SUMMARY
The Fund rose 6.2% in October, underperforming the Small Industrials by 1.2% and underperforming the Small Ordinaries by 0.3%. For the 12 months to October, the Fund was down 19.4%, outperforming the Small Industrials Index by 2.3% and underperforming the Small Ordinaries Index by 1.1%.
We recently held a Portfolio and Investment Update webinar, along with Q&A for shareholders, which is available below for your review. CPD points are applicable for Australian Financial Planners HERE.
COMMENTARY
Markets bounced firmly in October following a 15% drop over August and September. Inflation remains the primary driver of this volatility, and is likely to continue to drive wild swings in markets depending on shorter term developments. The US market’s 7.9% rise led global markets in October.
The Australian market rose 6.0% with banks and energy stocks especially strong. Mining companies underperformed due to concerns over Chinese demand following the Chinese party congress, which signalled a mild shift away from infrastructure driven growth in the next phase of Chinese economic development. China’s market fell 16.4% due to ongoing concerns on the zero-covid policy which seems to have locked the country into lockdowns following mild outbreaks.
Corporate activity in domestic technology stocks has picked up recently with well funded corporates and private equity investors making offers for Pushpay, Elmo Software, Nearmap, Nitro Software, Proptech Group, and Readytech,
Our key positive contributors in October were:
Tourism Holdings (+36%) enjoyed a rally after upgrading the synergy expectations from its proposed merger with key competitor Apollo Tourism. Lifestyle Communities (16%) strengthened following an increase in its debt facility signalling confidence in the long term growth opportunity. ALS Ltd (+13%) saw improved sentiment in line with stronger commodity prices. Hansen Technologies (+11%) had been drifting in recent months, with the recent bounce likely a response to recent takeover activity in domestic tech companies. Charter Hall (+13%) rallied in line with the domestic property sector which was up 10% in the month.
Our key detractors in October were:
NIB Holdings (-10%) suffered from indigestion following a capital raising to fund an NDIS services operation. Australian Clinical Labs (-4%) saw a cyber security incident at its recently acquired Medilab operation. Genex Power (-4%) drifted as the market perceives the chances of a competing takeover proposal has slipped with the passing of time. Kelsian (-3%) waned following comments at the AGM that the labour shortages continue to marginally hamper the bus operations. Propel Funerals (-1%) underperformed following a very strong two years’ rally.