Lincoln Australian Income Fund aims to provide its investors with: income above the yield of the benchmark; some capital growth; and lower volatility than the benchmark over the medium to long term.
Performance contributors this month included:
Nick Scali Ltd (NCK) – The stock price finished the period up 38.2% after announcing in October the acquisition of Plush-Think Sofas for $103m (funded by cash and debt). The deal finalises in 2Q22 and will be earnings accretive, so there will likely be positive revisions to consensus earnings estimates for FY22. The company reported well with its FY21 performance ahead of expectations, indicative of a recovering consumer sector benefiting from the economy reopening and renewed confidence in household spending.
Fortescue Metals Group Ltd (FMG) – FMG (+31.94%) reported 1Q22 iron ore shipment volumes that were 3% higher compared to the prior quarter and in line with market expectations. The average realised price for iron ore over the quarter was $118/dry metric tonne, which enabled the company to generate strong cash flow to fund dividends and support its Strong Financial Health rating (GR1).
Jumbo Interactive (JIN) – JIN was another example of the strong consumer theme finishing the period up 20.3%. The company’s strength is supported by robust cash generation and not debt on the balance sheet. Revenue expanded by 17% despite fewer high-value jackpots. Completion of the Stride acquisition, along with the potential to win the entire Lotterywest digital offering, we feel the consensus FY22 EPS growth rate of ~15% is achievable.
What is Lincoln Wholesale Australian Income Lincoln Wholesale Australian Income is an Managed Funds investment product that is benchmarked against ASX Index 200 Index and sits inside the Domestic Equity - Other Index. Think of a benchmark as a standard where investment performance can be measured. Typically, market indices like the ASX200 and market-segment stock indexes are used for this purpose. The Lincoln Wholesale Australian Income has Assets Under Management of 394.76 M with a management fee of 0.95%, a performance fee of 0.00% and a buy/sell spread fee of 0.7%.
How has the investment product performed recently? The recent investment performance of the investment product shows that the Lincoln Wholesale Australian Income has returned -0.71% in the last month. The previous three years have returned -0.36% annualised and 12.27% each year since inception, which is when the Lincoln Wholesale Australian Income first started.
How is risk measured in this investment product? There are many ways that the risk of an investment product can be measured, and each measurement provides a different insight into the risk present. They can be used on their own or together to perform a risk assessment before investing, but when comparing investments, it is common to compare like for like risk measurements to determine which investment holds the most risk. Since Lincoln Wholesale Australian Income first started, the Sharpe ratio is NA with an annualised volatility of 12.27%. The maximum drawdown of the investment product in the last 12 months is -3.65% and -22.71% since inception. The maximum drawdown is defined as the high-to-low decline of an investment during a particular time period.
What is the relative performance of the investment product? Relative performance is what an asset achieves over a period of time compared to similar investments or its peers. Relative return is a measure of the asset's performance compared to the return to the other investment. The Lincoln Wholesale Australian Income has a 12-month excess return when compared to the Domestic Equity - Other Index of -10.66% and -1.51% since inception.
Does the investment product produce Alpha over its Peers? Alpha is an investing term used to measure an investment's outperformance relative to a market benchmark or peer investment. Alpha describes the excess return generated when compared to peer investment. Lincoln Wholesale Australian Income has produced Alpha over the Domestic Equity - Other Index of NA% in the last 12 months and NA% since inception.
What are similar investment products? For a full list of investment products in the Domestic Equity - Other Index category, you can click here for the Peer Investment Report.
What level of diversification will Lincoln Wholesale Australian Income provide? Lincoln Wholesale Australian Income has a correlation coefficient of 0.94 and a beta of 0.29 when compared to the Domestic Equity - Other Index. Correlation measures how similarly two investments move in relation to one another. This establishes a 'correlation coefficient', which has a value between -1.0 and +1.0. A 100% correlation between two investments means that the correlation coefficient is +1. Beta in investments measures how much the price moves relative to the broader market over a period of time. If the investment moves more than the broader market, it has a beta above 1.0. If it moves less than the broader market, then the beta is less than 1.0. Investments with a high beta tend to carry more risk but have the potential to deliver higher returns.
How do I compare the investment product with its peers? For a full quantitative report on Lincoln Wholesale Australian Income and its peer investments, you can click here for the Peer Investment Report.
How do I compare the Lincoln Wholesale Australian Income with the ASX Index 200 Index? For a full quantitative report on Lincoln Wholesale Australian Income compared to the ASX Index 200 Index, you can click here.
Can I sort and compare the Lincoln Wholesale Australian Income to do my own analysis? To sort and compare the Lincoln Wholesale Australian Income financial metrics, please refer to the table above.
Has the Lincoln Wholesale Australian Income been independently verified by SMSF Mate? This investment product is in the process of being independently verified by SMSF Mate. Once we have verified the investment product, you will be able to find more information here.
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Comments from SMSF Mates SMSF Mate does not receive commissions or kickbacks from the Lincoln Wholesale Australian Income. All data and commentary for this fund is provided free of charge for our readers general information.
