The gap between our funds’ PE and the market (ex-Resources and Financials) PE has opened up over the past few months to the widest since we began. This is a result of a general upward re-rating of the industrials and us being underweight four of the bubbles that have emerged since COVID-19 hit: Gold,Tech, Iron Ore and Consumer Discretionary. These four sectors make up around 28% of the market cap of the S&P/ASX 300 index and have outperformed over the last quarter. Growth expectations are high going forward for these sectors.Much of the portfolio resides in stocks with low profit growth expectations but the market environment of the last few years has not been favourable for these stocks. There are however some early signs that profit growth expectations for more expensive stocks are not being met and they are seeing subsequent falls in their share prices. Should this continue the prospect for stocks with low expectations going forward could be changing and our portfolio’s prospects improved.
See attached full report.
The tragic human rights situation currently unfolding in Myanmar holds particular significance to our Sustainability Analyst Georgina. Please read Georgie’s poignant thoughts on her visit to the camp, our expectations on our portfolio companies in regard to Myanmar, and why Ethical Partners has recently signed on to the Investor Statement on Human Rights and Business Activities in Myanmar.
As members of the Investor Group on Climate Change, Ethical Partners Funds Management strongly endorses its new roadmap released today in conjunction with the CDP and the Principles for Responsible Investment. It is entitled: "Confusion to clarity: A plan for mandatory TCFD-aligned disclosure in Australia".
During May 2021 the Fund returned 1.56% versus the S&P/ASX 300 Accumulation Index of 2.31%, underperforming the market by -0.75%. An underweight position in IT and an overweight position in Westpac contributed to relative performance while an overweight position in Consumer Staples and an underweight position in CBA detracted from relative performance.