Income Report / Income Report; A look at our positioning (NAB, SUN, HVN, NCK, VCX)

By Market Matters 13 December 17

Income Report; A look at our positioning (NAB, SUN, HVN, NCK, VCX)

Market Matters Income Update 13th December 2017

Yesterday we saw the market close above 6000 and it finally feels like the local bourse, buoyed by a flow of corporate activity will follow the usual path of seasonal strength from the middle of December into Christmas. We’re positioned for this in the Income Portfolio with cash of just 2.5% - the lowest since the portfolios inception. The portfolio got a ‘kick’ this week from Vicinity (VCX) which was bid up strongly yesterday following the Westfield (WFD) takeover which we covered in the AM report today. Elsewhere, the banks are starting to move higher, something we’re positioned for in both of our portfolios, while our position in Telstra is now showing a paper profit of ~7%.

In terms of the MM Income Portfolio over the past week, it added +0.78% versus a market which was up 0.70%. Overall, the portfolio has gained 7.32% since inception (5th July 17). A return we remain comfortable with given the lower risk & higher income potential of the portfolio. As it stands, and looking primarily at Bloomberg Consensus Data, the portfolio is expected to yield 7.38% grossed for franking, a spread over a 12 month term deposit of near ~5%.

In today’s report, we’ll look at the portfolio composition and start setting some ‘traps’ for the Christmas period.

This month the ASX200 has oscillated between 5938 and 6027, since the GFC the average range for a December is 282-points, with the lowest range still 188-points in 2012. Hence if 5938 remains the low for this December, with the top-side of 6027 tested this morning, we have some simple logical targets:

·         An average December since the GFC targets ~6220 for the ASX200, while the quietest still has an objective of 6125.

·         The average gain for December since the GFC is +2.5% which coincidentally has 6120 as the likely conclusion for this month.

Looking further out, the key trend that we need to be conscious of into early 2018 is higher interest rates, and this will play into our sector positioning into the new year. When we consider the MM Income Portfolio we break it up into equities and income securities, however we’re fluid in our allocations depending on what’s most attractive at any given time. As it stands, we have 35% allocated towards floating rate income securities, 62.5% in equities and 2.5% in cash, which given the strong seasonality into January, feels about right.

When we look at the equity allocation, we then break it down into sector weightings, however we’re not that concerned about it relative to index weightings, we’re more around weightings relative to the prevailing conditions and market pricing. For instance, we have little interest in Healthcare which is typically expensive, and therefore will likely struggle as rates go higher. We have a high allocation in the financials space currently which positions us well for higher interest rates yet that seems to work counterintuitively to our reasonable position in Consumer Discretionary – the retailers of Nick Scali and Harvey Norman. In that instance its’ about valuation and the ‘oversold’ positioning of the market in terms of Harvey Norman, while Nick Scali is simply a very good business that got sold down to an attractive level. It remains our best performing currently held positon.   

*The banks are included in the Financials weighting however we have separated it out here to provide some further detail.

Looking forward and planning our positioning we’re likely to;

Index – reduce our overall equity exposure into strength – around the 6125 level

Reduce our position in Suncorp (SUN) by around 50% should it trade above $15
Reduce our big overweight call on NAB (NAB) should it trade nearer $32
Sell Harvey Norman (HVN) around $4.50 – being a buyer again should it trade nearer $3.50
Sell Nick Scali (NCK) nearer $7.50
Sell Vicinity (VCX) above $3.05

In terms of Income Securities, the new Bendigo Hybrid (BENPG) lists tomorrow – and should do reasonably well given the strong demand for it + other new issues since this was launched.

Conclusion (s)

We are positioned for more upside in the market however will be looking to sell equities into strength. 

BENPG will list tomorrow – a new hybrid we have allocated 7.5% of the portfolio in 

We will continue to remain active in terms of our exposures in 2018


Market Matters may hold stocks mentioned in this report. Subscribers can view a full list of holdings on the website by clicking here. Positions are updated each Wednesday, or after the session when positions are traded.


All figures contained from sources believed to be accurate.  Market Matters does not make any representation of warranty as to the accuracy of the figures and disclaims any liability resulting from any inaccuracy.  Prices as at 13/12/2017.  

Reports and other documents published on this website and email (‘Reports’) are authored by Market Matters and the reports represent the views of Market Matters. The MarketMatters Report is based on technical analysis of companies, commodities and the market in general. Technical analysis focuses on interpreting charts and other data to determine what the market sentiment about a particular financial product is, or will be. Unlike fundamental analysis, it does not involve a detailed review of the company’s financial position.

The Reports contain general, as opposed to personal, advice. That means they are prepared for multiple distributions without consideration of your investment objectives, financial situation and needs (‘Personal Circumstances’). Accordingly, any advice given is not a recommendation that a particular course of action is suitable for you and the advice is therefore not to be acted on as investment advice. You must assess whether or not any advice is appropriate for your Personal Circumstances before making any investment decisions. You can either make this assessment yourself, or if you require a personal recommendation, you can seek the assistance of a financial advisor.  Market Matters or its author(s) accepts no responsibility for any losses or damages resulting from decisions made from or because of information within this publication. Investing and trading in financial products are always risky, so you should do your own research before buying or selling a financial product.

The Reports are published by Market Matters in good faith based on the facts known to it at the time of their preparation and do not purport to contain all relevant information with respect to the financial products to which they relate. Although the Reports are based on information obtained from sources believed to be reliable, Market Matters does not make any representation or warranty that they are accurate, complete or up to date and Market Matters accepts no obligation to correct or update the information or opinions in the Reports.

If you rely on a Report, you do so at your own risk. Any projections are estimates only and may not be realised in the future. Except to the extent that liability under any law cannot be excluded, Market Matters disclaims liability for all loss or damage arising as a result of any opinion, advice, recommendation, representation or information expressly or impliedly published in or in relation to this report notwithstanding any error or omission including negligence.

To unsubscribe. Click Here