Over the last quarter eight out of ten of our largest overweight positions outperformed including our two largest overweight positions at 31 December 2019; Bega Cheese(+30.6% out performance YTD) and Graincorp (+22.2% outperformance YTD) that were operating at bottom of the cycle conditions (and valuations) for much of the last year but are now seeing improving conditions even amidst the current downturn. With respect to industry sectors the Fund benefited from overweight positions in Consumer Staples and Financials (namely Health Insurance) and an underweight position in Banks. Key detractors over the last quarter included an overweight position in both Consumer Discretionary (namely Services and Retail)and an underweight position in Healthcare.
The Fund’s characteristics of lower leverage (debt) and higher cash flow than the overall market proved more resilient with respect to performance, without performance for the month near the market low for the month on 20 March peaking at +1.78%. With the market rallying +11.8% in the last six trading days of the month, the outperformance fell away but we believe our conservative positioning and focus on strong company fundamentals will again assist in weak markets as we look forward.
Full report attached.
