Ronni Chalmers

CBG Asset Management’s long-only fund CBG Australian Equities Fund (Wholesale) notched a 16.6% return in the three months to 31 March 2019, placing the Fund third out of 97 in the category of long-only Australian shares. Over the same period the benchmark S&P/ASX 200 Accumulation Index returned 10.9%.

CBG, a wholly owned subsidiary of the ASX-listed wealth manager Clime Investment Management Ltd with approximately $887 million in FUM, employs an investment style that is biased towards quality stocks, as well as having a strong valuation discipline.

Ronni Chalmers, CBG Director, says: “What was particularly pleasing about the portfolio’s performance was the many examples of Large Caps, Mid-Caps and Small Caps across multiple industries all contributing to this robust performance.

“In the Large Cap sub-portfolio, we correctly identified that BHP (+19.7% for the quarter) and Rio Tinto (+32.8%) would deliver strong results, coupled with special fully franked dividends.

“In addition, Wesfarmers generated a 14.2% return including a large special dividend after a solid interim result that saw Bunnings record a 4% same-store sales growth.”

He says the fund was active in the quarter, trimming its positions in BHP and Rio Tinto, as well as adding Treasury Wines when its share price finally returned to the internal valuation. “We expect 20% per annum EPS growth over the next two years for this stock.”

“We also positioned the fund to take advantage of several Mid Cap stocks with particular emphasis on IT and software companies such as Afterpay Touch (+69%), Bravura Solutions (+49.3%) and Webjet (+33.9%).”

“These stocks are high-quality global businesses growing organically at double digit rates. Like the Large Caps, the portfolio took some profits when the stocks traded at our share price targets.”

Chalmers says that in the Small Cap Sub-Portfolio, the stand-out stock was Jumbo Interactive, appreciating 82% in the quarter and over 200% for the year to 31 March 2019.

“A change to the Powerball odds in April 2018 resulted in a step-change in the frequency of large lottery jackpots that led to a corresponding boost to ticket sales. The migration of ticket sales to the online and mobile channels is accelerating, now 21.5% vs 17.7% as at 31 December 2018.”

The rapid rise in equity prices in the March quarter means the fund is now positioned with an elevated short-term cash weighting. “Although we are not anticipating a sharp decline in equity prices, we believe it prudent to position the fund in this manner if compelling value re-appears in the Australian equity market.”

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