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 July 2020 Equivalent Unit Price – A$0.9357

Welcome investors to the monthly update for the Rivkin Australian Defensive Income Strategy (RADIS) for July 2020. The portfolio posted gains of 1.71% in July, with the Equivalent Unit Price (EUP) ending the month at 0.9357. Overall, July was a considerably quieter month for Australian equities, with the ASX200 confined to a relative tight trading range centred around the 6000 level. The reduction in volatility is quite welcomed however, considering what 2020 has been like to date. By month’s end, the ASX200 Accumulation Index gained 0.50%.

Monthly Commentary

Discussing the broader market environment, equity prices have remained largely well supported despite it becoming obvious that the Covid-19 pandemic is not going away anytime soon. Just this week, Melbourne has had to re-enter a Stage 4 lockdown to reduce the daily number of new cases, which has reached above 700 on several days. Nevertheless, equity markets have not reacted to this in a negative way, but instead have found good support at the 6000 level, for the ASX200.

There has been no change to the Blue-Chip portfolio at the end of July, with the current top 10 ranked stocks remaining unchanged. As of month-end this strategy comprises 34.0% of total assets, which is lower then typical, the reason being is that over recent months, we have reduced our exposure to some Blue-Chip stocks in order to free up capital to take several takeover arbitrage opportunities. Nevertheless, just this week, we have added AGL Energy (AGL) and Commonwealth Bank (CBA) back to the portfolio, which takes the number of Blue Chip stocks held to 9, and the weight of the strategy in the portfolio back to approximately 45%.

From the Blue-Chips, it has been the major miners which have contributed the bulk of the gains over the past month, with Fortescue Metals Group (FMG) leading the way with a 25.7% gain in July, while Rio Tinto (RIO) and BHP (BHP) gained 4.1% and 2.6% respectively. As a reminder, many of the large cap ASX listed stocks pay dividends throughout August and early September, meaning we should be seeing some cash hitting the account over the coming weeks.

Looking at the remaining makeup of the portfolio, we currently hold a 28.5% weighting to hybrid securities, 19.5% to event-style opportunities, with the balance of 18.0% in cash.

For the event strategy component of the portfolio, July was a very rewarding month with new takeover offers for two of our holdings, being Cardinal Resources (CDV) and Zenith Energy Ltd (ZEN). While our other arbitrage trades in OneVue (OVH) and Opticomm (OPC) continue to progress through to completion, where we expect to end with pleasing low-risk returns.

Looking to the weeks and months ahead, we discussed in the June update the possibility of a period of sideways trading to develop, which is often the case after a strong rally. This has occurred, with both the ASX200 and S&P500 consolidating for several weeks. Such a pause in a trend is often a healthy development, making the trend more sustainable over the longer term. And although the Covid-19 pandemic continues to grow, in terms of the number of infected people, equity markets are currently pushing ahead regardless.

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