Mainstreet Financial Group has developed three high conviction equities portfolios catering for income, balanced and growth objectives, with associated risk tolerances.
We review the performance of each portfolio monthly, and provide a monthly attribution analysis with a quarterly portfolio rebalance. The portfolios are each focused on specific industries by investing in a select group of 10 Australian listed companies on an equally weighted basis.
The companies within these portfolios have been selected based on their quality and earnings performance using the Skaffold research platform (www.skaffold.com) in order to take advantage of diversification and correlation benefits, which contribute to reducing the overall risk of the portfolio. We actively manage these portfolios and make any necessary changes as needed in order to maximise the portfolio returns while simultaneously minimising the overall risk.
The Income Portfolio has been developed to provide a high and stable level of dividend income. This portfolio is suited to an investor who aims to take advantage of franking credits and requires a steady income stream. Based on consensus analyst forecasts, the average forecast dividend yield for this portfolio is currently 5.5 per cent with an average earnings growth forecast of 13.6 per cent.
The Balanced Portfolio has been developed to provide a mixed balance between capital growth and a stable level of dividend income. This portfolio is suited to an investor who wishes to achieve capital growth and requires a dividend income stream. Based on consensus analyst forecasts, the average forecast dividend yield for the portfolio is currently 4.8 per cent with an average earnings growth forecast of 16.6 per cent.
The Growth Portfolio has been developed to provide capital growth while also providing a modest level of dividend income. This portfolio is suited to an investor who wishes to achieve higher levels of capital growth. Based on consensus analyst forecasts, the average forecast dividend yield for the portfolio is currently three per cent with an average earnings growth forecast of 30.8 per cent.
In our last review of the Growth Portfolio, we removed Vocus Group (ASX: VOC) effective as at May 3. This decision was made based on a revision to the 2017 earnings guidance, which has indicated a significant fall in expected earnings, and a significant increase in short selling activity of the stock and due to the sale of its investment in Macquarie Telecom Group.
We replaced VOC with Travel Management (ASX: CTD), which specialises in the organisation of travel services on a larger scale for business users and is anticipated to produce strong EPS growth over the following three years.
Our Growth Portfolio has managed to outperform the S&P/ASX 300 total return index by 6.6% to 20th June 2017. From its inception, the Growth Portfolio has returned 10% against the benchmark return of 3.4% and this was despite the downturn caused by the Vocus Group issuing it revised profit guidance. Companies within the portfolio which have assisted in its strong performance include; CSL, Fisher Paykel Healthcare, Corporate Travel and AGL.
Advisers can access our three model equity investment portfolios by subscribing to our Platinum membership at www.skaffold.com
Peter Leodaritsis is the managing director of Mainstreet Financial Group