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  • Writer's pictureMarcus Bogdan

Monthly Portfolio Update | October 2020

We are at the nascent stages of an economic recovery in Australia, with the FY20 earnings season marking the trough in corporate earnings and dividends. The AGM season and recent 1Q21 updates has also provided an important boost in supporting an improved outlook for earnings. At a portfolio level, Brambles, Cleanaway Waste Management, Coles, and Healius have provided encouraging trading updates.

In the foreseeable future Australia remains well placed to be a beneficiary of highly accommodative fiscal and monetary policy stimulus, at a time when the economy is starting to reopen. As such, we have tilted the portfolio more toward economic recovery plays, with an Australian earnings focus.

The global manufacturing PMI’s moved higher in October signalling a further recovery in the global manufacturing cycle. We would expect some moderation in the pace of expansion as northern hemisphere economies face the unenviable prospect of pandemic lockdowns. By contrast, we remain constructive on Australia’s recovery as the economy further opens.

The strong uplift in the ASX 200 was driven primarily by a 7.5% rise in the Banks, supported by an uplift in housing loan growth, improving signs on loan deferrals and the prospect of an easing of responsible lending laws. Since 2015 the portfolios have been underweight the sector, however, we feel that the FY20 bank results should represent the nadir in earnings and dividends. While we remain underweight the sector, we have materially increased our exposure to the retail banks, focusing on the largest home lenders in Commonwealth Bank (CBA) and Westpac (WBC).

The Blended Australian Equity portfolio finished the month of October up 0.36%. Positive contribution for the portfolio was driven by Ampol (ALD), Northern Star (NST), and Qube Holdings (QUB). Whereas Healius (HLS), News Corp (NWS) and Ramsay Healthcare (RHC) weighed on attribution.

The Australian Income Portfolio finished the month of October up 0.78%.Positive contribution for the portfolio was driven by Ampol (ALD), Qube Holdings (QUB) and Macquarie Group (MQG). Whereas Healius (HLS), Ramsay Healthcare (RHC) and Brambles (BXB) weighed on attribution.


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