InvestNow News – 15th May – Morphic – Performance Report – April 2020
Ethical Investing in Focus
Despite the almost 100% focus on COVID-19, another large bank in Australia, Westpac, announced that they would be exiting all support for lending to the thermal coal industry by 2030. This builds on prior commitments from other lenders and Insurers who are increasingly worried about the financial viability of lending to those investments.
As a reminder, your Fund does not buy shares in any fossil fuel producing company.
Portfolio review
The Fund rose 1.2% in April, underperforming global markets which rose 3.5% in AUD terms. Global equities rose 10.6% in USD terms, as the market had the strongest rally in 32 years, bouncing back on hopes that the worst of COVID-19 had passed quicker than first feared. The strong rise in the AUD dampened returns. Nearly all the underperformance came from the Fund carrying cash, which helped in March, but was a headwind in April.
The USA market performed best (+13%) with Europe (+5.7%) and Japan (+5.4%) lagging. Despite the oil price briefly trading below $0, Energy was the best performing sector (+15.7%) as hopes of reduced supply and better demand combined. Banks (+5.7%) was the laggard as fears of higher loan losses weighed on the sector.
Ping An Healthcare was the largest positive contributor over the month. The company has been leading the development of online medical advice in China, and with COVID- 19, the Chinese government has given the “stamp of approval” for the company. With the stock up over 50% in a month, we have taken profit and will look to add on pullbacks.
The largest detractor for the month was Service Corp, our funeral home provider. The company pulled guidance and provided downbeat commentary, which was disappointing as it was expected that demand for services should be higher in the current environment.
Our position in Alstom was also a detractor over the month. The stock struggled as investors become concerned that the company would push ahead with the Bombardier acquisition at the prior price and take on too much debt.