Portfolios end year on a high!

Co-founder of the Switzer Report
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Our Switzer portfolios ended the year on a high, and in the month of December, extended their relative outperformance to the benchmark indices.

For 2013, the income oriented portfolio returned 24.36% and the growth oriented portfolio 27.55% (see tables at the end). Compared to the benchmark S&P/ASX 200 Accumulation Index (which adds back income from dividends), the income portfolio has outperformed by 4.2% and the growth-oriented portfolio has outperformed by 7.3%.

Late rally sees market end higher in December

After a shaky start to the month, a late rally saw the market put on 0.6% in December – taking the year’s gain to 15.1%. In the main, the yield sectors took a breather, with financials losing 1.0% during the month, and property trusts, where takeover activity impacted a couple of the majors, down 3.1%. Telecommunications (with Telstra) was the exception – up by 4.3%.

While the final quarter saw a swing back to the cyclical sectors, the major yield sectors led the market in 2013 – with financials up 28.1%, telecommunications up 21.8% and consumer staples up 12.9%. Consumer discretionary, which includes companies as diverse at 21st Century Fox, Crown and JB Hi-Fi, was the best performing sector at 36.3%. The materials sector was the only sector in the red at -3.7%.

Income portfolio

The construction rules for the income-oriented portfolio are set out here. The portfolio is overweight in the financials, consumer staples and telco sectors, and underweight in the materials sector. It contains no consumer discretionary or property trust stocks, and is broadly index weight in the energy, health care and industrial sectors.

Over the course of 2013, the portfolio exceeded is targeted income return by generating a dividend yield of 5.55%, which was franked to 96.3%.

Details of the portfolio and its performance are listed below.

Income Portfolio

Growth-oriented portfolio

The construction rules for the growth-oriented portfolio are set out here. The portfolio is overweight stocks in the materials, energy and healthcare sectors, underweight financials and consumer staples, and broadly index weight the other sectors. It has benefited from some stock biases, particularly an overweight position in NAB, and the selection of Crown, Brambles and Toll.

At the end of October we reduced some of these stock biases by:

• Selling the BOQ holding (up 64% this calendar year), and re-invested these funds into Commonwealth Bank;
• Selling 25% of the NAB holding – and reinvesting these funds into Westpac shares.

The portfolio’s performance is detailed below:

Growth Oriented Portfolio

Portfolios for 2014

Next week, we will publish our income portfolio for 2014, and the following Monday, our growth-oriented portfolio. These will build on our 2013 portfolios – with some minor tweaks as we reweight the sectors and stocks, and take into account our expectations about relative stock value.

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.

Also in the Switzer Super Report:

Also from this edition