Welcome to the December 2024 Investment Update for the Switzer Dividend Growth Fund (SWTZ or the Fund).
The Fund’s portfolio delivered a return of -3.28% during the month, compared with the benchmark S&P/ASX 100 Accumulation Index (ASX 100) return of -3.08%. The ASX 100 decline was mainly driven by the Real Estate Investment Trusts and Materials sectors. However, this was partially offset by gains in the Consumer Staples sector.
The Fund’s performance was detracted by investments in Mirvac (MGR) and Orica (ORI), although we remain comfortable with these holdings and the underlying quality of their businesses. MGR’s stock price fell due to rising bond yields, despite achieving a record-breaking $600 million in pre-sales for its Harbourside Residences development. ORI’s stock price also decreased, despite a positive start to the new financial year. Following recent acquisitions, ORI is reviewing its capital allocation framework. Given its higher return targets and low leverage, there is potential for increased dividend payouts and/or share buybacks. ORI’s current price-to-earnings ratio is near its five-year low.
Conversely, holdings in Fisher and Paykel (FPH) and Brambles (BXB) contributed positively to the Fund’s performance as these companies delivered positive returns despite no significant news during the market downturn. In addition, the absence of Commonwealth Bank of Australia (CBA) in the Fund’s portfolio contributed positively as CBA’s valuation declined from recent highs. Similarly, not holding Macquarie Group (MQG) benefited the Fund as the stock experienced market-driven weakness.
December 2024 marked a full year with no official change to the Australian cash rate at 4.35%. In its December policy announcement, the Reserve Bank of Australia (RBA) noted that inflation has significantly declined since its 2022 peak, with underlying inflation at around 3.5% (though still above its 2.5% target). Economic growth has been impacted with Australian consumers spending less due to more restrictive financial conditions. Labour markets remain tight, but wage pressures and inflation risks are easing.
Looking ahead, the market landscape remains susceptible to volatility, with pockets of extreme overvaluation. By avoiding these areas and focusing on undervalued stocks, the Fund is well-positioned to generate attractive income and sustainable long-term returns. The Fund remains focused on delivering higher income and lower volatility than the ASX 100, with the potential for capital growth.
DISCLAIMER: AGP Investment Management Limited (AGP IM) (ABN 26 123 611 978, AFSL 312247) is a wholly owned subsidiary of Associate Global Partners Limited (AGP) (ABN 56 080 277 998), a financial institution listed on the ASX (APL). AGP IM is the Responsible Entity and Vertium Asset Management Pty Ltd is the investment manager of Switzer Dividend Growth Fund (Quoted Managed Fund) (ARSN 614 066 849) (the Fund).
This material has been prepared for general information only. It does not contain investment recommendations nor provide investment advice. It does not take into account the objectives, financial situation or needs of any particular individual. Investors must, before acting on this material, consider the appropriateness of the material.
Any references to ‘We’, ‘Our’, ‘Us’, or the ‘Team’ used in the context of the portfolio commentary, is in reference to Vertium Asset Management Pty Ltd, as investment manager for the Fund.
Neither AGP IM, AGP, their related bodies corporate, entities, directors or officers guarantees the performance of, or the timing or amount of repayment of capital or income invested in the Fund or that the Fund will achieve its investment objectives. Past performance is not indicative of future performance.
Any economic or market forecasts are not guaranteed. Any references to particular securities or sectors are for illustrative purposes only and are as at the date of publication of this material. This is not a recommendation in relation to any named securities or sectors and no warranty or guarantee is provided that the positions will remain within the portfolio of the Fund.
Investors should seek professional investment, financial or other advice to assist the investor determine the individual tolerance to risk and needs to attain a particular return on investment. In no way should the investor rely on information contained in this material.
Investors should read the Fund’s Product Disclosure Statement (PDS) and consider any relevant offer document in full before making a decision to invest in the Fund. The Fund’s Target Market Determination and other relevant information can be obtained by visiting www.associateglobal.com.
