In June, the HNW Australian Equity Portfolio posted a +1.37% gain just behind the ASX 200 TR return of 1.41%. There was minimal news due to companies being in blackout before releasing their six-month financial results in August, except for the last-minute earnings downgrades that crush the spirits of fund managers. Thankfully, the Portfolio avoided the June downgrades from the likes of Domino’s (-18%), IDP Education (-53%) and Reece (-8%).
Over the month, positions in Macquarie Bank (+7%), Woodside (+6%), Medibank (+6%), Lotteries (5%), and Suncorp (+5%) added value. On the negative side of the ledger, Bapcor (-4%), CSL (-3%), and Whitehaven (-2%) hurt performance, all on no news.
Our underweight position in CBA (+5%) continues to hurt. Click on the picture below to feel the pain and understand our thoughts behind the disconnect between its share price and earnings. We reduced our exposure to CBA again in mid-June to 9%. However, the share price continued to run, and its PE multiple expanded to 32 times. In the contest between momentum and fundamentals, momentum is currently winning. CBA now represents 12.5% of the ASX 200; however, even if we thought CBA’s earnings growth warranted this multiple, Portfolio construction rules require us to limit any single holding to below 10%.
In June, the HNW Australian Equities Income Focus Portfolio had another solid month, with a return of +1.86%, ahead of its blended benchmark of +1.02%. We are very pleased with how this Portfolio has performed over the past year. Over the month, positions in Macquarie Bank (+7%), Woodside (+6%), Medibank (+6%) and Suncorp (+5%) added value. On the negative side of the ledger, our LPT positions, Region (-4%) and Dexus Industrial (-3%), were weak after going ex-dividend on 27 June.
Income was healthy in June, with Dyno, Transurban, Charter Hall Retail, Arena REIT, Dexus Industrial and Region all declaring dividends – these will be credited to our investors’ accounts in mid to late August.
