September, 2023
Equity markets across the globe retraced gains made at the start of the financial year and delivered negative absolute returns in the September quarter as moves higher in global bond yields prompted weakness in equity markets. The S&P/ASX 200 Accumulation index delivered returned -0.8%, outperforming global markets as the S&P 500 returned -3.7% and the MSCI World returned -2.5% in local currency.
Volatility returned during the quarter, firstly throughout August reporting season as companies’ delivered results and then as the macrooutlook dominated headlines and drove uncertainty. Despite the Reserve Bank of Australia and Federal Open Market Committee electing to keep rates on hold during the September meetings the US 10 year yield reached a high of 4.6%, it’s highest level since 2007 while the Australian 10 year yield hit 4.5% as timing for prospective rate cutes was pushed out.
Momentum in the oil price, WTI Oil up over 25% supported the Energy sector (+11.2%), the best performing sector for the quarter, followed by Consumer Discretionary (+5.3) and Financials (+2.4%). The worst performing sectors were Healthcare (-8.6%), Consumer Staples (-5.9%) and Information Technology (-5.8%).
The top 3 performing stocks in the index for the quarter included Megaport (+63.0%) after company management for the networking service business delivered the FY23 result and subsequently provided strong guidance for FY24, Paladin Energy (+50.7%), the uranium miner benefitted from ongoing strength in uranium pricing and G.U.D Holdings (+35.9%) as the car product distributor reported results showing a 32% increase in Net Profit after Tax and Amortisation.
The bottom three performers included Chalice Mining (-62.9%) as the mineral explorer released a disappointing mine scoping study. Core Lithium (-55.0%), underperformed following an operational update that downgraded production guidance for future years and subsequently undertook a capital raising during the month and Sayona Mining (-46.9%), mineral explorer, despite first shipment of spodumene, the company share price continued to underperform due to lower spodumene prices.
A portfolio holding in focus is Altium, which is of one of our preferred holdings in the Software & Services sector. Altium is a global provider of software for Electronic Computer Aided Design, in addition to Parts listing platform, Octopart. Altium delivered a solid FY23 result showing the broader business is performing well. The management team have been successful in executing on their strategy of converting customers from Standalone to Term and SAS based licensing and breaking into the Enterprise customer segment due to their Cloud platform offering.
Solaris continues to see opportunity and growth in Altium, supported by the announcement of multiple Enterprise customers including a significant exclusive deal with Japanese Semiconductor company Renesas.
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The S&P/ASX 200 Accumulation index delivered -0.7% in August outperforming global markets which also delivered negative absolute returns with the S&P500 returning -1.8% and the MSCI World down -1.7%.
August reporting season saw 162 companies deliver results and brought a marked increase in intraday volatility and dispersion between winners and losers. The broader economy has demonstrated resilience as revenue has marginally exceeded expectations however there has been margin compression resulting from headwinds such as labour costs, interest costs, and higher inflation throughout businesses.
The Reserve Bank of Australia (RBA) elected to keep rates on pause and so the cash rate remains at 4.1% Against a backdrop where earnings downgrades outnumbered upgrades, 8 out of 11 sectors posted negative returns for the month.
Consumer Discretionary (+5.7%), Property (+1.6%) and Energy (+0.5%) were the best performers. Utilities (-3.8%), Consumer Staples (-3.2%) and Information Technology (-2.1%), were the worst performing sectors.
The top three performers included Altium (+26.7%) as the company delivered a strong FY23 result and reiterated aspirational 2026 targets, demonstrating that their strategy is working; Inghams Group (+24.3%) as the poultry farmer’s FY23 and future guidance exceeded the market’s expectations and G.U.D Holdings (+24.0%) as the car product distributor reported results showing a 32% increase in Net Profit after Tax and Amortisation.
The worst performers were Chalice Mining (-39.6%) as the share price of the mineral explorer reacted to the announcement of a disappointing mine scoping study; Iress (-38.3%), the financial services software provider delivered a disappointing result and cut their dividend and Core Lithium (-38.3%) as the Lithium explorer reached 12 months lows after undertaking a capital raising during the month.
A portfolio holding in focus is Altium, which is of one of our preferred holdings in the Software & Services sector.
Altium is a global provider of software for Electronic Computer Aided Design, in addition to Parts listing platform, Octopart. Altium delivered a solid FY23 result showing the broader business is performing well. The management team have been successful in executing on their strategy of converting customers from Standalone to Term and SAS based licensing and breaking into the Enterprise customer segment due to their Cloud platform offering.
Solaris continues to see opportunity and growth in Altium, supported by the announcement of multiple Enterprise customers including a significant exclusive deal with Japanese Semiconductor company Renesas.
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The S&P/ASX 200 Accumulation index delivered 2.9% for July, underperforming global markets as the MSCI World returned 3.3% and in the US, the S&P500 returned 3.1% in USD.
Equity markets were supported by improving commodity prices, with Energy names outperforming on the back of stronger prices with Brent Crude Oil up 14.2%. Further, Iron Ore prices were stable over the month while Gold rebounded from its decline in June, up 2.4% for the month Meanwhile, despite strong employment data, the Reserve Bank of Australia (RBA) left cash rates unchanged at 4.10% but noted further increases may be required.
The top-performing sector for the month was Energy (+8.8%) aided by oil prices, followed by Financials (+4.9%) and Information Technology (+4.5%). The worst-performing sectors were Healthcare (-1.5%), Consumer Staples (-1.0%) and Materials (+1.4%)
The top three performers included Megaport (41.3%), after company management for the networking service business delivered the FY23 result and continued to provide positive guidance for future years. Flight Centre Travel (+22.7%), as the travel company upgraded profit guidance, noting better demand from corporate clients and Costa Group Holdings (+21.7%), the share price of the fresh produce company surged after receiving a bid from a Private Equity firm.
The worst performers were Core Lithium (-28.9%), the most shorted stock in the ASX200, underperformed following an operational update that downgraded production guidance for future years. Lake Resources (-25.0%) continued to underperform following a disappointing management update in June, and further announcement of increased capital expenditure. Syrah Resources (-22.7%) underperformed as the graphite producer keeps production paused due to oversupply and low prices for graphite.
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The S&P/ASX 200 Accumulation index delivered 1.0% for the June quarter bringing the index return to 14.8% for the 2023 Financial Year. The local market underperformed the US equity market, as the S&P 500 returned 8.3% in the June quarter and 15.9% for the financial year, driven by ongoing outperformance by technology stocks in the latter half of the period.
The Reserve Bank of Australia (RBA) raised interest rates by 50 basis points during the quarter, bringing the cash rate to 4.10%, and with hawkish commentary and economic data prints not yet indicating a broad economic slowdown, expectations are for further rate hikes to continue. In terms of commodities, the month of June witnessed a reversal of the 12-month trend; Iron Ore up +8.1% for the month vs -7.1% for the year, Brent Crude Oil up +3.1% but down -34.8% for the year whereas Gold retreated -2.2% for the month but returned +6.2% for the year. The top-performing sector for the quarter was Information Technology (+21.1%) buoyed by the strong performance of global technology stocks, followed by Utilities (+5.5%) and Energy (+3.8%). Conversely, the worst-performing sectors were for the quarter were Healthcare (- 3.2%), Materials (-2.5%), and Consumer Discretionary (-1.7%).
The top three performers included Megaport (+75.2%) after company management for the networking service business announced significant upgrades to earnings for the next two financial years, Telix Pharmaceutical (62.6%) the biotech firm provided a positive quarterly update with increased revenue and demand for their diagnostic imaging agent and Life 360 (+53.8%) which provided a positive Q1 update indicating the growing technology safety company is on track to be cash-flow positive this financial year.
