Strategy Objective: The Rivkin Australian Defensive Income Strategy aims to produce positive average annual returns while seeking to maintain a level of volatility lower than that of the S&P/ASX 200 Accumulation Index over the same investment period. The strategy focuses on income over capital growth and invests in high dividend paying blue chip stocks, hybrid securities, and takeover arbitrage.
31 December 2020 Equivalent Unit Price – A$0.9876
Welcome investors to the monthly update for the Rivkin Australian Defensive Income Strategy (RADIS) for December 2020. For the month of December, the RADIS was relatively flat, with the Equivalent Unit Price ending the month at 0.9876, for a gain of 0.06%.
| PORTFOLIOS | RADIS |
|---|---|
| Latest Month | 0.06% |
| QTD | 5.87% |
| Calendar YTD | -1.70% |
| Financial YTD | 7.35% |
| 12m | -1.70% |
| Inception | -1.24% |
Monthly Commentary
December tends to be a quieter month for equities, with volumes declining markedly, particularly over the last two weeks, as Christmas holidays begin. Despite the decrease in activity, historically, December has also been a very positive one in terms of performance. Assessing the performance for 2020, after an early rally, the ASX200 drifted sideways for much of the month, kept to a range between approximately 6,600 and 6,770, before closing at 6,587.1, for a gain of 1.21%.
There were pockets of the market that performed quite strongly however, with many technology and materials companies doing quite well. This can be seen by the performance of the ASX200 Information Technology and Materials Indices which were up 9.4% and 8.8% respectively. On the other hand, utilities and healthcare stock were weaker, with their indices declining 6.8% and 4.9%.
Overall, equity markets remain buoyant, despite much of the new flow remaining pessimistic. The two major global events at present remain the Covid-19 pandemic, which shows no sign of slowing. More so, despite the rollout of vaccines across the US and UK, infection rates continue to surge, leading to new lockdowns being imposed. Even in Australia, Brisbane has recently announced a 3-day hard lockdown, based on a confirmed case of the more virulent strain of the virus from the UK. Such measures, while necessary, will only serve to prolong the road to recovery within the real economy. The other major event is the transition in power in the US, which is going less than smoothly, thanks to continued claims of fraud from Trump. At least of this front, this should be well behind us come our update at the end of January, with Joe Biden due to be sworn in on Inauguration day, which is January 20th.
In terms of the current composition of the portfolio, there has not been a great change over the past month. Approximately 60% of the portfolio is invested in Blue Chip strategy, which are the top dividend yielding stocks from the ASX50. As a reminder, the composition of this portfolio is assessed monthly, and as of the end of December, there were no changes to make. We continue to allocate 20% of the portfolio to the Low Volatility strategy, which is comprised of Bonds (VAF), Australian dollar Gold (GOLD), and the S&P500 (IVV). We currently have two event trades open, being Vitalharvest (VTH) and Coca-Cola Amatil (CCL). Regarding CCL, the price is currently trading towards the $13 level, above the initial bid price of $12.75, meaning the market seems to be anticipating the likelihood of a higher bid to come. We also believe this is a decent probability, meaning we remain happy holders. For VTH, a higher bid would be a surprise, meaning our current expectation is to receive the $1 currently on the table, which will result in a little over 3% gain from our $0.97 entry price, which is not too bad for a short-term, low risk, arbitrage.
2020 was quite an extraordinary year, both in terms of global events, but also share market performance. The speed of the February to March decline, as well as the relentless recovery since then goes to highlight the near impossible task of predicting stock market performance. It is partly for this reason, i.e. the difficulty in prediction, that so many of our strategies use a systematic approach to guide our investments. As it relates to our momentum strategies, which can and do go to cash when markets roll over, with strong uptrends currently in place, our portfolios remain fully invested as we start the new year.
If you have any questions regarding the above or your investments with Rivkin in general, please call us on 02 8302 3605.
Performance
NAV Price Chart
Monthly Returns
Portfolio Composition
Sector Breakdown
Top 10 Stock Holdings
Strategy Weighting
Strategy Description & Information
The Rivkin Australian Defensive Income Strategy invests predominantly in listed Australian securities whose characteristics satisfy one or more of the strategies that occupy the portfolio. These strategies include: Blue Chips, being high dividend paying stocks from the ASX50, Hybrids Securities, which as the name suggests are a hybrid between a debt and equity instrument, and Events, which include opportunities such as takeover arbitrage.
Important Disclaimer
The Rivkin Australian Defensive Income Strategy is available to wholesale investors only. Past performance is not a reliable indicator of future performance. The value of your investment may rise and fall, and you may not receive the amount originally invested.
Contact
Thomas Silitonga – Director, Rivkin Asset Management
thomas.silitonga@rivkin.com.au – +612 8302 3605
