Taking a look at the EAM Enhanced Bundle Range

Here's what EasyAssetManagement's Retail Chief Investment Officer thinks about the EasyAssetMgmt Enhanced bundle range.

The Enhanced bundle range represents EasyAssetManagement’s best view on asset allocation for an investor’s preferred risk outcome.

For reference, the SWIX All Share Index Total Return Index is up 6.77% as at the end of July and the S&P 500 Total Return Index is up 20.31% as at the end of July.

How the sectors have been performing:
The leading sectors of the SWIX have been Health Care which is up 26.95% ytd (ending July), Industrials 21.01% and Financials 16.01%. The worst performing sectors have been Materials -7.16% and Energy -27.35%. In the US, Information Technology and Communications has been far and away the biggest sector performer led by the Magnificent Seven (Apple, Meta, Alphabet, Nvidia, Tesla and Microsoft).

Notes from our CIO
In this note I will talk about a few of our stocks and how we are currently positioned.

Locally, we have had a large holding in Richemont through this year which we have currently maintained. Richemont sells luxury goods, such as Cartier, worldwide. This is a company that falls solidly into our Quality basket and is up 27.9% as of end of July. We like the luxury goods sector which is less exposed to the average consumer who has been battered by high interest rates this year – a person who can afford Cartier is mostly able to still be able to afford Cartier no matter the economy whereas a customer buying on credit from Mr Price is much more exposed to economic conditions. While this position has served us well this year it was down approximately 10% in July. The company reported slowing sales in the US which is a big market for them, and the Chinese economy has not been performing this year either, Chinese are a big consumer of luxury goods. We continue with our outsized holding in this company as this is a quality company with recent news of more stimulus coming from the Chinese government and with recent data highlighting a re-acceleration of US growth.

Bidvest Group has been a nice performer for us this year. Bidvest Group operates in six main divisions: Services (more than 30%); Freight (about 10%); Financial Services (less than 5%); Branded Products (about 20%); Commercial Products (15%); and Automotive (25%). Bidvest is coming out of our value factor and is an attractive investment in a period of macro-economic uncertainty. The company's growth was driven by continued underlying growth in hygiene, continued increase in office occupancies (Bidvest services this), strong demand for bulk minerals, freight, spectacular demand for renewable energy offerings and signs of a potential turnaround in Financial Services.

We have been under-invested in Materials as we expected a weak global economy, particularly in China, to have a pronounced impact here. That has cost us recently as gold and platinum mining companies have had a rebound. We continue to remain under-weight mining companies, while we continue to monitor their performance. Inflation seems to be coming down which is generally negative for the gold price, but the dollar has been weakening too which is generally positive for the gold price. We are also worried that mining output has not been great, the costs of production have been increasing at a faster rate than the underlying commodity and SA’s deteriorating electricity and rail infrastructure has made resources harder to mine and export.

In our enhanced USD portfolio, some themes we like have been infrastructure, AI and open advertising. The Biden administration, with the Inflation Reduction Act and the chips act, has opened up the fiscal spigot for companies to invest in US domestic infrastructure and semi-conductors.

We have invested in Quanta services, up 40% ytd approximately, who provides contracting services to electric utilities, telecommunication, cable television operators, and government entities. The Company also installs transportation control and lighting systems and provides specialty electric power and communication services for industrial and commercial customers.

Another example in the infrastructure space is General Electric who is up about 70% ytd, they reported earnings in July which beat estimates with momentum particularly strong at Vernova, their power generating division with record orders and improving profitability within Renewables and continuing margin expansion within Power. GE recently split off GE Health Care into its own company and they plan to split the remaining company into a separate power and an aerospace company – there is a lot of research that supports that generally when a conglomerate splits up into concentrated units there is value added.

We have a large position in both The Trade Desk and Meta when it comes to advertising. Meta reported blow out results recently and is up 160% for the year. When you think the Trade Desk think of all advertising that is not on Google or on Meta properties. The Trade Desk is the advertising for the open web and they are very successful at what they do. Streaming has been a big boon for them as many more streaming companies are providing a free solution supported by advertising. In fact, Netflix is now offering a cheaper ad driven subscription. They selected Microsoft to be their advertising partner. However, they have been disappointed with Microsoft’s performance, and they have elected to use the Trade Desk now to support them with their advertising rollout. This is despite the fact that Microsoft was paying Netflix to be their sole advertising solution and this move means Microsoft will no longer have to pay that fee.

Everyone knows of Nvidia when it comes to AI but perhaps fewer people are aware of ServiceNow who we have invested in. ServiceNow is a cloud platform that manages digital workflow for enterprises. It is clear to see how ServiceNow can, and does, use AI to improve workflow by automating tasks, providing insights, personalizing experiences, and improving collaboration. This helps businesses to save time and money, improve efficiency, and make better decisions.

Shaun Krom
Chief Investment Officer, EasyAssetManagement Retail