Model portfolio update

By Martin Fowler - September 25, 2018

The long term investment performance of our model equity portfolios continues to be solid.

Part 1: Australian Equities

Commentary:

  • Our Australian Equity model portfolio returned 10.21% over the year ending 30 June 2018 (2.80% below the market index).
  • Strong contributions came from Nextdc (+75%), BHP (+57%), Rio Tinto (+43%), CSL (+38%), Seek (+33%) and Wesfarmers (+32%).
  • Conversely, Telstra (-31%), Ramsay Healthcare (-23%), Integrated Research (-21%) and Challenger (-14%) detracted from performance.
  • Over the last 10 years, the model portfolio has outperformed[1] the ASX200 Accumulation Index by 46%.

FY19 changes:

Out

  • Integrated Research was removed due to management concerns following a disappointing profit downgrade only weeks after advising the market that there were no material issues to disclose.
  • Challenger was removed to reduce financial services exposure.
  • Cochlear was removed on valuation grounds (great company but overvalued in the short run).
  • Nextdc was removed on valuation grounds (share price well above our intrinsic valuation).

In

  • Boral included due to positive outlook for non-residential construction in Australia and favourable residential construction outlook in the United States.  
  • Chorus (CNU) included as fundamentals are appealing. CNUs is the leading telecommunication company in New Zealand and will own 81% of the fibre network once the rollout is complete. We estimate cashflow could be in the order of 60c/share post-rollout, which would make it an attractive proposition at current prices.
     

Part 2: Direct International Equities

Due to the success of our Australian equity model portfolios, we began managing our own direct international equity portfolios in 2016. These were initially rolled out to a selective group of high net wealth clients who had expressed interest in these services. As the pilot period has been successful, these portfolios are now available to most non-platform clients. An update follows.

Commentary:

  • Our International Equity model portfolio returned 23.39% over the year ending 30 June 2018 (11.60% above the market index).
  • Strong contributions came from Apple (+35%), Adobe (+77%), Microsoft (+51%) and Royal Dutch Shell (+48%).
  • British American Tobacco (-21%), Zimmer (-5%), Nestle (-4%) and Johnson & Johnson (-3%) detracted from performance.
  • Zimmer and Harley Davidson were sold during the year and replaced with Abbot Laboratories and Alibaba Group.
  • Monsanto was subject to a takeover offer by Bayer where we elected to take the cash proceeds.
  • Since inception, the model portfolio has outperformed[1] the MSCI World (ex-Australia) (Local currency) Index by 17%. 

FY19 changes:

In:

  • No additions.

Out:

  • Monsanto due to takeover by Bayer.

[1] Disclaimer: Past performance is not a reliable indicator of future performance.
[1] As per footnote 1.

 

Copyright © 2018. The information provided is not personal advice. It does not take into account the investment objectives, financial situations or needs of any particular investor and should not be relied upon as advice. While the information is provided in good faith and believed to be accurate and reliable at the date of preparation, we will not be held liable for any losses arising from reliance thereon. We recommend investors consult their personal financial adviser to discuss suitability and application to their individual circumstances. Advisors at Pitcher Partners Sydney Wealth Management are authorised representatives of Pitcher Partners Sydney Wealth Management Pty Ltd, AFS & Credit Licence number 336950.

Contact our experts


Other articles


 

Top of Page







IN THIS SECTION:


Rob Southwell

Rob Southwell's picture

Sydney

Managing Partner and Partner – Private Business and Family Advisory


> View profile

Michael Minter

Michael Minter's picture

Newcastle

Managing Partner


> View profile

Leon Mok

Leon Mok's picture

Perth

Managing Director


> View profile

Brendan Britten

Brendan Britten's picture

Melbourne

Managing Partner and Executive Director/Partner- Business Advisory and Assurance


> View profile

Nigel Fischer

Nigel Fischer's picture

Brisbane

Managing Partner - Private Business and Family Advisory


> View profile

Tom Verco

Tom Verco's picture

Adelaide

Managing Principal - Private Business and Family Advisory


> View profile



Partnership fraud

SUCCESS

Paperwork and independent advice saves partnerships from fraud

Discover more

Kia Ora Horse Stud

CASE STUDY

Pitcher Partners fills a Financial Manager gap to keep the business on track

Discover more

Fuel Injection Company Administration

LEADERSHIP

A fuel injection company began life as an Australian public company before being acquired by a UK publicly listed company while in the research and development stage of a “green...

Discover more



@PitcherPartner FAMILY FUN | Kids & parents alike had a wonderful day out at our Perth firm's recent Family Day. Held at the Landsd… https://t.co/jmPJWi3daC