The worst performers were Syrah Resources (-50.7%), who continues to underperform following April’s quarterly business update and subsequent capital raising through a convertible note; Lake Resources (-32.6%) whose share price fell post management update that disappointed due to timing delays and Perseus Mining (-30.7%) following an escalation of armed conflict near their goldmine in Sudan and deferral of their final investment decision.
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The S&P/ASX 200 Accumulation index experienced a decline of -2.5% in May, underperforming global equities as the S&P500 delivered +0.2% and the MSCI World delivered -1.25% in local currency. The strength of technology stocks buoyed US equity markets as concerns regarding the US banking sector faded, and focus shifted to artificial intelligence (AI). Notably, NVIDIA, a US tech company, upgraded earnings from AI, and its share price surged over 50%.
The rate-hiking cycle of global central banks continues, with the Reserve Bank of Australia (RBA) increasing by 25 basis points to bring the cash rate to 3.85%. The US Federal Reserve also increased rates by 25 basis points. Meanwhile, commodity prices were under pressure during the month, with Iron Ore down over 4.5%, Oil (WTI) down over 11% and Gold down 1.4%.
Australian technology stocks performed well alongside their US peers, with Information Technology (+11.6%) the clear topperforming sector for the month, followed by Utilities (1.1%) and Energy (+0.2%). Conversely, the worst-performing sectors were Consumer Discretionary (-6.1%), Consumer Staples (-4.6%) and Materials (-4.4%).
The top three performers included Life360 (+34.1%), which provided a positive Q1 update indicating the growing technology safety company is on track to be cash-flow positive this financial year. Lithium miners Lake Resources (+26.2%) and Allkem (+21.2%) also outperformed, with Allkem announcing a merger with US manufacturer, Livent.
The worst performers were Syrah Resources (-26.0%), who continues to underperform following April’s quarterly update and subsequent capital raising through a convertible note; Lovisa (-22.5%), as local and international peers downgraded, impacting the fast fashion jewellery chain and IDP Education (-22.5%) sold off post announcement that their stranglehold in the Canadian market will be opened to competitors, impacting future earnings.
A portfolio holding in focus is Worley, a global provider of project delivery and consulting services to the Energy and Resources industries. Historically, Worley's business primarily involved consulting services for carbon-intensive industries such as Oil & Gas, Resources, and Chemicals, resulting in earnings that were closely tied to the capex cycles of these companies, making them cyclical in nature. However, as the world undergoes a significant transition toward achieving net-zero emissions, Worley has strategically positioned itself as a leader in sustainability. They are poised to benefit from the increasing investment in energy transition and decarbonization initiatives.
Worley offers a diverse range of services in key areas including Carbon Capture and Storage, Hydrogen, and Wind. Currently, approximately 35% of their revenues are derived from sustainability projects, and they have set an ambitious target of reaching 75% by 2026. This commitment was reaffirmed by management during a recent investor day, where they highlighted the strong outlook and margins for sustainability projects.
Solaris expects continued earnings growth, that is less cyclical in nature given the future investment in decarbonisation by energy and resources companies and given Worley's position as market and technical leader in this space.
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The S&P/ASX 200 Accumulation Index returned 1.85% in April. The Reserve Bank of Australia paused rate hikes as they sought time to assess the lagged impact of the previous ten hikes, despite the strong domestic labour market. Investors viewed the pause as supportive for equities and aided the delivery of a positive return for the market for the month.
Throughout the month, mining companies provided quarterly trading updates, with many proving disappointing, citing challenges on production, weather and costs. Materials was the only sector to deliver a negative return, driven by the quarterly updates. The exception was gold companies that outperformed as gold prices continued to rally.
Real Estate (+5.3%) was the top performing sector for the month as the relief in rate hikes was positive, specifically for companies with residential exposure. Information Technology (+4.7%) and Industrials (+4.5%) were also strong performers.
Conversely, the challenging quarterly updates from miners led Materials (-2.6%) to be the worst-performing sector for the month, followed by Utilities (+1.4%) and Energy (+1.7%).
The top three performers included Telix Pharmaceutical (+47.1%), the biotech firm provided a positive quarterly update with increased revenue and increased demand for their diagnostic imaging agent. Megaport (+36.7%) after company management announced significant upgrades to earnings for the next two financial years, and Blackmores (+35.0%) received a takeover bid at a substantial premium, $95, from Japanese company Kirin Holdings.
The worst performers were Syrah Resources (-37.1%), whose share price fell following a disappointing quarterly update and subsequent capital raising through a convertible note; Brainchip (-14.7%), the semiconductor company continues to underperform with full-year results showing another loss. Star Entertainment Group (-11.2%) also underperformed after announcing a downgrade to earnings from challenging operating conditions resulting in a reduction of staff. A portfolio holding in focus is Pilbara Minerals, a hard rock lithium miner producing spodumene in the Pilabara regions of Western Australia. Lithium is seen as a critical mineral for the energy transition, required for batteries and electronic vehicles.
Lithium pricing has been volatile due to supply and demand imbalances but we expect demand to remain strong and for pricing to stabilize.
Within our resources exposure, we predominately invest in companies with tier one assets. By tier one we preference assets that are low cost, high grade, low risk jurisdictions, long life and can generate cash flow through the inevitable commodities cycle. Pilbara ticks all the boxes and with a competent management team who are doing well operationally. Lithium assets are technically difficult to bring on new supply as we have seen recently. Supply is taking longer to come to market.
This is currently to the benefit of Pilbara as they are already in production. Pilbara have close to A$3 billion net cash on their balance sheet and we are excited by their growth ambitions in downstream production Solaris expects continued production growth and cash flow generation from Pilbara Minerals. Pilbara is producing minerals vital for the energy transition.
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The first quarter of 2023 has seen the first cracks of the global rising rate cycle with the collapse of Silicon Valley Bank in the US, and the takeover of Credit Suisse by UBS in Switzerland. The higher bond yields have weighed on equities, but these events were viewed as signs of fragility in the global financial system, and prompted volatility in Australia, with the local markets giving back most of the gains from the strong start to the year, underperforming global equity markets. The S&P/ASX 200 Accumulation index finished the quarter up 3.5%.
Despite the volatility in equity and credit markets, central banks continue to raise rates as inflation continues to print high, albeit declining in Aus. The RBA raised rates for the 9th and 10th consecutive times to bring the official cash rate to 3.6% in Australia, while the Bank of England and the FOMC also raised rates during the period.\ The top-performing sectors were Consumer Discretionary (+11.4%), Communication Services (+9.4%) and Information Technology (+8.1%). The worst-performing sectors were Financials (-3.0%), Energy (-1.0%) and Real Estate (+1.2%).
The top three performers for the quarter were all beneficiaries of take-over bids including Liontown Resources (+95.5%), United Malt Group (+36.9%), and Newcrest Mining (+33.0%). Liontown Resources, a lithium exploration and mining company, received a bid from US company Albermarle at a ~65% premium to its share price, which was rejected by the board. United Malt Group received a takeover bid from Malteries Soufflet and entered exclusive due diligence while gold miner, Newcrest Mining, received a non-binding indicative offer from US entity, Newmont Corporation.
