Powerwrap’s Model Portfolios – November

 

 

Every month we provide our readers with an update on a few of new and existing Separately Managed Accounts on the Powerwrap platform. Please keep in mind the information disclosed is general in nature and does not take into account your personal situation.

 

Top 10 Largest SMA (FUA)

 

 

Blackmore Capital Equity Investors Monthly Portfolio Update

Commentary

This year the world’s economy is expected to grow by its slowest rate since 2009, according to the International Monetary Fund. Growing concerns that the global economy could further weaken has prompted central banks to ‘do whatever it takes to prevent a recession.’ A new program of monetary stimulus has ushered in a series of global interest rate cuts and the US Federal Reserve announcing it will expand its balance sheet to support liquidity. Equity prices have responded favourably, with the 12-month forward Price Earnings ratio (PER) for the ASX 200 at c.16.5 times, trading well above its 30- year average of 14 times.

Notwithstanding, the muted vitality of Australia’s profit cycle (highlighted by subdued company commentary at the recent AGM season) investors remain unfazed by historically high valuations.

Instead, with an RBA cash rate at 0.75% compared with the ASX 200 dividend yield of c.4%, investors are seeking solace from higher income alternatives. The accompanying table highlights companies held in either the Blended and Income portfolios and the relative attractiveness of their dividend yields compared to the current RBA cash rate.

 

 

Recent changes to the Blended Australian Equities Portfolio

  


Sold Resmed (RMD)

We have sold our position in Resmed following a 40%+ uplift in its share price over 2019.  RMD is currently trading on a forward price earnings ratio (PER) of c.33 times, with its current premium well above its five-year average. On PER to growth basis, RMD is expensive relative to domestic healthcare companies. While RMD’s operational performance has delivered strong growth and market share gains in its masks division, there is a medium-term risk that prices will be negatively impacted by the recommencement of competitive bidding in 2021. Changes to U.S reimbursement levels remains a key risk for industry participants.

 

 


Increasing Healius Ltd (HLS)

Healius (HLS) remains well positioned to be a beneficiary of a greater focus on preventative and primary healthcare. The implementation of the $448.5m 2019-20 Federal Budget measure, will be the first stage of a Primary Health Care 10-year plan. Tangible signs of improving operational and industry trends coupled with undemanding valuation metrics (c.10 times EV/EBITDA) has provided support in adding to the position in HLS.

Increasing News Corporation (NWS)

We have added to our position in News Corporation (NWS). The potential sale of its US Coupons/Inserts business is an important first step in unlocking value across its portfolio.  Trends to monetise and value premium content in its News business through recent agreements with Apple and Facebook provide an important source for new revenue streams. Moreover, there are nascent signs that the decline in its Subscription Video Services (Foxtel) are embarking on the right strategy by offering new differentiated products, particularly in sports. Latency exists with News Corporation’s net cash position combined with its undemanding sum-of-the-parts valuation.

 

Blackmore Capital – Blended Australian Equity Portfolio  |  Australian Equities Income Portfolio

 

The Blended Australian Equity Portfolio finished the month of October up 0.02% compared to the ASX 200 Accumulation Index down 0.35%. Positive attribution for the Blended Australian Equity Portfolio was driven by Brambles (BXB), Ramsay Health Care (RHC), and Caltex (CTX). Whereas, Healius (HLS), Cleanaway Waste Management (CWY), and News Corp (NWS) weighed negatively on attribution.

The Australian Income Portfolio finished the month of October down 0.22% compared to the ASX 200 Accumulation Index down 0.35%. Positive attribution for the Australian Income Portfolio was driven by Brambles (BXB), Caltex (CTX), and Ramsay Health Care (RHC). Whereas, Healius (HLS), Cleanaway Waste Management (CWY), and Alumina (AWC) weighed negatively on attribution.

The Blended Australian Equities Portfolio commenced investing in Feb 2014. Since its inception, the portfolio has achieved a compound annual return of 11.7% compared to the ASX 200 Accumulation Index of 8.4%.

The Australian Equities Income Portfolio commenced investing in May 2014. Since its inception, the portfolio has achieved a compound annual return of 10.3% compared to the ASX 200 Accumulation Index of 8.3%.

To download the fact sheet for the Blended Australian Equities Portfolio click here.

To download the fact sheet for the Australian Equities Income Portfolio click here.