OC Premium Small Companies Fund: 21/05/13 Application price $1.8823; Redemption price $1.8710; Net Asset Value $1.8767 OC Dynamic Equity Fund: 21/05/13 Application price $2.5371; Redemption price $2.5220; Net Asset Value $2.5295 OC Concentrated Equity Fund: 21/05/13 Application price $1.0571; Redemption price $1.0507; Net Asset Value $1.0539
May 10th, 2013
With the US S&P 500 at record highs and Australian interest rates at historic lows there would seem to be cause for optimism about the state of financial markets across the spectrum including our core Australian small-mid cap equity space. We will, however, continue to adopt a more circumspect approach to investing with a firm eye on risk management. We will focus on stocks that we are comfortable will be able to grow earnings regardless of the economic cycle. In essence, we will “stick to our knitting”. This approach has served us well in recent years and we see no reason to change our approach even in the face of the unbridled enthusiasm of others.
April 12th, 2013
The global growth outlook is certainly improving, with economic conditions more upbeat than they have been for some time. Importantly for Australia, our major trading partners, namely China and Japan, are showing signs that they ought to outperform much of the developed world in the coming years. Japan, in particular, has seen a rapid improvement in its economic fortunes in recent months with the aggressive expansionary fiscal and monetary policies of the new government and the new Bank of Japan Governor creating a wave of optimism not seen in Japan for well over a decade.
Closer to home, the domestic economy remains delicately poised with mining investment at or near a peak and interest rate cuts not yet showing signs of re-stimulating the cyclically depressed areas of the economy such as housing, non-residential construction and the retail sector in any material away. While the RBA minutes continue to convey a view that an impending cyclical recovery will offset the eventual decline in mining investment, the OC Investment team is much more circumspect. We suspect that there could be a near term slowing in domestic growth, beyond the RBA expectations, before rate cuts eventually kick-start the non-mining economy.
March 13th, 2013
Overall reporting season across the Australian market was roughly in-line with consensus expectations. Earnings generally increased for defensive stocks or those companies with offshore earnings or financial markets exposure, but this was offset by weakness for domestic cyclical and resource exposed companies. Investor sentiment has turned sharply positive in recent months no doubt helped by the fact that the US economy is showing signs of a sustainable recovery.
February 11th, 2013
The market has recently gone ‘risk-on’ after a sustained period of poor investor sentiment. The global macro-economic picture has continued to improve during January with the key data out of the US and China indicating that both economies have likely troughed and are beginning to pick-up. This, coupled with continued stimulus from central banks and sustained low bond yields globally, has increased investor risk appetite which clearly has positive implications for equities.
December 12th, 2012
With the RBA’s decision last week to deliver a Christmas rate cut, monetary policy settings are currently at historic lows of 3.00%. It is widely anticipated rates will move further lower in the first half of calendar 2013. We believe these rate cuts will eventually gain traction and cyclical sectors such as consumer discretionary and housing are likely beneficiaries.
November 7th, 2012
Funds Continue Positive Trend
The Company AGM season is well advanced and we remain comfortable with our portfolio positioning heading into the end of the calendar year. Despite the strong October for many of our stocks, valuations do not look stretched and we remain confident on the operational outlook for earnings growth from our companies over the balance of financial year 2013. The investment team has a busy Australia wide company visitation schedule booked for November and we look forward to updating you on our findings at the start of next month.
October 11th, 2012
Market Firmer on Global Action
The Australian equity market was firmer in the September quarter, albeit on relatively weak volume, with the key benchmark ASX 200 Index finishing the period up 7.1%. The market was buoyed by positive action from global central bankers and the expectation of ongoing rate cuts from the RBA domestically
The performance of the Aussie bourse matched or bettered all its global peers outside of the German DAX (up an impressive 12.5%). The best of the rest were led by the Hong Kong Hang Seng at +7.1% and the US S&P 500 Index, which approached 5 year highs to close +5.8% for the quarter. Other global indices were comparatively lacklustre with the UK FTSE +3.1% and our other Asian counterparts finishing in negative territory; the Japanese Nikkei at -1.5% and the Shanghai Composite at -6.3 for the quarter.
September 11th, 2012
Funds Rally on Solid Reporting Season
As expected, there were very few surprises for us on the earnings front from our core holdings in the August reporting period. Overall, results in the small industrial space clearly demonstrated the lingering effects of the domestic two-speed economy, with many of the non-mining service sectors negatively impacted by cyclical headwinds (eg. housing and building products) or structural challenges (eg. retail and media).
August 10th, 2012
Earnings Upgrades Drive Performance
The Funds have come through earnings “confession season” (the lead up to the full year reporting period when many companies “fess up” to earnings downgrades) unscathed. We have had regular contact with company management and unlisted peers and we are confident on our key assumptions about the earnings of our holdings ahead of reporting season which kicks off in earnest from mid August.
During the reporting season, the investment team is scheduled to have more than 80 meetings with different companies, many of them one-on-one with the Managing Director and/or Chief Financial Officer. The overwhelming focus in this busy period is our existing portfolio holdings, in particular cross checking our risk management parameters and the key earnings drivers that help us model the forward earnings. We will also be actively looking for new investment ideas that can help drive strong performance into the future.