The worst performers were Lake Resources (-44.4%), Brainchip (-36.2%) and Megaport (-34.7%). Lake Resources reached 52- week lows and was impacted by the chairman selling, while Brainchip, developer of AI software delivered a disappointing full year result. Megaport's CEO abruptly resigned, causing the stock to decline 15%.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Monthly-Update-Solaris-Core-Australian-Equity-Fund-Performance-Fee-Option-4.pdfFebruary, 2023
After a solid start to the year, equity markets pulled back in February as the S&P/ASX 200 Accumulation index returned -2.5%, in line with global markets as the S&P500 returned -2.6% and MSCI World ex Australia -2.4%.
Central banks remained hawkish, and bond markets priced higher rates, with the yield on the U.S. 1yr bond reaching over 5% for the first time in 20 years. The Reserve Bank of Australia raised rates again in February, bringing the Australian cash rate to 3.35%. While the macro environment continues to prove a headwind to equities, the Australian reporting season provided an opportunity for further volatility at the sector and company level, as over 300 companies reported during the month. At a sector level, the best performers were Utilities (+3.4%), Information Technology (+2.7%) and Industrials (+1.5%). The worst performers were Materials (-6.6%), Financials ex property (-3.2%) and Energy (-0.8%).
At a company level, two of the top three performers were automobile related, including G.U.D. Holdings (+25.3%) on positive half-year results showing auto sales momentum improving, and Eagers Automotive (+19.9%) delivering strong FY22 results and positive guidance for FY23. Link Administration Holdings (+19.3%) outperformed from news flow on a possible resolution to pending FCA regulatory issues and associated fines.
Conversely, Domino’s Pizza (-33.1%) underperformed after delivering a disappointing result and concerns regarding margin pressure. Mining was one of the worst-performing sectors, led by Lake Resources (-23.3%), impacted by a fall in lithium price and Silver Lake Resources (-22.7%) as gold stocks were impacted by rising real yields.
A portfolio holding in focus is Orica, a global Ammonium Nitrate (AN) manufacturer and technology provider operating across Australasia, the Americas, Europe, and Africa. Disruption in the ammonia market from European curtailments has resulted in higher AN prices globally and on the East Coast of Australia. Orica are positioned to benefit, given the favorable industry structure as Orica is generally one of two main players and will be able to pass on higher AN prices to customers. We expect to see a subsequent uptick in sales and profits, and this is further supported by the cost advantage Orica has with supply of lowcost gas on the East Coast of Australia (gas is a feedstock in making AN). Orica's technology offering is also notable. They are well advanced compared to competitors in their higher margin technology offer. Management have been investing time and capital into broadening their offer which utilizes digital and automated technologies to create safer and more productive blast outcomes for customers. We expect strong earnings growth over the next few years as the benefit of higher AN prices, and a superior technology offering is realized by the focused management team.
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The January effect was in full force as markets bounced back strongly to start 2023. The S&P/ASX 200 Accumulation index delivered 6.2%, underperforming global markets slightly as the MSCI World Developed Markets delivered 6.5% and MSCI Emerging Markets returned 7.7%.
Markets adopted a risk-on sentiment as recession fears subsided on weaker wage data and inflation prints in the US, as equities rose and bond yields fell. The Australian 10yr and US 10yr yields were both at 3.5% at month end, falling 50bps and 30bps respectively over the month.
All sectors, excluding Utilities, delivered positive returns for January led by Consumer Discretionary (+9.9%), supported by better than expected Christmas retail data, followed by Materials (+8.9%) and Property (+8.1%). All underlying constituents in the Utilities sector were negative for the month, leading to a -3% return for the sector.
Within the ASX200 index for January, the top 3 performers were Sayona Mining (+36.8%) on announcement of their North American Lithium operation targeting production of locally sourced lithium in Q1, Pilbara Minerals (+26.7%) outperformed after a strong quarterly update prompting earning upgrades and Corporate Travel Management (+24.6%) performed well on optimism for the travel sector. The bottom three performers include Brainchip Holdings (-15.4%) that underperformed post a disappointing quarterly update and capital raising, Whitehaven Coal (-10.8%) impacted by thermal coal prices and a NSW government announcement regarding regulation of coal prices and Computershare Limited (-9.4%) whose earnings are leveraged to the rate cycle and potential pausing of rate hikes has tempered investors expectations for future earnings growth.
A portfolio holding in focus is Macquarie Group. Macquarie Group provided a third-quarter 2023 financial year trading update early in February, highlighting another “good quarter for the group”, with FY23 year-to-date earnings up on a record FY22 year-to-date. The driver of the improved result was their growing Commodities and Global Markets (CGM) division, which is now expected to be “substantially up” versus FY22. CGM reported strong results across commodities, particularly gas and power, driven by trading, physical execution, logistics and client risk management opportunities from volatile market conditions. What is often underappreciated by the market is the growing scale of this division and management’s canny ability to report ‘peak earnings’ year after year. We believe the increasing frequency of ‘peak earnings’ alludes to a sustainably higher level of CGM earnings than the market may expect, driven by both structural and cyclical factors. CGM has quietly positioned itself as the fifth largest physical gas marketer in North America, continues to grow the business across Europe and sees opportunities to further expand in adjacent markets like Asia. CGM is in a unique position with an ability to leverage off the Macquarie Group excess capital position (>$12b) providing management and the board optionality for continued organic and inorganic growth for the foreseeable future.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Monthly-Update-Solaris-Core-Australian-Equity-Fund-Performance-Fee-Option-2.pdfDecember, 2022
After two months of strong performance, equity markets pulled back in December, and the S&P/ASX 200 Accumulation index finished the quarter up 9.4%.
Inflation and central bank’s reactions drove sentiment in equity markets. A lower-than-expected US CPI print provided relief for equity markets early in the quarter and the market seized on any dovish rhetoric. However, by quarter end, the RBA had raised rates by 0.25% each month, bringing the cash rate to 3.1%. The ECB and FOMC both raised rates by 1.25% in December quarter, while the Bank of Japan paused their long-standing yield curve control leading the market to conclude that the hiking cycle will continue until inflation is under control.
Despite the sell-off in December, all sectors delivered positive returns for the quarter with Utilities (+28.0%) the strongest supported by the bid for Origin, and Materials (+15.2%) benefitting from strong performance of mining stocks with improved commodity prices and potential relaxation of China’s restrictive covid policies. Meanwhile, Consumer Staples (+1.84%) and Health Care (+1.86%) were the worst performing sectors for the quarter.
Within the ASX200 index for the quarter, the top 3 performers were Chalice Mining (+60.3%) which performed well on the back of positive drilling results, Virgin Money UK (+56.9%) outperformed after a strong FY22 result benefitting from rising rate environment and Telix Pharmaceutical (+53.7%) which outperformed noting a significant increase in sales of their Illuccix product in the United States as well as positive results on new kidney imaging process.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Monthly-Update-Solaris-Core-Australian-Equity-Fund-Performance-Fee-Option-1.pdfNovember, 2022
Throughout November, equity markets continued to be driven by movements in bond markets. Having sold off early in the month with the US Federal Reserve raising cash rates by 0.75%, equity markets then soared on a lower-than-expected US inflation print and continued to edge higher for the rest of the month with further support from the Australian inflation print coming in below expectations at 6.9% year on year. The S&P/ASX 200 Accumulation index finished the month up +6.6%, while bonds yields were lower at month end with the Australian 10-year yield finishing the month at 3.5%, despite the RBA raising the cash rate by another 0.25% to 2.85% during November. All sectors in the index posted positive returns for the month, led by Utilities (+20.9%) powered by the bid for Origin, and Materials (+16.3%) supported by iron ore prices and potential relaxation of China's restrictive covid policies. Conversely, Financials ex Real Estate (+2.4%) and Communication Services (+2.1%) were the worst-performing sectors for the month.
