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Market volatile
There’s been more volatility in the market this week with the S&P/ASX All Ordinaries Accumulation Index falling almost 2% in the first two sessions, but rising towards the end of the week to finish down just 0.5%. A key feature for the week were the RBA’s comments suggesting they are softening their stance and making it clear that rates will be on hold for the foreseeable future. Governor Glenn Stevens acknowledged that interest rates are very low by historical standards. The next inflation reading (due out in April) will be critical to our outlook for interest rates. With the economy still generally sluggish, in our view we need the cash rate to stay low for the time being to foster growth.
WAM Research outperforms market, delivers record result
This week WAM Research Limited (ASX: WAX) reported a record interim pre-tax profit of $18.4m (up 35.1%) and a record fully franked interim dividend of 3.75c per share (up 7.1%). For the 12 months to 31 December 2013, WAX’s investment portfolio increased 29.1%, outperforming the market by 9.4%. The total shareholder return in 2013 was +35.7%. The significant rise in the Company’s profit reflects the investment portfolio’s increased value (up 17.0%) and size (up 32.5%). See full announcement at the link below.
WAM Active announces increased fully franked dividend, profit up 86%
On Tuesday, WAM Active Limited (ASX: WAA) announced a half year pre-tax profit of $2.6m, up 86.0% and an increased fully franked interim dividend of 4.8c per share. WAA’s investment portfolio increased 17.9% in the 2013 calendar year and the total shareholder return was +32.3%. WAM Active employs an active trading strategy and, following the spike in IPOs in 2013, we expect an increase in corporate activity this calendar year which could lead to a number of takeover arbitrage opportunities for the Company. The significant increase in WAA’s profit reflects the investment portfolio’s increased size (up 72.8%) and value (up 12.7%). Since inception in 2008, WAA’s investment portfolio has returned 13.2% per annum. See full announcement at the link below.
WAX and WAA are Listed Investment Companies (LICs) managed by Wilson Asset Management Group. For more details visit our website: www.wamfunds.com.au
Odds on for a flat sharemarket in 2014
The equity market’s poor start to the year looks likely to set the tone for the remainder of 2014 according to the ‘January Indicator’ which shows there is an historical tendency for the first month of the year to set the tone for the remaining 11 months. Yale Hirsch’s January Indicator (or January Barometer) shows that since 1972, if the S&P 500 falls in January, the Index will only gain on average 0.2% from February to December that year. But, if the S&P 500 rises in January, the Index will rise on average 11.2% for the remainder of the year. With the All Ordinaries down 2.8% in January, the Indicator suggests the performance of our equity market may be subdued in 2014.
Housing hot this half
Based on the RBA’s comments this week, we believe Australia’s housing market still has some way to run. Although property prices surged in 2013 – up 9.8% across all capital cities and up a staggering 14.5% in Sydney – we believe there’s enough momentum in the market for property to stay hot in the first half of calendar year 2014. What we’re seeing is a combination of factors that we think will continue to drive property prices being: record low interest rates; a significant supply/demand imbalance; more competition from second tier and smaller lenders; and a loosening of lending criteria. Latest figures show property prices are off to a strong start in 2014 with capital city house values up 1.2% in January alone. We have exposure to the Australian property market through holdings in Brickworks Limited (ASX: BKW), CSR Limited (ASX: CSR) and Villa World Limited
(ASX: VLW) on the market driven side of our investment portfolio.
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