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.
During February 2022 the Fund returned 1.87% versus the S&P/ASX 300 Accumulation Index of 2.09%, underperforming the market by 0.21%. Over the past 12 months the Fund has returned 14.7%, outperforming its benchmark by 4.45% (after fees).