During the month, two of the top three stocks, Sandfire Resources (+45.2%) and Champion Iron (+39.0%), were mining stocks that performed well on improvement in underlying commodity prices and further supported by optimism regarding the reopening of China. Origin Energy (+41.1%) also outperformed in response to a $15.5 billion takeover proposal from a consortium led by Brookfield. The bottom three performers included Collins Food Ltd (-18.6%), which underperformed post half-year results indicating significant inflationary impacts on margins, Elders (-18.4%), whose share price fell following the announcement of the retirement of the CEO and Novonix (-16.4%) on concerns of a potential slowdown in electric vehicle demand.
A portfolio holding in focus is Northern Star Resources Limited, a West Australian based gold mining company. Northern Star is run by a high-quality management team, who have proven their operational skills, execution skills and shareholder focused capital management approach. Northern Star owns and operates three gold production centers, and the flagship asset is the super pit located at Kalgoorlie, which we view as very high quality and will benefit from expandable production in future years. Additionally, the risk profile is low compared to peers whose production growth is reliant on a higher risk overseas assets. Company management have demonstrated capital management discipline across both internal growth projects and acquisitions. Prudent capital allocation has resulted in a strong balance sheet, which is in a net cash position, and the company is currently buying back shares on market. In regard to acquisitions, their most recent acquisition was the Pogo Mine in Alaska which controls over 17,000 hectares of mining and exploration leases that contain significant embedded value. Management have had success in improving the recent operational performance at this asset and remain disciplined with respect to future capital expenditure. Northern Star are focused on improving ESG outcomes and have committed to decarbonising their gold production with a target of reducing emissions by 35% by 2030.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Monthly-Update-Solaris-Core-Australian-Equity-Fund-1.pdfOctober, 2022
The S&P/ASX200 Accumulation Index increased +6.0% in October, delivering a positive return but underperforming developed market equities with the MSCI World Index posting a +7.5% return. Equity markets rallied despite economic data continuing to be strong, with the Q3 Australian CPI print at 7.3% y/y, which was the highest in 32 years. The Reserve Bank of Australia raised the cash rate for the sixth straight month bringing the cash rate to 2.6%; the hike was at a reduced margin of 0.25% but any dovish sentiment was balanced by accompanying comments that the central bank is committed to fighting inflation, and that further increases in cash rates are likely.
Financials (+12.0%) were the strongest-performing sector benefitting from the rising rate environment, followed by Real Estate (+9.9%) which bounced following the smaller than expected interest rate hike from the Reserve Bank of Australia and Energy (+9.5%) which rallied with the strength in oil prices during the month (Brent Oil +7.9%). Consumer Staples (-0.2%) and Materials (-0.1%) were the worst-performing sectors for the month.
Within the ASX 200 Index, the top three moves were Novonix (+52.3%) which performed strongly after the announcement of a $150mn grant from the US Department of Energy, Telix Pharmaceutical (+46.5%) after a trading update indicated a significant increase in sales of their Illuccix product in the United States and Liontown Resources (+26.5%), a lithium miner benefitting from ongoing demand in this sector. The bottom three performers included St Barbara (-31.1%), a gold miner whose quarterly results showed production down and costs up, BrainChip (-25.9%) and Megaport (-21.8%), which both underperformed following disappointing quarterly results.
A portfolio holding in focus over the month is Suncorp Group. In July, Suncorp Group announced its intention to sell its banking division to ANZ bank (subject to regulatory approvals over 2023) in order to focus on its core General Insurance operations, which remains one of the two significant general insurance businesses in the Australian and New Zealand markets. Suncorp has been undergoing structural improvement in its Insurance division in recent years (across digitisation, automation and investment in brands) and is well positioned to take advantage of a recovery in industry conditions as insurance premium rates and improving investment yields more than offset the adverse impact of claims inflation and rising reinsurance costs. Industry feedback suggests the sector has become more rational as many of the smaller, more aggressive competitors are becoming constrained from recent insurance catastrophes and rising reinsurance costs. While the heavy rainfall and flooding across Eastern Australia remains a risk to short term earnings, the forecast of an end to La Nina weather conditions by the end of 2022 and the improving industry fundamentals are yet to be priced into Suncorp Group’s value and we see the pending bank sale and its associated release of capital as a strong catalyst for the stock over the next 12 months.
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The S&P/ASX200 Accumulation index fell -6.2% over September, largely erasing the gains from July and August to finish the quarter up +0.4%. Global markets corrected sharply over the quarter, with the S&P500 (-5.3%), the MSCI World ex Australia Index (-6.5%) and the MSCI Asia Pacific ex Japan Index (-13.6%) responding to the aggressive and coordinated hiking cycle of global central banks. Most major central banks raised cash rates during the quarter, including the US Federal Reserve, Bank of England, and the Reserve Bank of Australia and guided to higher cash rates for longer in a commitment to fight inflation. Market volatility was further exacerbated by the UK's ‘mini-budget’, with unfunded tax cuts resulting in a significant sell-off in UK Government Bonds which prompted intervention from the Bank of England. Global bond yields reach their highest levels since pre-financial crisis, with the United States 10-year government bond reaching a high of 4.00% during the month and the Australian 10 year government bond reaching a high of 4.13%.
The top three constituent performers in the Index over the quarter included Pilbara Minerals (+99.1%) which outperformed along with all lithium miners and was buoyed by a successful Battery Material Exchange (BMX) auction. Whitehaven Coal (+95.6%) surged as profitability increased, driven by the considerable moves in thermal coal prices and Life360 (+87.3%) performed strongly when the interim result demonstrated strength of the Life360 application. The bottom three performers included EML Payments (-24.0%) which is undertaking a strategic review amid discovery of fraudulent activity, Domino’s Pizza (- 23.4%) which underperformed during the quarter due to the impacts of inflation and Novonix (-22.8%) was impacted by the derating of high growth segments of the market over the quarter.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Solaris_PerfPFO_Update-9.pdfAugust, 2022
The S&P/ASX200 Accumulation Index rose +1.2% during August, delivering a positive return and outperforming offshore markets, with the S&P500 finishing the month down -4.1% and MSCI World ex Australia Index down -4.2%. As expected, the RBA again raised the cash rate in the August meeting, to 1.85% and hawkish comments from the Federal Reserve indicating rates would remain elevated to combat inflation sparked a sell-off in equities at the end of the month. On a sector basis, Energy was the strongest performer, followed by Materials while Property and Consumer Staples were the worst performers. Reporting season dominated, with more than 90% of ASX companies reporting June results. Relative to consensus expectations, approximately over one third of companies reporting exceeded expectations. However, with the macro concerns of higher rates, inflation pressures and a constrained labour market resulted in an increased number of downgrades for FY23.
The top three moves within the ASX 200 Index were all Metals and Mining stocks as share prices surged for lithium miners, including Lake Resources (+44.4%) and Pilbara Minerals (+31.8%), based on strong sales of electronic vehicles and expected future demand. Oz Minerals (+ 36.6%) performed strongly as the share price rallied following an indicative takeover bid from BHP during the month. The bottom three performers included City Chic Collective (-29.1%), which sold off after a disappointing result and concerns regarding inventory management. Megaport (-25.1%) underperformed, noting they were laying off staff and preparing for rises in direct network costs, while gold miner Ramelius Resources (-25.0%) also underperformed with earnings downgrades post results.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Solaris_PerfPFO_Update-8.pdfJuly, 2022
Following the steep cash rate hikes, long-duration bond yields fell throughout the month, reflecting signs of slowing growth and investor concerns the sharp front-loaded rate hikes will lead to a recession and subsequent cash rate cuts in 2023. The Australian 10-year Commonwealth bond fell 0.60% to 3.06% over the month, which led to the outperformance of yield-sensitive sectors including Software & Services (+15.2%) and Real Estate (+12.1%). The market rally over the month was largely driven by a re-rating of the one-year forward valuation multiple applied to the market as opposed to significant changes in earnings expectations. Materials (-0.66%) was the only negative sector, driven by a decline in commodity prices as growth slowed in the US and lockdowns continued in China, impacting sentiment on the Chinese property sector and demand for iron ore.
