energy, on the back of the fall in the oil price, consumer staples and utilities.
Contributing to Fund performance were overweight positions in IGO Limited (IGO), Afterpay (APT) and Boral (BLD). IGO’s March quarter report was well received by the market with confirmation that its lithium acquisition was on-track for completion in the June 21 quarter. The company also announced it had agreed to sell its 30% stake in the Tropicana Gold Mine asset to Regis Resources for approximately $900m – regarded by some analysts as a premium price.
Technology stocks were the strongest performers in April, in large part driven by the decline in Australian bond yields, which fell by approximately 10 basis points in April following a similar fall in March. APT released its 3Q21 update which revealed underlying sales were up by 123% in constant currency on 3Q20. The company also noted the successful launch and potential of its new European operations. BLD announced the sale of its 50% share in USG Boral for US$1bn with proceeds to be used to fund a share buyback program
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/171645875.pdfDecember, 2020
The Antares High Growth Shares Fund delivered a return of 1.6% (net of fees) for the month of December 2020.1 Australian shares recorded more modest gains than most global equities markets. While news of a virus outbreak in Sydney in late December served as a dampener, some sectors ended December on a very positive note including Information Technology which reflected the robust gains on Wall Street.
The Resources sector also performed strongly as the iron ore price surged by more than 20% on news of lower Brazilian production. Oil and gold prices also rallied. Utilities and health care sectors declined during the month. Contributing to Fund performance were overweight holdings in Afterpay (APT), IGO Limted (IGO) and Metcash (MTS). The change in market direction helped some of the “COVID-winners” including APT recover their momentum. An upbeat trading update in November by APT and the company’s entry into the S&P/ASX 20 in December also aided positive sentiment.
In early December, IGO announced its intention to acquire a 24.99% indirect interest in Greenbushes, a large, low-cost, hard rock lithium mine in Western Australia and a 49% interest in Australia’s first lithium hydroxide plant, with the acquisition funded through a combination of debt, existing cash and a successful equity raising. Metcash posted solid gains after delivering a robust set of results with strong sales and operating leverage coming through the business. Detracting value were overweight positions in A2 Milk (A2M) and Cochlear (COH) and an underweight position in Fortescue Metals (FMG). Shares in A2M fell during December after the company provided downbeat earnings guidance. While the market had been expecting some weakness in A2M’s sales in 2021 as it struggled to replace the lucrative Daigou channel into China, the update revealed that the Daigou channel weakness has also found its way into the e-commerce channel in China, a bigger hit than had been previously anticipated.
The resurgence of the coronavirus in the northern hemisphere and its potential impact on implant surgery weighed on investor sentiment. In addition, in early December COH lost their last appeal against a USD280m patent infringement judgment in the USA. As a pure iron ore producer FMG’s share price rose strongly as the iron ore price increased by nearly 25% during December. Australia’s economic data continues to strengthen, suggesting a sustainable recovery provided the Sydney virus outbreak is contained. Strong job gains and retail spending were recorded in November with the ending of Melbourne’s virus lockdown.
Business and consumer surveys show very positive responses given the Federal Budget’s investment allowance initiatives as well as income tax cuts. With coronavirus vaccines being rolled out across the northern hemisphere, the imminent inauguration of President-elect Biden in the US and completion of Brexit, the global outlook is positive, although a shadow remains over Australia’s relationship with China.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/163249077.pdfticker: PPL0106AU
release_schedule: Monthly
commentary_block: Array
factsheet_url:
https://www.antarescapital.com.au/home/resource-library/fund-documents
Monthly report
asset_class: Domestic Equity
asset_category: Australian Long Short
peer_benchmark: Domestic Equity - Long Short Index
broad_market_index: ASX Index 200 Index
structure: Managed Fund
manager_contact_details: Array
fund_features:
Antares Prof High Growth Shares aims to outperform the S&P/ASX 200 Accumulation Index (‘Benchmark’) by 5% per annum (before fees) over a rolling five year period. The Fund seeks to enhance returns through a range of investment strategies including long/short positions and active trading. The fund is an actively managed portfolio of Australian listed equities and cash equivalent instruments, with exchange traded derivatives used for efficient portfolio management, to hedge market risks and to enhance returns.