Investment Update: April 2019

Markets bounced back in the March quarter, so it was a much better time for investors. The “downturn” in the December quarter, that looked like it could get ugly for a while there, ended up petering out to nothing more than a blip on the radar. We wouldn’t recommend that as an excuse for complacency though.

Among the major holdings (see bottom of this update) there are as usual some interesting tales.

Our largest listed Australian shareholding is a firm called Nearmap, which fund manager Nick West described at the recent Investor Updates.

Nearmap is in the business of aerial mapping and imaging – a bit like Google Maps on steroids. High quality images and frequent updates, combined with state-of-the-art technology which is changing the way many businesses, councils, even governments do business. It’s worth a look at their website if only to see some amazing pictures.

Nearmap is growing rapidly both in Australia and the US, and its share price reflects that. The chart below shows its performance over the past three years, with the stockmarket average thrown in for comparison.

You’re probably aware we engage a number of managers to run share portfolios for the fund. For the most part there is very little duplication between them – not much point having several managers doing exactly the same thing. But it’s a happy coincidence that of the very few duplicates that do exist, Nearmap is one that happens to be a major holding of both Sterling’s Equity Fund and the Anacacia Wattle Fund.

Polaris Marine is shaping up as a quiet achiever.

As you might guess it’s in the maritime services business – construction, tug and barge work in particular. It is very prominent inside Sydney Harbour but also offshore. Strong corporate performance and a solid pipeline of work saw its value appreciate significantly this quarter.

As is usually the case in this game though it’s not all gravy. Regrettably we’ve had to take another haircut on perennial problem child Condor Energy. Alert readers will see it’s no longer in the list of major holdings. So, if there’s a silver lining it’s that it can’t cause any more pain.

With perfect hindsight we’d all do some things differently. In this game that you simply can’t get everything right all the time. This page contains a few insights into the age-old principle of diversification, including:

  • The importance of limiting the damage any one investment can do by having limits on exposure to individual assets;
  • If the wins like NearMap and Polaris can outweigh the losses, you end up with a satisfactory result.

So, who’s got what?

The table below shows the ARAIF’s investments as at the time of writing. Please note, the percentages refer to the proportion of each portfolio allocated to that investment, not its rate of return.

Major Holdings

Apart from bank deposits and other interest-bearing accounts, the Fund invests in a range of assets through the fund managers listed in the table above. If we drill through to the assets selected and overseen by those managers, there are in fact over a hundred individual securities providing diversification of risk and exposure to a wide range of opportunities.

The table below shows the 20 largest individual holdings and what proportion of each portfolio they represent. These are the investments that will have the biggest impact on the return of your portfolio.

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