Within the ASX 200 Index the top three moves were Zip Co (+158%) after the company announced it was terminating its merger with other buy-now-pay-later company Sezzle to focus on profitability, Megaport (+77.8%) which posted strong quarterly results particularly in Japan and Canada and Telix Pharmaceutical (+63.1%) which reported strong sales following the launch of a new cancer diagnostic imaging agent. The bottom three performers included Coronado Global Res (-14.8%) which underperformed the market after reporting a drop in second-quarter sales volumes, EML Payments (-14.6%) which was impacted after the Central Bank of Ireland identified concerns with its Prepaid Financial Services arm’s risk assessment of stakeholders and Champion Iron (-10.9%) which declined after reporting higher fuel and explosive costs in the previous quarter.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Solaris_PerfPFO_Update-7.pdfJune, 2022
The S&P/ASX200 Accumulation Index fell -8.8% during the month, finishing -11.9% lower for the quarter ending 30 June 2022. The start of 2022 has witnessed some of the worst year-to-date returns on record as investors grapple with inflation, higher interest rates, geopolitical tensions, and an economic slowdown. Despite a sea of red, there has been a clear divergence in global equity returns. US indices have led the decline for the half (S&P500 -20.6%, NASDAQ Composite -29.5%), resulting in Emerging markets outperforming Developed markets. Japan (Nikkei 225 -8.3%) and Australia (S&P/ASX 200 Accumulation - 9.9%) were exceptions and acted somewhat as safe havens for investors.
The sell-off in bond markets continued during the quarter amid stubborn inflation and higher than anticipated interest rate hikes from global central banks. The US 10-year yield moved from 2.34% to 3.01%, with 2-year yields rising from 2.33% to 2.95% and the 10/2-year spread inverted multiple times throughout the period, which has stoked fears of a US recession. The Australian 10-year yield moved from 2.83% to 3.66%, the highest level since 2014. At a sector level Energy was the standout winner during the quarter, supported by higher energy prices and intensified supply constraints resulting from the conflict in Ukraine. Defensives such as Utilities, Health Care and Consumer Staples also outperformed. Information Technology, REITs and Consumer Discretionary sectors underperformed as long-duration assets continue to face headwinds in this higher interest rate environment and as consumer sentiment deteriorates.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Solaris_PerfPFO_Update-6.pdfMay, 2022
Within the ASX 200 Index the top three moves were Polynovo (+30.0%) after the company announced it is close to appointing a new CEO, Allkem (+11.9%) which was supported by the strength in Lithium markets and Codan (+10.8%) after the Board confirmed the company is on track for a record profit in the 2022 financial year. The bottom three performers were CSR (- 21.0%) which underperformed the market due to concerns with respect to the health of the housing and construction sector, Novonix (-21.8%) which was impacted by the de-rating of higher growth segments of the market and AVZ Minerals (-21.2%) which entered voluntary suspension in relation to the finalisation and release of an announcement with respect to its mining and exploration rights at a key project.
A portfolio holding in focus over the month is Mineral Resources, which is performing well across its three key divisions of mining services, iron ore and lithium. We believe the market is not fully appreciating the value of its high-quality lithium business, with the company now a top 5 global lithium producer with a pipeline of significant growth projects. Importantly, relative to other lithium producers and explorers, the key projects are based in Australia which differentiates the company versus many other lithium peers which operate in higher risk jurisdictions including Africa and South America where it is hard to price sovereign risk and execution risk. We are attracted to the experienced management team led by CEO Chris Ellison who is the founder of the company and still maintains a 12% shareholding today. Management have a strong track record of superior capital allocation and strong execution on their projects.
They have built a sector leading mining services business which continues to grow very strongly and will benefit from planned growth in their iron ore and lithium businesses. The company has strategy initiatives to increase the quality of the iron ore business through the development of the Ashburton and Pilbara Hub projects, lowering the cost of production and enabling the operation to be profitable through the cycle. The company has a clear sustainable vision with a commitment to reduce operational emissions to net zero by 2050 and a focus on identifying opportunities to commercial low and zero emission innovations. Relative to other resources companies we are excited with respect to the company’s organic growth profile, superior capital allocation and strong track record on execution.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Solaris_PerfPFO_Update-5.pdfMarch, 2022
The S&P/ASX200 Accumulation Index rose +6.9% during the month, finishing +2.2% over the quarter to 31 March. The fund outperformed its benchmark for the quarter by 1.08%. With US inflation reaching levels not seen since February 1982, bond yields moved sharply higher over the quarter. Australian bond yields followed, and the 10-year Government yield shifted from 1.67% on 31 December 2021 to 2.83% at 31 March, a remarkable move in a short period of time. This drove a de-rating of the longer duration segments of the market including the Software & Services, Real Estate and Healthcare sectors. Commodity prices rose sharply due to heightened geopolitical tensions associated with the Russian invasion of Ukraine, with oil, natural gas and nickel some of the highlights over the quarter (brent oil +37.7%, US natural gas futures +51.3%, and nickel +59.6%). Overall, Australia continues to lead global equity markets this calendar year driven by strong contributions from the Materials, Energy, and Banking sectors.
The top three moves in the Index over the quarter were Whitehaven Coal (+63.0%) which performed strongly due to rapidly rising coal prices as a result of the sanctions placed on Russian coal exports, Woodside Petroleum (+54.0%) which is benefitting from sharply rising oil and gas prices and Champion Iron (+45.9%) which performed well operationally achieving record production despite scheduled maintenance and COVID-19 associated interruptions. The bottom three moves in the Index were ZIP Co (-65.7%) on credit quality concerns impacting the BNPL sector which overshadowed an agreed scrip merger with Sezzle, Pointsbet Holdings (-46.4%) which underperformed the market as a result of the broader de-rating of high-growth segments of the market and Telix Pharmaceuticals (-40.3%) which was impacted by the broader sell-off and de-rating of higher growth Healthcare companies during the quarter.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Solaris_PerfPA_Update-1.pdfFebruary, 2022
Despite being a short month, only 28 days in duration, February was filled with significant macroeconomic and geopolitical developments combined with a robust domestic company ‘results season’. The S&P/ASX200 Accumulation Index rose +2.1% during the month, significantly outperforming the United States S&P 500 and MSCI World indices which fell -3.1% and -2.7% respectively. The fund outperformed its benchmark for the month by 0.36%. Early in the month the US annual inflation rate was published for January confirming a rate of +7.5% driven by strong demand, rising energy costs, labour shortages and supply chain disruptions. This was the highest inflation print in 40 years (since February 1982) and led to a further sell off in bonds globally, with the Australian 10-year government bond yield reaching as high as 2.29% intra-month, a move of +0.40%. Geopolitical threats continued to escalate throughout the month, culminating in the Russian invasion of Ukraine, sending commodity prices including oil, coal and natural gas sharply higher (Brent Oil +10.8%, Thermal Coal +20.2%, Natural Gas Futures +19.1%). Australian equities outperformed offshore markets, supported by strong contributions from the Materials and Banking sectors and a robust company ‘results season’. Corporate results for the period to 31 December 2021 highlighted the underlying strength in the Australian economy where unemployment remains low, labour markets remain tight, and corporate balance sheets are generally in good health. Despite this, management teams highlighted continued COVID-19 related interruptions as lockdowns, labour shortages and supply chain issues are a common theme across most sectors. Although well below levels in the United States, inflation is increasing and is being felt across corporate Australia. Many companies are pushing through higher prices but are feeling the impacts of input cost and transport cost escalation on their margins.
