INVESTMENT UPDATE
FEBRUARY 2023
INVESTMENT UPDATE
FEBRUARY 2023

Cadence Capital Limited returned a negative performance of 7.1% in February, underperforming the All Ordinaries Accumulation Index by 4.6% for the month. The largest detractors from performance during February were AMP, Domino’s Pizza, BHP, Syrah Resources, Citi Chic Collective, Tietto Minerals and Star Entertainment Group. The top contributors to performance were Red 5, Genworth Financial and QBE Insurance.

Equity markets declined in February led by the resource and financial sectors which were down 6.9% and 3.1% respectively. Financial conditions continued to tighten during the month, with the RBA and the US Federal Reserve raising interest rates by 0.25% to 3.35% and 4.75% respectively. The reporting season on the ASX was weaker than expected, with nearly 50% of companies missing earnings expectations, significantly above the longer-term average of 30%. Many companies are finding it difficult to maintain profit margins in an environment of ongoing inflation pressure and demand that is starting to falter.

Portfolio performance was impacted by stocks in turnaround situations where progress was slower than hoped. For example, AMP traded weaker post its result as divestments and cost cutting measures are taking longer than expected, however we believe a large amount of its market capitalization remains in surplus capital that is likely to be returned to shareholders. Domino’s Pizza was also sold off heavily following results that showed sales were weaker than expected despite price rises, suggesting customers were more price sensitive than originally thought. The fund has exited its DMP position. Star Entertainment issued a downgrade as a result of the increased regulatory oversight into operations and undertook a $800m capital raise at $1.20 p/share to repair the balance sheet.

Elsewhere, the main positive contributors to performance were short positions in selected mining companies such as Red 5 which needed to undertake an emergency $80m capital raise after raising $60m only four months ago. Strong results from insurance companies Genworth Financial and QBE Insurance also contributed to performance. These businesses are simplifying their operations and are benefitting from the trends of higher inflation and higher interest rates.

Fully Franked Half-Year Dividend

On the 3 February the Board declared a 4.0 cent fully franked half-year dividend. This interim dividend equates to an 8.6% annualised fully franked yield or a 12.2% gross yield (grossed up for franking credits) based on the share price on the date of the announcement of $0.935 per share.

After paying this dividend the Company still has 22 cents per share of profits reserves to pay future dividends.  The Ex-Date for the dividend is the 14 April 2023. The payment date for the dividend is the 28 April 2023. The dividend re-investment plan (DRP) will not be in operation for this interim dividend as the Company’s shares are trading at a discount to the underlying NTA.

Fund NTA

Fund Performance

Fully Franked Dividends Declared Since Listing

Historic Portfolio Exposure

Portfolio Sector Analysis

Top 20 Portfolio Positions

Portfolio Market Capitalisation Analysis

Recent News

To watch CDM’s half-year Audiocast please click here. This Audiocast gives an update on the Company’s performance, its portfolio composition, some of its current investment holdings and the outlook for the rest of the year.

Portfolio manager Jackson Aldridge was recently interviewed:

  • Nadine Blayney Interviewed Jackson Aldridge on Ausbiz – 17 February 2023 (Click here to watch)
  • Nadine Blayney Interviewed Jackson Aldridge on Ausbiz – 3 March 2023 (Click here to watch)

To view all previous Cadence webcasts and interviews please visit the Media Section of the website.

We encourage you to visit our 52 books you should read before buying your next stock page on our website. We have compiled a list of books/ documentaries that have influenced our investment style or helped provide insight into the Cadence investment process.

10 Books To Read Before Buying Your Next Stock

10 Books To Read Before Buying Your Next Stock

Funds management involves a lot of synthesis of information and reading. Over the years we all end up reading many investment books and refer to them from time to time.

The team at Cadence has compiled a list of books that have influenced our investment style, or helped provide insight into the investment process.

Whilst not an exhaustive list, the 10 titles contained in this eBook provide a good starting point for any interested investor.

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