Welcome to the October 2024 Investment Update for the Switzer Dividend Growth Fund (SWTZ or the Fund).
The Fund’s portfolio delivered a return of -2.19% during the month, compared with the benchmark S&P/ASX 100 Accumulation Index (ASX 100) return of -1.54%. The fall in the ASX 100 was mainly driven by the Consumer Staples and Utilities sectors. However, these falls were partially offset by a gain in the Financials sector.
A significant drag to the Fund’s relative performance was its zero holding in Commonwealth Bank of Australia (CBA). Despite a lack of substantial new developments, CBA’s valuation rose approaching its record highs again, seemingly detached from its muted earnings growth. The Fund’s absence from Arcadium Lithium PLC (LTM) also impacted relative performance when Rio Tinto (RIO) announced its knockout takeover bid for LTM at a 90% premium to its pre-bid price.
Within the Consumer Staples sector, the Fund’s holdings in Woolworths Group (WOW) and Coles Group (COL) were impacted by WOW’s warning of softer margins due to increased price promotions. This warning served as a cautionary tale for the entire sector, including Wesfarmers (WES), which the Fund avoided.
On the positive side, the Fund benefited from its investments in Block, Inc. (SQ2) and Light and Wonder (LNW). Improved investor sentiment towards SQ2’s prospects and growing confidence in LNW’s long-term value, despite recent legal setbacks, contributed to the Fund’s performance. The Fund’s position in Evolution Mining (EVN) also benefited from the strength of the gold price in recent times.
Global economic growth prospects improved in October 2024 as the U.S. Federal Reserve cut interest rates, supported by strong U.S. growth and China’s economic stimulus. Australia’s economic data also surpassed expectations, prompting analysts to question the pace of rate cuts amid improved forecasts. The Reserve Bank of Australia kept the official cash rate unchanged at 4.35% at its November 2024 meeting, without detailing any specific timing of rate cuts, citing that inflation is still considered on the high side.
Looking ahead, the market landscape remains uncertain, 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.