The top three moves in the Index were Cimic (+34.8%) after receiving a takeover proposal from majority shareholder HOCHTIEF Australia, Sims Metal (+28.1%) which reported strong results for the six months to 31 December and ahead of market expectations, and Silver Lake Resources (+25.9%) which announced the closure of the deal to acquire Harte Gold for $102million and was supported by the strength in gold prices. The bottom three moves in the Index were Life 360 (-36.6%), Novonix (-32.9%) and Tyro (-31.5%) which despite having materially different product offerings and business models were all similarly impacted by the broader sell-off and derating of higher growth technology focused companies during the month.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Solaris_PerfPFO_Update-4.pdfJanuary, 2022
The US Federal Reserve sent shockwaves through global markets during January, signalling an intent to raise interest rates and reduce monetary policy accommodation in response to elevated inflation. Both of these intended moves are earlier than market expectations and drove a significant spike in bond yields during the month (the Australian 10-year Commonwealth Government Bond increased from 1.67% to as high as 2.05%), impacting high-growth stocks, long-duration assets and the technology sector in particular. The ASX200 Accumulation Index ended the month down -6.35%, with the Information Technology sector (-18.4%) hit particularly hard as market participants factored in higher discount rates, while the Energy sector (+7.9%) was supported by strength in oil markets (WTI +17.5%, Brent +17.1%). Oil markets are proving resilient with demand in 2022 proving to be higher than expected, as the rapid spread of the Omicron COVID-19 variant has proved less disruptive to transport and travel than the spread of previous variants. Late in the month, BHP Group collapsed its dual listing structure, resulting in a material index event as the BHP Group PLC shares listed on the London Stock Exchange transferred to the Australian Stock Exchange, resulting in the index weight from increasing from ~7.0% to ~11.3%. The positioning for this event resulted in a record daily value traded for the Australian Stock Exchange of $41.6 billion on 28 January 2022 eclipsing the previous peak recorded during the peak of the COVID-19 sell-off in March 2020 of $21.7 billion. In terms of commodity markets, Lithium (+35.9%) continued to appreciate materially during the month, along with Iron Ore (+18.2%) and Oil (+17.1%). The fund outperformed its benchmark for the month by 0.59%.
The top three moves in the Index were Champion Iron (+18.6%) which performed well assisted by the strength in iron ore markets, Beach Petroleum (+17.5%) which was buoyed by strength in oil markets and AGL Limited (+15.6%) experienced a bounce as value appeared following a collapse in the share price over 2020 and 2021. The bottom three moves within the Index were PointsBet Holdings (-31.1%), Megaport (-27.8%) and Promedicus (-27.8%) as all three companies were impacted by the broad-based sell-off in high growth names seen during the month.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Solaris_PerfPFO_Update-3.pdfDecember, 2021
The S&P/ASX 200 Accumulation Index rallied +2.7% in December and +2.1% over the quarter, a positive end to a strong year with the market finishing up +17.2%. The fund underperformed its benchmark for the quarter by 0.44%. The economy roared back to life following the COVID-19 ‘Delta’ lockdowns in September, as high rates of vaccination combined with substantial policy support underpinned the recovery. Retail sales bounced +4.9% in October, driven by fashion and spending at cafes and restaurants which jumped significantly. Job creation has been stronger than expected with almost all of the jobs lost during the Delta lockdown already being replaced. The Australian unemployment rate is at 4.6% and back down to pre-lockdown levels. As we enter 2022 many sectors of the domestic economy are in good health. The emergence of the new Omicron COVID-19 variant added a new element of uncertainty in late November, spreading quickly across the nation. Given the advances in vaccine and treatment technology over the past 18 months, we believe the world is in a strong position to detect, assess and respond to the new variant and do not expect it to derail the recovery. The strong economic activity and heightened demand for goods has led to ongoing capacity constraints in the shipping and logistics industry. These capacity constraints combined with rising energy costs and labour shortages have driven a spike in inflation, which the Reserve Bank of Australia is closely monitoring. The Reserve Bank has signalled less accommodative policy conditions ahead with the end of the asset purchase program expected in May 2022. Commodity markets remained volatile over the quarter with Iron Ore falling materially mid quarter and rallying back to finish up +3.4%. Oil markets experienced a similarly volatile quarter – up +11.4% in October as travel resumed, down -20.8% in November due to the onset of Omicron and then up +13.6% in December as the variant is appearing to be less severe than feared.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Solaris_Core_Aus-EQT_Update-4.pdfNovember, 2021
The S&P/ASX 200 Accumulation Index fell late in the month to finish down -0.5% in November. The fund underperformed its benchmark for the month by 0.34%. As the number of COVID-19 Delta variant cases continued to climb throughout the month, the discovery of the new Omicron variant rattled markets and sent a wave of panic across the globe with equities correcting, bond yields pushing sharply lower and the oil price falling. Given ‘Delta’ is the dominant variant and is relatively well understood, the uncertainty associated with ‘Omicron’ is what spooked markets most. It is clearly highly transmissible, but questions remain as to the level of severity and effectiveness of existing vaccines. While it is early days, indications suggest the variant is less severe than Delta, which would be a positive development in the evolution of COVID-19. Given the advances in vaccine and treatment technology over the past 18 months, we believe the world is in a strong position to detect, assess and respond to the new variant. Globally, inflation continues to remain elevated due to a range of factors including changing lifestyle patterns, government stimulus and supply chain factors. In terms of sector performance, the Materials sector (+6.3%) performed strongly despite softness in the price of iron ore (-6.6%) as investors anticipated a return to stimulus in China, while the Energy sector (-8.3%) was impacted by the collapse in the price of oil (Brent -16.4%) and the Banking sector (-9.3%) underperformed as major banks cited increased pressure on net interest margins due to increased funding costs and heightened competition.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/2111-Ausbil-Active-Sustainable-Equity-Fund-Product-Report_AAP3940AU.pdfOctober, 2021
The S&P/ASX 200 Accumulation Index fell by 0.1% over the month of October, underperforming global markets including the MSCI All-Country World Index +5.0% and the United States S&P 500 Index +6.9%. The fund outperformed its benchmark for the month by 0.02%. Headlines were dominated by moves in interest rate expectations, where expectations of the timing of cash rate hikes from the Reserve Bank of Australia were brought forward, as the economy continues to improve following the COVID-19 ‘Delta’ lockdowns. Investors continue to debate the transitory versus non-transitory nature of inflation which continues to increase year on year. This drove the Australia 10 year government bond yield +0.59% higher to 2.08%, following a +0.33% increase in September. During the month many companies held their annual general meetings which provided an opportunity to update investors on trading conditions. Companies that were impacted by lockdowns in New South Wales and Victoria were positively exposed to re-opening and provided updates that surprised to the upside, while in general companies that benefitted from lockdown buying generally reported softer sales growth rates. Supply chain issues and rising input costs were cited by many companies and continue to be managed closely. In commodity markets Iron Ore remained weak (-4.6%), while oil and energy markets were strong following a period of underinvestment and a spike in demand as global markets re-open (West Texas +11.4%, Brent +7.5%).
