Strategy Objective: The Rivkin Australian Equity Managed Account 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.
30 April 2020 Equivalent Unit Price – A$0.9246
Welcome investors to the monthly update for the Rivkin Australian Equity Managed Account (RAEMA) for April 2020. The RAEMA rebounded throughout the month of April, gaining 7.34% for the month, ending the month with an equivalent unit price of 0.9246. This follows a sharp fall during the prior 2-months as equity markets sold off aggressively due to the Covid-19 pandemic.
Monthly Commentary
The Strategy begun the month of April with a 27.9% cash position since both the ASX100 and ASX200 Momentum portfolios had begun to reduce exposure to equities. As a reminder, both these portfolios can move to a 100% cash position and do so as the number of up trending stocks available decreases. Throughout the month of April, the momentum portfolios have reduced their exposure even more, going from a combined 25.3% of assets to currently accounting for 16.9% of assets. Normally, this reduction in equity exposure would lead to an increase in our cash position, however we made a discretionary decision not to do so throughout April, due largely to the extremely oversold nature of the market. Instead, we have redirected the bulk of this now available capital position towards ‘market exposure’ via the purchase of an ASX200 ETF, which closely tracks the performance of the broader ASX200 Index. This decision has so far proved to be a good one, as equities continue to recover off the March lows.
At month end, the AEF had a total exposure to ASX listed equities of 69.1%, comprised mostly of individual stock positions but also a 10.2% market position discussed above. If we add the S&P500 ETF position which is component of the LV strategy, total equity market exposure sits at 74.2%. The remaining 25.8% is split between gold (4.6%), bonds (4.7%), and cash (16.5%).To conclude our look at the current portfolio composition, more than 70% of all stock exposure is in 4 sectors at present, being information technology (24.5%), health care (16.3%), consumer staples (16.2%), and communications (14.3%).
Investors may have also noticed that we have taken small positions in several stocks, which fall outside our current strategies. To explain, we have selected what we believe are stocks that may issue attractive capital raisings over the coming weeks and have thus taken a small position so that we can participate as a current shareholder. One of these stocks, Credit Corp (CCP) has so far announced a share purchase plan, of which we intend to submit for the maximum $30K allocation per client. Given the offer price is $12.50, which is a 15% discount to the current price, this offers a great ‘event style’ trade for our investors.
The top performing stocks for the month of April were Pro Medicus (PME), Appen (APX), and Hub24 (HUB) which gained 34.6%, 31.2%, and 22.6% respectively. PME has rallied strongly following the announcement of an on-market share buyback, with the company set to acquire up to 10% of shares on issue, a clear indication that management views recent falls in the share price as on overreaction. Appen on the other hand appears to have weathered the recent storm better than most, with EBITDA figures still forecasted to grow 25% over the prior year.
In terms of the current economic climate, Australia has done an extremely good job of reducing the spread of Covid-19, evidenced by the very low rate of new daily cases. As such, the Morrison government is preparing the economy to reopen from this week. Given that it has been approximately 6 weeks since the restriction measures were first implemented, we believe many aspects of the Australian economy should be able to recover rather quickly. We would imagine that economic data will continue to look very pessimistic over the coming months, however it is important to recognise the difference between backwards looking economic data, and stock market performance, which is always forward looking. Put another way, stock prices will bottom well before the economic data shows improvement.
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 RAEMA Strategy invests predominantly in listed Australian companies whose characteristics satisfy one or more of the strategies that occupy the portfolio. These strategies include: Momentum 100 & 200, being two discreet segments (ASX 100 & ASX 200 ex the ASX 100) of securities that are enjoying positive price trends; Quality, being companies with robust earnings profiles that are priced favourably versus their peers; Income, being securities that provide a high yield relative to the broader market; and Low Volatility, which cushions market shocks.
Important Disclaimer
The Rivkin Australian Equity Managed Account 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
