SUMMARY
The Fund rose 8.7%1 in August, underperforming the Small Industrials by 0.9% and outperforming the Small Ordinaries Indices by 1.5%1. For the 12 months to August, the Fund was down 2.0%1, underperforming the Small Industrials Index by 2.7%1 and underperforming the Small Ordinaries Index by 4.1%.
The past six months have been challenging, however, we are pleased with our performance overall. From the market lows on March 23, the Small Industrials index has risen 52% while our fund has risen 59%.
Full written commentary available HERE
COMMENTARY
Markets continued the relentless rally established from the lows in March with tech stocks again leading the way. The US market rose 7.0% in August, while Nasdaq rose 9.6%. So far in 2020, including the breathtaking collapse in March, the US market has now risen 19.6%, while the Nasdaq is up 47.9%. Valuations have been supported by low interest rates, and the benefits from COVID related isolation accruing to larger companies such as Facebook, Apple, Netflix, Google, etc.
The Australian market rose 3.1%, driven by the tech sector (notably Afterpay up 33% and Wisetech up 36%). Our banks, which make up 18% of the local market, fell 0.6%, and the mining sector underperformed due to softer gold and oil prices. Industrial commodities such as iron ore, nickel, and zinc were very strong on the expectation of stimulus spending (especially infrastructure) contributing to heightened demand. This also pushed the Australian dollar up 3% to US74c.
August featured results from most of our companies, and so is a critical month. We were pleased with most of the results delivered in our portfolio, with many of our companies showing resilience given the recent upheaval. Technology stocks like Hansen, Megaport, and E-Road; insurance brokers AUB Group, PSI Group, and Steadfast; financial services companies such as HUB24 and Netwealth, all showed minimal disruption. Cleanaway (waste removal), Johns Lyng (home repairs), and AFT Pharmaceuticals (pain management medication) also performed well, as did Lifestyle Communities, Moelis, Carsales, and Integral Diagnostics, despite some short term impact on profits.
We have added a range of newer positions where prices were oversold, and where growth rates are improving. It is also worth noting that there are a high number of IPOs coming to market, which should continue given the strong markets. We always approach IPOs cautiously, however, this will no doubt result in new investment opportunities.