The top three moves within the Index were Silver Lake Resources (+26.5%) and Ramelius (+19.1%) rebounded on positive sentiment in the gold sector following a soft September month along with Appen (+20.0%) which performed well and appointed a new Chairman who brings deep experienced to the board. The bottom three moves were EML Payments (-24.2%) which advised it is in correspondence with the Central Bank of Ireland with respect to concerns raised by the regulator, Codan (-21.3%) which provided an update at the company’s Annual General Meeting that was softer than investors expectations and Pendal (-19.6%) after management confirmed that the companies investment products remain in net outflow.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Solaris_PerfPFO_Update-2.pdfSeptember, 2021
The top three moves within the Index were WiseTech Global (+68.2%) which presented a strong set of 2021 financial year results, Whitehaven Coal (+66.5%) benefitted from the rally in coal prices (Newcastle Thermal Coal +44%) and Flight Centre (+44.5%) appreciated as we move closer to the reopening of domestic and international borders. The bottom three moves within the Index were Appen (-33.8%) after management provided a soft outlook in the 2021 full year result, Magellan Financial Group (-32.6%) which retracted following the release of financial results for the 12 months to 30 June 2021 that were softer than anticipated and Polynovo (-31.7%) where growth rates have not been as high as investors previously anticipated due to COVID-19 associated impacts within hospitals.
A portfolio holding in focus that contributed positively to active returns over the quarter is Macquarie Group. In September management provided a trading update confirming improving trading conditions are supporting earnings to be higher than market expectations, with the share price up +4.7% on the day. Macquarie Group remains well-positioned to deliver superior performance over the medium term, with a strong and conservative balance sheet, an exceptional risk management framework and culture, deep expertise in major markets and a portfolio of business that are adaptable to market conditions. Annuity style recurring income is produced from Macquarie Asset Management (which now has over A$693 billion in assets under management) and from Banking & Financial Services, while the market facing businesses of Commodities & Global Markets and Macquarie Capital are well positioned to benefit from improving market conditions. In addition to this, Macquarie is well positioned with its ‘Green Investment Group’ to facilitate capital investment in the ‘Green transition’ through development and investment in projects with specific green objectives, including the reduction of greenhouse gas emissions. Since 2010, Macquarie has invested in or arranged over A$63 billion in over 150 green energy projects that collectively will reduce greenhouse gas emissions by around 200 million tonnes of CO2 equivalent over their lifetime. A portfolio underweight position that detracted from active returns (relative to the Index) over the quarter is Sydney Airport, which received a takeover proposal from a consortium of investors and appreciated +42.3%. Whilst we do not hold Sydney Airport in the portfolio, we hold several companies that have been similarly impacted by the pandemic and are encouraged that other patient long-term investors are seeing the significant outstanding value in a range of listed companies that have been impacted by the pandemic.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Solaris_PerfPFO_Update-1.pdfAugust, 2021
The S&P/ASX 200 Accumulation Index rallied +2.5% over August, marking the 11th consecutive month of gains and the most extended series of successive monthly advances since 1943. The fund outperformed its benchmark for the month by 0.43%. August was dominated by company reporting season, with the majority of the top 300 companies presenting half-year or full-year results. Results for the period to 30 June were broadly strong, however the outlook and trading updates were soft due to the draconian lockdowns in Sydney and Melbourne impacting economic activity. Relative to consensus expectations, approximately 33% of companies reporting exceeded expectations, 33% were in line, and 34% were below expectations. Capital management was a key theme, with solid conditions over the past months enabling a wave of dividends to be declared (over $31.5 billion), combined with over $15 billion in buybacks (over half of which are off-market taxefficient buybacks). In addition to this, mergers and acquisitions activity is heightened, with many stocks subject to corporate activity.
Another critical development over the month was investors increasing confidence in the vaccination program, where momentum continues to build nationally. Key thresholds for re-opening are expected to be met soon and as a result companies exposed to a relaxation of restrictions (travel, physical retail, casinos, toll roads) outperformed during the month. With respect to commodities, heat came out of the iron ore price (-14.3%) as China curtailed steel production due to seasonal factors and a focus on improving air quality, while the oil price (WTI -7.4%) was weaker in anticipation of weakened demand worldwide due to the surge in COVID-19 cases.
The top three moves within the Index included Wisetech Global (+57.0%) which reported high growth in revenue and users combined with a strong outlook of 26%-38% EBITDA growth, Afterpay (+39.2%) appreciated after agreeing to a merger proposal with Square, and Blackmores (+37.4%) which reported underlying earnings growth of 61.2% on the prior year assisted by improving international sales and an underlying business improvement program. The bottom three moves included Champion Iron (-22.5%) and Fortescue Metals (-15.7%) which were both impacted by sharp falls in the price of iron ore and Boral (-15.0%) which highlighted an uncertain outlook as we approach 2022 and expects underlying market conditions to be mixed due to ongoing impacts of COVID-19.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Solaris_PerfPFO_Update.pdfJuly, 2021
The fund underperformed its benchmark for the month by 0.07%. Overweight holdings in BHP Group Limited, IGO Limited and Mineral Resources Limited and underweight positions in Afterpay Limited and Australia and New Zealand Banking Group Limited made a positive contribution to relative performance. The main detractors were overweight holdings in Westpac Banking Corporation, Insurance Australia Group Limited and Altium Limited together with underweight positions in Sydney Airport and Fortescue Metals Group Ltd.
Significant Contributors Afterpay Limited (-18.2%) The buy-now-pay-later payment provider underperformed the market during the month, as investors digested the news of new entrants in the space including a partnership between Apple and Goldman Sachs in the United States, which plans to roll out a ‘pay in four’ service called ‘Apple Pay Later’.
Significant Detractors Sydney Airport (+34.9%) Sydney Airport received a takeover proposal from a consortium of infrastructure investors to acquire 100% of the stapled securities at an indicative price of $8.25 per security. The board subsequently rejected the proposal after it deemed the consideration failed to generate sufficient long-term value for security holders.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Solaris-Core-Australian-Equity-Fund-Update-WHT0012AU-1.pdfJune, 2021
The fund underperformed its benchmark for the quarter by 0.86%. Overweight holdings in Altium Limited, Aristocrat Leisure Limited and Mineral Resources Limited and underweight positions in Sydney Airport and Australia and New Zealand Banking Group Limited made a positive contribution to relative performance. The main detractors were overweight holdings in Woodside Petroleum Limited, Aurizon Holdings Limited, Ramsay Health Care Limited and Lendlease Group together with an underweight position in Commonwealth Bank of Australia.
Significant Contributors
Altium Limited (+38.6%)
The company which specialises in software for the design of printed circuit boards performed strongly, after receiving a takeover proposal from the Nasdaq listed company Autodesk for $38.50. The Altium Board considered that the proposal materially undervalues Altium’s prospects and rejected the proposal.
Aristocrat Leisure Limited (+25.9%)
During the quarter management upgraded earnings guidance for the six months ended 31 March 2021, with normalised EBITDA of $750 million, representing growth of 6% compared to the prior year. The gaming business performed well boosted by stronger than expected consumer sentiment in the United States, while the digital business experienced elevated demand.
Mineral Resources Limited (+41.3%)
The mining services and processing company continued to perform strongly, supported by the elevated price of key commodities including iron ore and lithium combined with elevated mining activity and good operational performance. Management hosted a strategy day which highlighted the future growth prospects associated with the build, own and operate strategy.
