The funds benefitting from consumer staples exposure
As investors are warned that consumer staples are one of the few sectors that are likely to perform well in coming months, Money Management investigates which stocks have bucked the market downturn this year and the funds that hold them.
Allan Gray chief investment officer, Simon Mawhinney, said certain consumer staples companies had not been badly impacted by the downturn, if not enhanced by it, and would be in a position to maintain or enhance dividends.
“Many companies have experienced big losses and won’t be able to pay a dividend without some sort of capital impost, or elevating their gearing. In April we had APRA writing to the banks and insurers requesting a prudent reduction in dividends and a materially reduced level of returns to shareholders over the coming months.
“There are some companies whose earnings have not been badly impacted, if not enhanced, by COVID-19 and they will be in a position to maintain or even enhance dividends. This includes the likes of Woolworths, Coles and other staples.”
In the battle between Australia’s two largest supermarkets, Coles was the victor with returns of 14.1% since the start of 2020. This compared to returns of 1.1% by Woolworths.
Other strongly-performing consumer staples included agribusiness Elders, which was up 49%, A2 Milk, up 26%, and Metcash up 8.5%.
Share price performance of consumer staples stocks versus ASX 200 since start of 2020 to 24 June 2020
According to FE Analytics, within the Australian Core Strategies universe, there were 14 funds in the Australian equity sector which held Coles in their portfolios.
These were AllianceBernstein Managed Volatility Equities, Antares Dividend Builder Professional, BetaShares FTSE Rafi Australia 200 ETF, BlackRock iShares Edge MSCI Australia Minimum Volatility ETF, EQT Flagship, EQT Wholesale Flagship, Fidelity Australian Equities, Fidelity Australian Opportunities, Legg Mason Martin Currie Sustainable Equity, Maple-Brown Abbott Australian Equity Trust, Maple-Brown Abbott Responsible Investment, Nikko AM Australian Share Concentrated, Paradice Long Short Australian Equities and Pendal Australian Share.
The best-performing fund among these was AllianceBernstein Managed Volatility Equities which had lost 6% since the start of the year to 31 May, 2020 while the worst was Nikko AM Australian Share Concentrated which lost 19.6%. The Australian equity sector lost 11.5% over the same period.
Performance of AllianceBernstein Managed Volatility Equities and Nikko AM Australian Share Concentrated funds versus Australian equity sector since start of the year to 31 May 2020
There were nearly 40 funds which held Woolworths including several of the former funds which also held Coles; Alliance Bernstein Managed Volatility Equities, BetaShares FTSE Rafi Australia 200 ETF, BlackRock Edge MSCI Australia Minimum Volatility ETF, Fidelity Australian Opportunities and Paradice Long Short Australian Equities.
Only one fund, Perpetual Wholesale Australian Share, held a 3.7% stake in Elders, while three held Metcash and three held A2 Milk.
The three funds holding Metcash were Pendal Ethical Share at 3.1%, IML Concentrated Australian Share at 3.5%, AXA Wholesale Australian Equity Value at 3.5%. The funds holding A2 Milk were SGH 20 at 4.2%, BetaShares Australian Sustainability Leaders ETF at 4% and CFS Wholesale Australian Share at 4.9%.
The best performing of these seven funds since the start of the year to 31 May, 2020, was CFS Wholesale Australian Share which lost 3.7% while the worst was AXA Wholesale Australian Equity Value which lost 17%.
Performance of CFS Wholesale Australian Share and AXA IM Wholesale Australian Equity Value funds versus Australian equity sector since start of the year to 31 May 2020
AUTHOR
Laura Dew
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