13 Aug 2020
The Fund’s recent positive momentum continued with a net return of +9.9% in July. This was particularly pleasing given the fall in the Small Industrials Index and All Ords’ modest return of less than 1%.
While the market displayed improved stability, there continued to be a significant disparity in performance at a sector level. The chart below shows the performance of the ASX by industry sector over the past 12 months with sectors such as IT and healthcare having materially outperformed more traditional ‘blue chip’ sectors like banking and industrials.
Month in Review
In the early stages of the pandemic we wrote:
“The Fund was particularly active in February and March as the spread and impact of Covid-19 emerged. During that period we repositioned the portfolio, corner-stoned by a fourfold strategy:
The strong recent fund performance has unfolded because of these decisions. Looking forward these strategies remains relevant, however large moves in stock prices and other market gyrations mean individual stock holdings and weightings will continue to be monitored and adjusted accordingly with respect to their perceived risks and expected future returns.
Throughout July, we enjoyed many strong contributions including:
2. Existing businesses held:
3. New holdings added at attractive prices:
4. Cash deployed into attractive opportunities:
The investment environment remains interesting (to say the least) with the obvious economic impacts of Covid-19 and associated declines in business confidence being countered by government stimulus packages and largely buoyant (but somewhat surprising) consumer behaviour.
As we enter August this scenario is being further complicated by reporting season, requiring investors to find a balance between short-term earnings impact and long-term business and financial strength and pitting all this against a backdrop of record low interest rates.
Nevertheless there are many investment sectors thriving in this challenging environment and enthusiastic investor sentiment is further contributing to strong performances which is creating the opportunity to deliver some significant returns (as evidenced by the Fund’s recent strong numbers).
Again the Fund has begun the new month on a positive note and there certainly appears to be no downturn in the number of opportunities being presented at the smaller end of the market.
If you have any questions about the Fund, our current exposures or investment philosophy and strategy please contact us directly.