Cadence Opportunities Fund returned a negative gross performance of 3.4% in March, compared to the All Ordinaries Accumulation Index which was down 0.2% for the month. The largest detractors from performance during March were Genworth Financial, Lynas Rare Earths, Patriot Battery Metals, Teva Pharmaceutical Industries, Block and Saint Barbara. The top contributors to performance were Newcrest Mining, Sayona Mining, BHP Group and Meta Platforms. At month end the Company was 44.5% net invested (55.5% in cash).
Global markets finished the month higher despite major banks such as Silicon Valley Bank, Synchrony Financial and Credit Suisse facing solvency issues. The All Ordinaries Index fell 5% intra month only to close nearly flat for the month. High volatility adversely affects trend following. Different sectors of the market are starting to emerge as potential new trends, such as gold and other precious metals. The fund has been scaling into positions such as Newcrest, Tietto Minerals, Resolute Gold and Capstone Copper and still maintains a BHP position.
The fund has sold all its thermal coal positions; however, it remains invested in metallurgical coal producer Stanmore Resources. These coal positions have provided large positive contributions to the company’s performance over the past two years, however more recently they have detracted from performance, as they rolled over from their peak prices. Pleasingly, new turnaround positions in the fund such as Meta Platforms have done well, as Metaverse spending, company CAPEX and operating costs have been reduced. The stock looks to have stopped falling, and we have added to our position as the share price has increased. Some other turnaround situations have not worked, such as The Star Group and City Chic Collective, as regulatory concerns, high operating costs and/or inventory levels continue to weigh on these businesses.
The All Ordinaries Index has traded resiliently over the past twelve months, partly due to a strong iron ore price of $125, generating huge amounts of profits for large index weightings BHP, Rio Tinto and Fortescue Metals. Similarly, nearly 90% of the SP500’s return in the first quarter of 2023 was generated from the top 20 stocks alone. Beneath the surface a different story has emerged for small capitalisation and industrial stocks within the ASX Small Ordinaries Index, which are significantly underperforming the All Ordinaries Index.
Upcoming Fully Franked Half-Year Dividend
In February the Board declared a 7.5 cent fully franked half-year dividend. This interim dividend equates to a 6.9% annualised fully franked yield or a 9.9% gross yield (grossed up for franking credits) based on the share price today of $2.16 per share.
After paying this dividend the Company still has 36 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”) is in operation for the half-year dividend. The issue price will be at a 3% discount to the weighted average of the prevailing share price over the relevant DRP pricing period.
Historic Portfolio Exposure
Portfolio Sector Analysis
To watch CDO’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 by Nadine Blayney on Ausbiz on 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 investment process.