Performance Commentary - September 30, 2021 Performance contributors this month included:
AusNet Services Ltd (AST) – During September, AST received two acquisition bids and finished the period up 44%. Global asset manager Brookfield bid $2.50 (cash) per share, and APA Group (APA) followed shortly afterwards with a bid for $2.60 (cash and script). With the AST Board granting Brookfield exclusive 7 week access for due diligence, APA has to wait for the end of this period, or a favourable ruling from the Takeovers Panel, before undertaking its own due diligence.
Pinnacle Investment Management (PNI) – The company reported well and was strong throughout the period finishing up 32.6%. Net profit margins surged to 68% from 55%, which drove EPS growth of 103% and bolstered ROE to 31% from 18%. From an income perspective, dividends grew by 86% to 28.7cps on a 79% payout ratio.
Carsales.com Ltd (CAR) – The stock rallied 29.35% over the quarter and is currently trading close to all-time highs. On September 1, int announced the completion of its 49% stake in Interactive Brokers (announced back in May), funded by a $600m capital raise. It had a dilutionary impact on the most recent result, with ROE falling from 34% to 24%.
Performance Commentary - April 30, 2021 Accent Group (AX1) – Was the best performing stock in the portfolio, closing the month +30.67% higher. The strength in price was partly due to another solid month for Australian retail sales, but predominately related to the company’s announcement that it had agreed to acquire youth apparel retailer Glue Store for $13m. The consideration would be funded out of existing cash facilities and, in time, will be an accretive investment. Monadelphous (MND) – Following a few months of underperformance, Monadelphous (MND) experienced a shift in investor confidence, rallying +22.6% for the month. The Fund Team believes the strong month was a related to growing confidence that the capex cycle for metals mining/ oil gas will continue in the face of soaring commodity prices and analyst upgrades. On top of this, the company announced that it had settled a lawsuit filed by Rio Tinto relating to a fire incident at their iron ore facility in 2019. The lawsuit was in part acting as somewhat of a headwind for investor sentiment.
Adairs Limited (ADH) – Was another retailer buoyed by the continued strong consumer spending environment. Retailers such as Adairs, who invested in a strong omni-channel strategy have benefited enormously from the growth in online spending. On top of that Adairs are well placed to benefit from the housing market recovery
Performance Commentary - February 28, 2021 Performance contributors this month included:
RIO Ltd (RIO) – A beneficiary of the cyclical rotation driven by a global economy recovering from COVID and elevated iron ore prices, reported a strong result in February. A US$3.09 per share ordinary dividend and US$0.93 special dividend were declared for the second half, for a full year payout of US$5.57. This represented a solid 72% payout ratio, higher than the 40–60% policy. BHP Ltd – The company reported well on 17 February and closed the month +12.8%. 1H21 profitability was ahead on 1H20 due to record iron ore prices and a strong recovery in copper. The company’s willingness to pay out all the free cash flow in a fully franked US$1.01 dividend was important because, with of Net Debt marginally below their target range, management is taking the view that the global economy is on the mend and iron ore prices will support strong cashflows through the current half.
Service Stream Ltd (SSM) – (-39.6%) reported late in the month and management indicated 2H21 earnings to be in-line with its already lowered expectation due to ongoing COVID disruptions. From an income perspective, a 1H21 dividend of 2.5cps was announced (vs 4.0cps in 1H20 and below expectations). This means that forward dividend estimates are likely to decrease in-line with lower earnings expectations (from ~8.8cps to ~5cps). Although a disappointing outcome, the Fund Team sees little near term risk for further downside and as such has decided to retain the position in the portfolio until the dividend in March.
Performance Commentary - December 31, 2020 The Lincoln Australian Income Fund closed the year 5.42% higher, outperforming its benchmark index by 3.1%. Over the month, the Fund rose 0.78% which represented a small underperformance of its benchmark by 0.5%. The materials sector played an important role in the market over the month and did a lot of the heavy lifting.
Performance Commentary - November 30, 2020 Performance contributors this month: Accent Group Ltd (AX1) – (+30.7%) Was the strongest performing stock in the Fund for the month after a trading update reported a continuation of strong sales in the first 20 weeks of FY21. Digital sales were strong as were like for like sales despite the impact of lockdowns on the Victorian stores.
Nanosonics Ltd (NAN) – (+29.3) Continued October’s strength retracing roughly five months of losses. Positives come from a recent 1Q21 trading update reporting the company’s sale of Trophon units, Consumables revenues, and an improvement in hospital access underscoring an operational recovery.
Growth to Value Rotation – Adairs Ltd (ADH), Rhipe Ltd (RHP) and Dominos Pizza (DMP) fell -16%, -12.6% and -11.2% respectably getting caught in the movement away from pandemic beneficiaries into cyclical stocks and previous underperformers. Gold (XAUAUD) – Gold was down 9.35% in AUD terms as money shifted from risk off assets to risk on asse
Performance Commentary - October 31, 2020 The Lincoln Australian Income Fund (Fund) rose by 0.81% during October, underperforming its benchmark by 1.13%. ResMed Inc produced a quarterly result that was well ahead of analyst expectations as the company benefitted from surging ventilator sales and solid cost controls. Adairs Ltd was also up strongly, providing the market with another robust trading update with total sales up 22%. The lift in revenues was driven by online sales which skyrocketed 134%. The Fund continues to outperform its index over 1 year, 3 years and since inception and is amongst the best performing funds in its category according to Money Management’s^^ list of high yield Australian equity funds.
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