SUMMARY
The Fund rose 4.6% in January, underperforming the Small Industrials by 1.7% and underperforming the Small Ordinaries by 1.9%. For the 12 months to January, the Fund was down 7.4%, outperforming the Small Industrials Index by 0.4% and underperforming the Small Ordinaries Index by 3.0%.
COMMENTARY
The US market rallied 6.2% in January and Nasdaq rose 10.7%, on a sense that the inflation outlook may have abated, leading to a slower rise in interest rates through 2023. Bond yields fell back, the AUD rose 4% and the gold price rose 7%. The Australian market also rose 6.2% with resources stocks outperforming due to the optimism about global growth.
The volatility of the past 18 months reminds us that the inflation picture is far from settled, and is likely to remain a source of ongoing uncertainty as it evolves through 2023.
Our key positive contributors in January were:
Pinnacle Investments (+19%), Charter Hall (+15%), MA Financial (+10%) all outperformed given their earnings are exposed to stronger asset markets. Healthia (+19%) posted a strong earnings update with patient volumes recovering from the patchiness of the September quarter. Aussie Broadband (+15%) continues to recover from an oversold situation in 2022. Technology stocks globally were especially strong in January, which aided Technology One (+10%) and smaller positions in our portfolio such as Chrysos (+42%).
Our key detractors in January were:
A range of stocks in our portfolio are relatively defensive such as EBOS (-4%), EQT Holdings (-1%), Propel Funerals (-3%), PSC Insurance (-5%), and Freightways (-3%). These stocks mostly outperformed well in 2022 during the market correction, hence it is not surprising they are left behind in such a sharp short-term reversal in sentiment.