Archives: Reports
October has started in a very similar vein to September, with the ASX200 already down -1.3% as rising long-term bond yields continue to rattle equities. Over the last week, all eleven sectors closed lower with little respite for the bulls, with the index breaking to fresh lows for 2023, led by weakness in the energy and consumer discretionary names. It was a tough start to the new month for the MM Flagship Growth Portfolio, which holds a few of the standout losers last week courtesy of the aggressive “risk off” sentiment:
Local shares tracked higher into the weekend with the big end of town doing the heavy lifting. Banks were well supported, as were iron ore stocks as China’s Golden week wraps up and reports that the China Mineral Resources Group is getting on the front foot to secure supply for 2024. The Energy rout continued though with oil tumbling this week, a sharp ~8% decline put plenty of pressure on the sector, but’s it’s good from an inflation perspective.
MM increased our position in First Solar (FSLR US) overnight from 4% to 6% into the current market weakness. The move aligned with our current rhetoric that we believe US stocks are looking for a low, and our migration “up the risk curve” is most likely to be executed through increasing existing positions. Following the purchase, we hold 5% cash in our International Equities Portfolio which launched mid-2019 and has enjoyed solid performance since inception, with the intention of opening this portfolio up for direct investment (via Market Matters Invest) this side of Christmas.
Some respite across the ASX today with the market bouncing from the bottom of its trading range despite a fairly brutal night across material and energy stocks, both sectors lagged today but the slack was more than taken up by interest rate sensitive names, property stocks enjoyed the pullback in US bond yields which flowed through to our own bond market today while Tech rebounded nicely from an aggressive 3-week, 13% pullback that has improved the risk/reward materially in the number of the large cap names.
We are adding to our existing position in FSLR
We are selling one underperformer to buy a high quality technology stock.
Last time MM went bargain hunting in the underperformers via Lend Lease (LLC), Magellan (MFG) and Elders (ELD), things didn’t turn out too well. We subsequently closed ELD for a loss (-9%) while we hold LLC (down -11%) & MFG (up +6.7%). Today, we’ve looked at things slightly differently, as discussed at length, bond yields have controlled equities through 2023, with the lack of traction by the small caps illustrating the point perfectly, i.e. small companies often need to borrow to fund growth, and with these costs rising plus the additional premium usually allocated to smaller companies borrowing it’s been hard work for the space to embrace the recovery in say the cashed up US big tech space.
Another sell-off today with the ASX hitting the lowest close in 11-months, although the selling is fairly anaemic in nature and on very light holidays volumes, but still, the direction of least resistance has clearly been down since the ASX 200 peaked at the end of July at 7472, now down ~600pts/8% from that milestone, back at the very bottom of its 12-month trading range.
When markets test our resolve, we stand back and try to “KISS” – keep it simple, stupid. Today’s question is simple: is our roadmap for bond yields wrong, and hence, do our portfolios require restructuring? Fighting the tape can be a dangerous practice, and although we constantly asses portfolios, they get special attention when our views on a very influential piece of the puzzle comes under pressure.
Quite a bizarre day for stocks with the market lower overall, although there were some decent intraday-rallies met with some decent intraday selling; ultimately a very choppy session on low school holiday volumes that saw the ASX 200 track back and test the bottom of its recent trading range – chalking up a 6-month low in the process.
