posted in: Building Wealth

Montara Wealth Investment Update – February Quarter 1 2024


Key points

  • Inflation – investors are anticipating meaningful interest rate reductions as inflation eases
  • Strong market performance – all investment asset classes rallied hard towards the end of the quarter
  • Themes vs fundamentals – the markets continue to react to prevailing themes in the media and not the fundamentals

Market & Economic Overview

Inflation

In the December quarter, we saw examples of how short-term narratives such as interest rates and global instability can have a quick and drastic impact on portfolios. We started the quarter with the sombre message that interest rates would be higher for longer, and whilst we had no news on earnings, the lower-than-expected US inflation number and subsequent commentary from the Federal Reserve meant the returns in the previous quarter resulted in a solid year overall.

Strong market performance

For the quarter, all markets were up strongly with International Property and Australian Equities leading the way as the market re-assessed the outlook for interest rates, and in particular the US market. For the full year, the returns were even stronger, with International Equities leading the way with an outstanding 23% return courtesy of the performance of the ‘Magnificent 7’ stocks (Apple, Tesla, Nvidia, Amazon, Alphabet – Google, Meta, Microsoft), that are expected to be the biggest beneficiaries of the Artificial Intelligence (AI) boom. There were also solid returns from Australian Equities, Property Funds and Emerging Market Equities.

Portfolio Summary

Portfolio returns for the December quarter were incredibly strong as investor sentiment turned positive in November and continued through December.

  • It was impressive to see Quay Global Real Estate deliver as the top performer in the portfolio in the December quarter. Their 17.6% return for the year was well ahead of their benchmark and is a valuable reminder of why we are comfortable backing quality managers, even when macro conditions in their sector might be challenging
  • 4D Global Infrastructure was just as notable – they also outperformed their benchmark by an impressive 15% across the calendar year
  • For the whole of calendar 2023, our portfolios generated excellent returns and outperformed their benchmarks

Portfolio Changes

  • The overweight position to infrastructure versus property has worked very well for the last few years, but it might be time to rebalance this part of the portfolio so they are of an equal weight
  • Given the strong run that the growth part of our portfolio (magnificent 7 as an example) has had lately, the decision was made to take some of those gains and move them to an alternate manager who takes a broader view of markets rather than just focussing on growth stocks

Stock of the Quarter – Corporate Travel Management (CTD)

One of our best performers has been Corporate Travel Management, which generated an impressive 35% return in calendar 2023. As a travel company, they were one of the sectors most impacted by the COVID-19 pandemic. However, the company’s low fixed costs and substantial cash balance meant that they were able to quickly cut costs, sustain their operations and raise funds to strategically acquire struggling competitors – enabling them to emerge strongly from the pandemic. While the corporate travel sector globally is only expected to return to pre-COVID turnover in FY25, it was good to see the company elected to use some of its cash to buy back up to $100m of its shares at its recent AGM in October. This will further increase our investor’s percentage ownership in this business at an attractive price, without having to spend a cent.

 

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Financial Advisers & Planners – Hire Fee Based Best Financial Advisors – Estate Planning Firms,
Wealth Management & Advice Experts, SMSF Specialists- Financial Consultant & Strategy that
is Best for You in Bondi, Balmain & Sydney – Montara Wealth

 

Suite 1, Level 6/309-315 George St, Sydney NSW 2000 | GPO Box 4473, Sydney NSW 2001
Montara Wealth Pty Ltd, ABN 14 625 010 344 is Corporate Authorized Representative of Montara Services Pty Ltd Licence No. 526747

Privacy Policy | Licensing Disclaimer | Financial Services Guide | Advisor Profile