Our Model Portfolio

By Jason Fittler

I thought I would provide a review of how our model portfolio has been travelling.

Keep in mind that our model portfolio was set up on the 02/01/2012 with the aim to invest in value companies for income and long-term gain.

We measure the performance against the ASX 200 accumulation index not because we aim to outperform this index but because it is the most well known index. Outperforming or underperforming the index is of little concern to me.

The model is designed to produce long-term income and capital gains through investing in undervalued companies while they are out of favor with the market.

This commonly results in periods where the model will massively outperform the index due to these out of favor companies moving back towards fair value faster than the market generally.

This can be seen in the period from July 2012 until November 2012 when the banks rallied, we were long in the banks since the start of January 2012.

There are also periods of underperformance like July 2013 when the broader market sold QBE and Newcrest down. We have no intention of following the trend; we hold value stocks for the long-term.

We are working to be able to provide access directly to our model by early next year through a Separately Managed Account (SMA). This will allow investors to invest part or all of their money directly in our model.

How did we do? 

Since the start of 2012 we have been overweight in the banks and large miners. These have been the driving force of the market since November 2012 as such over this period we have performed well. Right now we have lightened up on these companies to lock in the gains.

We have started to focus on the perpetual preference share market, which is trading below face value with a medium term view of realising some growth and steady income.

We also see value in some of the smaller second tier companies such as Chorus and Metcash and the out of favor mining engineering companies for a long-term growth. 

At present we hold 20% cash, as the market pulls back. 

The model has outperformed the index by around 1% pa but this is of little consequence to our ongoing investment choices.

The model current yields around 5.7% gross.

If you would like more information on our model portfolio please call us on (07) 4771 4577.