• Marcus Bogdan

Monthly Investor Update - April 2021



Optimism on Australia’s economic recovery continued to propel equity markets higher in April. Equity returns have been further bolstered by earnings upgrades being the strongest in over 20 years. The strongest EPS momentum sectors are the Banks and Materials which are enjoying a cyclical upswing but also trade on below market PE multiples and provide investors with above market dividend yields. A powerful combination for investors seeking attractive income returns.


The strength in bank share price performance has been underpinned by the magnitude of the recovery in earnings and dividends. The major banks are trading on 1-year forward dividend yield of ~4.5% which compares favourably to the broader Australian share market and with the 10-year bond yield.


The materials sector was also a strong performer in April, with BHP’s share price supported by higher iron ore and copper prices. A positive 3Q 2021 result by BHP lead by iron ore, copper, and oil guidance underpins material upside to earnings for FY21.


Industrial shares also benefited from an improved outlook with Amcor, Brambles and Cleanaway reaffirming the strength in their underlying businesses. 


The healthcare sector was significantly disrupted in the early stages of the pandemic (reduction in elective surgery & clinical testing) is now showing signs of normalisation of activity levels.


This markedly improved economic and business outlook also needs to be balanced by the ongoing threat of COVID-19 and the sharp rise input costs evident in supply chains in recent months.


Indeed, as we move closer to the peak in the momentum of growth, market returns could show signs of moderation. While we see limited upside at the ASX 200 index level, we still see good opportunities at a stock and sector level.


The Portfolio continues to see attractiveness within Quality and Value supported by fair valuations and strong fundamentals. The historically high valuation spread between Value and Growth stocks further supports our thesis for tilting the portfolio toward sectors that offer a higher margin of safety. Hence, our preference for Quality and Value at this point of the cycle.



Blended Australian Equities Portfolio | Monthly Attribution


The Blended Australian Equity portfolio finished the month of April up 3.2% compared to the ASX 200 Accumulation Index up 3.4%. Positive contribution was driven by Cleanaway Waste Management (CWY), BHP Group (BHP), and Northern Star (NST). Whereas Woolworths (WOW), Santos (STO) and Brambles (BXB) weighed on attribution.


Australian Equities Income Portfolio | Monthly Attribution


The Australian Income Portfolio finished the month of April up 3.24% compared to the ASX 200 Accumulation Index up 3.40%. Positive contribution for was driven by Cleanaway Waste Management (CWY), BHP Group (BHP), and Medibank Private (MPL). Whereas Woolworths (WOW), Santos (STO), and Brambles (BXB) weighed on attribution.