QVE Portfolio Manager’s, Simon Conn and Marc Whittaker, discusses the markets performance during October and the performance of the QVE portfolio.
Subtitles for QVE investment update October 2022.
Hi Simon. So, another month in terms of QVE in the month of October.
Markets are a little bit volatile again. Maybe take us through what you thought about markets
over the course of the month.
Yeah. Look, it’s very strong month for markets.
Really a risk-on market globally.
So I think, investors it was really a global theme
that we saw investors talking about pivot
and thinking that Central Banks globally had done, in
terms of increasing interest rates or that they had
slowed the rate of increase, and that led to a lot of enthusiasm globally.
So I think in the US the quarter earnings season wasn’t
as bad as feared and so we saw a strong rally in the US.
The Dow was up 14%. Euro index up about 9%
But the Nasdaq – which obviously all the tech stocks
have been very strong in the last few years –
it really lagged, returning just under 4%.
So, yeah, I think the strength was broad based.
Our local [ASX] ex-20 sector was up about 6% for the month.
So, look, a lot of strength across the markets.
And also, AGM season was a big story here domestically.
You know, a lot of companies, you know, retailers
in particular, talking about still seeing strength in their consumer set.
That’s right. So a lot of positivity there. But,
importantly, I think for investors, that’s the short term.
It’s really a lot of the consumers haven’t really been seeing the full impact of the interest rate
increases that have been pushed through locally by the Reserve Bank here.
And, you know, it’s really only when those two-year rates roll off,
that we’ll start to see the full impact of the increased cost of living plus interest rates.
on the consumer. So we’re, you know, pretty cautious on that sector.
Yes, So October, obviously QVE, we
lagged a little bit, just on the 4% versus the index.
We did benefit from some of the names that sort of rallied on the back of those
interest rate expectations coming back a little bit.
So the likes of the Charter Hall Retail group and HomeCo Daily Needs REITs,
And we also had a couple of other really strong performers in the portfolio,
so maybe take us through a couple of those.
Yes, so obviously, Bank of Queensland had a good result, and it rallied strongly on the back of that.
Also SkyCity had their AGM, and that was positive,
they talked about, you know, they’re up 10% for the first quarter,
which is a really strong outcome.
That’s actually stronger than pre COVID comps as well, which is good.
Yes, just getting back to that the pre COVID level.
And, you know, so obviously, its trading well, and it’s obviously been a very strong decash generator.
Orica, which had been sold off over the previous few months.
obviously had a bit of a rally as well.
Bit of a bounce – yeah.
And you mentioned Charter Hall and the HomeCo Daily Needs in the REITs sector.
More defensive REITs, you know, those neighbourhood shopping centres.
tend to be highly recurring — Yep. — in their cash flows.
And so, you know, perspectives that, you know, consumers continues to trade well helped those.
Well, I guess what was interesting from my take on markets,
was obviously we’ve seen, you know, lots of really nice quality stocks pull back.
So we’ve had a bit of a rally in some of the market,
but a lot of the what we think is really attractive actually,
hasn’t really performed that well relative to other parts of the market.
So there’s still some, what I think, is some really outstanding value in the market.
So we we did take that opportunity to add to a few names in the portfolio during the month.
Maybe you can take us through a few.
Yeah. Okay.
And so, you know, APA is one we added portfolio over the last few months.
So we can continue to add that stock to the portfolio, trading on over 5.5% yield.
they’re highly recurring. The gas pipeline business is a very resilient business.
The Lottery Corporation had pulled back, you know, below $4
– – That’s right. – – opportunity to add to that position.
There’s been a few cyberattacks and and one that impacted a stock we own was Medibank Private,
you know, we had a small position pre the cyber incident.
Yes. But that, you know, that looks like a pretty short-term
impact on the earnings of the business,
which I don’t think it’s sort of going to have a long term impact.
So that created opportunity of weakness for us to add to that stock at attractive prices.
And then, also, we topped up on GUD I know that’s one that you you’ve been following for a long time.
It’s a favourite Simon,
But, you know, below eight bucks, it looks very cheap. Right?
Yeah, we talk about outstanding value from my point of view.
I think that it certainly meets that description for sure.
Yeah. So maybe the one point I should note was that the highlight of the month
clearly was our dividend announcement at the AGM for QVE.
So pushing the dividend higher on a quarterly basis to 1.3 cents.
Yes. That’s right. So maybe we should talk to them about that.
Yeah. So we flagged, you know, 5.2 cents is the outlook
that is the statement that the board’s made around the dividend
for FY23,
paid quarterly with the first of those quarterly dividends being 1.3 cents,
but paid for the September quarter.
Yep. So that should be a nice
little earner for shareholders over the year.
Yep, that’s the focus, continue to generate the income from the underlying portfolio
and looking to return that to shareholders over time.
Right. Thanks, Marc.
Thank you Simon.