Significant Detractors
Woodside Petroleum (-7.5%)
Woodside experienced a soft quarter despite strength in the price of oil (where Brent was up +18.2% over the quarter). Management is progressing towards a final investment decision on the Scarborough project in the second half of 2021 and has around 50% of expected equity production under contract.
Lendlease Group (-11.3%)
Lendlease underperformed the market over the quarter due to the lack of news flow in relation to near term development activity, which was hampered due to the ongoing impacts from COVID-19. The new chief executive Tony Lombardo announced a restructure that aims to streamline the company’s operations to focus on the company’s $110 billion development pipeline.
May, 2021
The fund underperformed its benchmark for the month by 0.39%. Overweight holdings in Westpac Banking Corporation, Aristocrat Leisure Limited and Northern Star Resources Ltd and underweight positions in Xero Limited and Afterpay Limited made a positive contribution to relative performance. The main detractors were overweight holdings in Macquarie Group Limited, Ramsay Health Care Limited, Sezzle Inc. and The A2 Milk Company Limited together with an underweight position in Commonwealth Bank of Australia.
Significant Contributors
Afterpay Limited (-21.1%) The buy now pay later (BNPL) payment provider underperformed the market over May, as high growth companies were impacted by investor concerns that higher inflation data may lead to higher bond yields. Further to this, investors continue to assess the level of competition in the sector given the increasing number of new entrants.
Westpac Banking Corporation (+8.2%) Management published the 2021 interim financial results during the month, where earnings were considerably higher than the prior corresponding period due to a combination of improving net interest margins, improving balance sheet strength and positive impairment provision releases.
Significant Detractors
Commonwealth Bank of Australia (+12.0%) The bank provided a trading update for third quarter ended 31 March 2021. Investors were pleased with the strong balance sheet settings (Core equity tier one ratio of 12.7%) combined with a 2% increase in operating income from continued strong volume growth and an improved net interest margin.
Macquarie Group Limited (-3.2%) Macquarie Group announced a $3,015 million full year profit, which is up +10% on the prior year. Macquarie’s businesses continued to perform well despite challenging market conditions, reflecting the diversity of the underlying operations and focus on prudent risk management.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Solaris_Core_Aus-EQT_202105.pdfApril, 2021
The fund underperformed its benchmark for the month by 0.06%. Overweight holdings in Cleanaway Waste Management Limited, Altium Limited, IGO Limited, Mineral Resources Limited and Sezzle Inc. made a positive contribution to relative performance. The main detractors were overweight holdings in Woodside Petroleum Limited, Aurizon Holdings Limited and Woolworths Group Limited together with underweight positions in Afterpay Limited and Fortescue Metals Group Ltd.
Significant Contributors
Cleanaway Waste Management (+29.5%)
The waste management company attracted investors attention during the month as management successfully negotiated a deal to acquire a portfolio of prized Sydney waste infrastructure assets from Suez. The assets fill a gap in Cleanaway’s network and are expected to be significantly earnings accretive for Cleanaway once the deal completes in 2022.
Mineral Resources Limited (+25.6%)
The mining contractor and producer of iron ore and lithium experienced continued positive momentum supported by strength in the price of iron ore and lithium. Management hosted an investor day during the month which highlighted the companies contracting capabilities and portfolio of quality assets.
IGO Limited (+19.3%)
During the month management announced it has entered into a binding agreement with Regis Resources for the sale of IGO’s 30% interest in the Tropicana Gold Mine for $903 million. This will enable management to concentrate on its strategic focus on commodities critical to the transition to a clean energy future (lithium, nickel, copper and cobalt).
Significant Detractors
Fortescue Metals Group (+13.0%)
During the month the company presented the March 2021 Quarterly Production Report which confirmed strong operating performance contributed to record shipping performance. Earnings are supported by the record iron ore price environment which is leading to significant free cash flow generation for the Australian iron ore miners.
Afterpay Limited (+15.9%)
The buy-now pay-later payment provider announced active customers globally increased by 75% to 14.6 million, driving sales over the March 2021 quarter to exceed the December 2020 quarter with the US recording over $1bn in underlying sales in a single month. Margins remained firm and gross losses remained below historical levels.
Woodside Petroleum (-4.8%)
The West Australian oil & gas producer underperformed the market over the month, as production volumes for the quarter to 31 March 2021 were 2% below the prior corresponding quarter due to impacts from heavy weather. The board announced the CEO will retire from Woodside on 3 June 2021 and is progressing an internal and external search for their next CEO.
November, 2020
The fund underperformed its benchmark for the month by 0.12%. Overweight holdings in National Australia Bank Limited, Woodside Petroleum Limited, Scentre Group and Qantas Airways Limited and an underweight position in Afterpay Limited made a positive contribution to relative performance. The main detractors were overweight holdings in Altium Limited, Sonic Healthcare Limited, Northern Star Resources Ltd and Saracen Mineral Holdings Limited together with an underweight position in Australia and New Zealand Banking Group Limited
Significant Contributors
Scentre Group (+33.3%)
The owner and operator of Westfield malls in Australia and New Zealand performed strongly over the month as the economy entered a re-opening phase. As the lockdown restrictions eased, footfall and rent collection continued to increase, highlighting the quality of the portfolio.
Woodside Petroleum Ltd (+27.7%)
Management hosted the 2020 investor briefing during the month which confirmed the strong balance sheet and attractive investment opportunities that lie ahead. Further to this investor sentiment was buoyed by the re-opening sentiment and expectations that demand will recover when the global economy re-opens.
National Australia Bank Limited (+24.8%)
National Australia Bank performed strongly over the month as the positive vaccine news leads to expectations of an improving asset quality outlook and the potential for the regulator to remove dividend restrictions earlier than investors had previously anticipated.
Significant Detractors
Altium Limited (-4.7%)
The printed circuit-board software firm failed to keep pace with the strong market over the month, despite reaffirming earnings guidance of $76-89 million. Management hosted the annual general meeting during the month and confirmed the strategy to pivot customers from perpetual licenses to term-based subscription services is on track.
Sonic Healthcare Limited (-5.4%)
Sonic Healthcare underperformed the market as it failed to keep pace with the “re-opening rally”. Management hosted the 2020 annual general meeting and confirmed that in Australia, where the pandemic is under control, revenue from the base business (excluding COVID-19 testing revenues) has returned to positive growth.
Australia and New Zealand Banking Group Limited (+22.6%)
The bank rallied over the month as investors anticipate lower than expected bad debts, less loan deferrals and earlier than expected increases in dividends. Supported by federal government stimulus the economy has performed far better than many expected, which has led to lower than expected levels of bad debts.
ticker: WHT0017AU
release_schedule: Monthly
commentary_block: Array
factsheet_url:
https://solariswealth.com.au/adviser/performance/
Bottom left -> SOLARIS CORE AUSTRALIAN EQUITY
FUND (PERFORMANCE FEE OPTION) -> Performance Report
asset_class: Domestic Equity
asset_category: Australia Large Blend - Broad Cap - Passive
peer_benchmark: Domestic Equity - Large Cap Passive Index
broad_market_index: ASX Index 200 Index
structure: Managed Fund
manager_contact_details: Array
fund_features:
Solaris Core Australian Equity PFO’s investment objective is to 3.0% p.a. outperformance of the S&P/ASX 200 Accumulation Index over rolling 3 year periods. Solaris has no consistent bias towards value or growth stocks, therefore the investment style can be described as style-neutral. Solaris picks stocks using fundamental analysis to exploit market inefficiencies in forecasts and valuations. Fundamental analysis and stock selection are optimized by analysts being empowered and rewarded as portfolio managers.