• Marcus Bogdan

Portfolios Changes - Sold Coles| Reduced MQG |Increasing WOW & CSL




Blended Australian Equities Portfolio Changes:


WOW’s supermarket business has consistently outperformed Coles, and notably its online grocery sales momentum of +90% compared to Coles +49% in 3Q21 highlights the leverage in its operating model. The proposed Endeavour drinks de-merger in June provides the favourable catalyst for a capital return between $1.6-$2.0bn to shareholders.


With Woolworths continuing to execute well across its Food and Discount Department Store (Big W) businesses coupled with the prospect of a capital return from the de-merger of Endeavour we have sold our position in Coles and added further to our position in WOW.


We see opportunities in quality stocks that have markedly underperformed relative to the ASX 200 over the last 12 months.


CSL’s underperformance relative to the benchmark has been dramatic over this period, weighed down by depressed plasma collections due to COVID-19 disruptions in its largest market in the US. Plasma disruptions have led to declines of collections of ~20% in FY21, however, recent data suggests that foot traffic in CSL’s US plasma collections has risen materially in recent weeks supported by the successful rollout of the COVID-19 vaccine.


CSL’s supply of plasma is also being bolstered by increasing donor fees by ~30% and the opening of new collection centres to ensure that adequate supply is reaching patient demand. Overall, a recovery in plasma supply should provide greater confidence that CSL’s earnings are well positioned to rebound by FY23. Given nascent signs of improved operating conditions coupled with a depressed share price we added to our position in CSL.


Macquarie Group stock has outperformed CSL by ~17ppts over the year-to-date period and ~55ppts over 12-months, posting returns of 15% and 46% for the respective periods. The FY21 profit result released last week showed growth of 10% year on year and bettered the record FY19 profit, driven by a record contribution from the Commodities and Global Markets division. While we remain positive on Macquarie’s medium term prospects and growth across its diverse range of businesses, this has been a bumper year and we expect the contribution from the more volatile market-facing businesses to moderate. We have therefore taken some profits in Macquarie and directed the proceeds to increasing CSL.