Investment Matters

Your portfolio and Trump

Over the holiday break, everything Trump was felt on the markets.  Following his early November shock election, equity markets have been on a quite meaningful upwards trajectory (All Ordinaries up 9% in the roughly 2½ months between his election and inauguration, and the US S&P500 Index increased 6% over the same period).

Equity markets seemed to operate on hope subsequent to the US election - hope that measures such as changes to taxes, and an infrastructure spending spree, will stimulate the US (and thereby the world) economy.   A dampening started in the days leading up to the inauguration; perhaps some consideration of the risks (such as protectionism) has crept in, along with a need to see actual policy details and the reality of the changes Trump is going to implement.  The recent US reporting season has seen some good results - moderating the market's jitters.

Rise Fall of Trump

Your Australian equity securities' portfolio

First Samuel clients have had a positive start to the year.  In fact, the First Samuel's clients' equity portfolios rose an average of +1.1% in January, compared to the market's -0.8%.   At the risk of some modesty, this is somewhat of a record.   Since First Samuel was established in 1999, this is now the longest successive months of positive returns: 12 (the market has had five negative months over the same 12-month period).
 
Of course, a run of monthly positive returns by itself, whilst pleasing, is not a relevant as long-term returns that are (a) positive and (b) comfortably in excess of the market.

First Samuel shares Jan 17Equally, the importance of such returns is their contribution to clients' diversified portfolios.  The performance of all portfolio types (Concentrated, Diversified, Balanced and Conservative) all benefit.

Notable news

There were some notable news stories over the break.  CSL issued a profit upgrade, which the market rewarded (+12.5% on the day of the announcement, to be priced well over the $100 mark).  A sales' surge of immunoglobulins and specialty products led to the upgrade (repeatability in future periods??). 

Bega Cheese investors were also happy little vegemites.  Their share price rose 15.2% on the day the company announced the acquisition of most of Modelez's Australian and New Zealand grocery and cheese business.  Modelez is a Kraft spin-off, and includes Vegemite, Bonox and Kraft products under license (peanut butter, mayonnaise Mac & Cheese and many others).  The market liked the diversification (and thereby decreased exposure to milk price volatility), along with the earnings growth outlook, that the larger company offers.

But there were some major disappointments too.  The Bellamy's saga continued in earnest. After a trading halt, then suspension, it recommenced trading on 11-Jan to fall 19.9% on that day, and a further 17.8% the next day (and remember the 43.5% fall on 2-Dec-16...).  Now Board spills and class actions are on the table.  Messiness. 

Brambles released a profit downgrade.     More significantly, what Brambles experienced doesn't tell us good things about the retail environment in the US, which is a key part of their overall economy.  Brambles' share price fell 15.8% on the day of the announcement.