July 16th, 2012
Strong Risk Management Pays Dividends
The Australian market traded lower in the June quarter, with the ASX 200 Index finishing the period down 5.6%. As has been the trend recently, the quarter was again characterised by offshore macro news flow (predominantly out of Europe but also coming from China and the US) and ongoing bearish earnings guidance from domestic companies.
The beauty of investing in the small to mid cap space is that despite all the structural and macro issues facing the market, it is always possible to find pockets of the economy that are performing well. In the current environment we remain heavily focused on finding companies that can grow their earnings irrespective of the overall macro-economic environment.
June 14th, 2012
Eurozone Uncertainty Leads to Volatility
Rarely, in recent times, has there been so much economic and geo-political newsflow released, or about to be released, that has the potential to provide a catalyst for downbeat equity market investors. Over the coming days and weeks, outcomes in Europe, China and/or the US have the ability to deliver greater certainty for investors and with it increased stability in the equity market.
May 10th, 2012
OC Consolidates Strong Performance
April proved to be a month of consolidation for the OC funds after a very strong March quarter. With the Federal budget this week and the Gillard led minority government’s numbers in the lower house changing almost weekly, we are cognisant now, more than ever, of the impact events in Canberra can have on the domestic equity market.
We have mentioned Warren Buffet’s well known quote in our reports many times, “…be fearful when others are greedy and be greedy when others are fearful”. We believe this to be sage advice in the current environment and the investment team will certainly be looking to take advantage of exceptional opportunities the market may present in any periods of heightened volatility.
April 12th, 2012
Strong Operational Results Drive Outstanding Fund Performance
The March quarter was strong across all of the OC Funds and was underpinned by excellent operational results from most of our core holdings and reported results in excess of market expectations and re-rated accordingly. In particular, the mining services space was extremely buoyant for us…
OC Funds has become a regular contributor to the well known on-line investing publication The Eureka Report. Published by Alan Kohler, one of Australia’s most experienced financial journalists, the report covers a wide range of investment related topics. OC Funds has been asked to contribute regular stock ideas for subscribers.
The stocks we write about are typically high quality companies held within our Funds that have been selected based on our rigorous investment process. Most of them possess many of the following attributes: proven management; sustainable and transparent business model; reliable earnings streams; strong free cash-flow; strong balance sheet; high return on equity and a proven track record. To see our contributions, click here
March 9th, 2012
Reporting Season Delivers
The February reporting season proved to be an excellent one for all of the OC Funds and saw a continuation of the strong positive momentum that started in January. Many investors are cashed up but sitting on the sidelines awaiting further confirmation that a global recovery is underway. Our view is that these investors, in exercising caution, risk paying significantly higher prices for equities when they eventually wade back into the market.
February 8th, 2012
Market Surges as Sentiment Turns Positive
Against the expectations of many investors, the global equity markets clearly went into “risk-on” mode in January, a trend which has continued into early February. Many of our portfolio holdings have positive momentum coming into reporting season including our key consumer related stocks which have recently released positive trading updates. We continue to position the portfolio towards stocks which are not reliant on a strong domestic or global economy for growth.
January 12th, 2012
Sentiment Poor but Valuations Compelling
The Australian equity market finished the quarter in the black with the S&P ASX 200 Accumulation Index finishing up 2.1%. This was well behind many of the major international bourses which bounced from oversold levels at the end of the September quarter despite a continuing challenging macro backdrop.
In our view, the equity market is pricing in a material chance of a major sovereign default in the coming months. Should such a scenario be avoided (and we believe that it will be avoided) then we ought to see a strong relief rally in equity markets.
December 14th, 2011
Euro-Zone Leads Market Lower
Following a strong bounce in October, the Australian equity market was again weak in November as Euro-zone debt issues continued to weigh on investor sentiment. Last weekend’s EU summit went a long way toward forging the closer economic ties needed to prevent a future debt crisis but there remains some scepticism that such long term steps could solve the current crisis.
November 9th, 2011
Market Bounces from Oversold Levels
The domestic equity market bounced strongly in October. This was a reflection of renewed optimism that European leaders may finally agree upon a plan to solve the euro-zone debt crisis and also US economic data that continues to surprise on the upside.
October 14th, 2011
Equity Markets Fall on the Back of Macro-Economic Concerns
Global macro-economic issues have continued to drive equity markets significantly lower in recent weeks. The Australian equity market is now priced on a similar risk premium as was applied in the depths of the GFC in late 2008 when the world was gripped by a major credit crisis. This is clearly a bearish state of affairs and has been driven by concerns surrounding three dominant macro themes.
September 15th, 2011
Australia Well Positioned Against Global Backdrop
The OC team provide an update on the markets and the funds for the month of August and give their outlook for the future.
August 9th, 2011
Extreme Volatility Creates Opportunities
The OC team provide an update on the markets and the funds for the month of July and give their outlook for the future.
July 12th, 2011
Financial Year Ends Against a Challenging Macro Environment
The OC team provide a recap on the financial year and highlight what moved the funds over the quarter, plus our outlook for the markets for the start of the new financial year.
June 8th, 2011
Market Volatility Continues
The OC team provide an update on the markets and the funds for the month of May and give their outlook for the month ahead.
May 12th, 2011
Market Pulls Back as Australian Dollar Surges
The OC team provide an update on the markets and the funds for the month of April and give their outlook for the month ahead.
April 7th, 2011
OC Funds Deliver Strong March Quarter
The OC team provide a recap on what moved the funds over the quarter, plus our outlook for the markets for the future.