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Portfolio Performance – October 2018


Quarterly Review

The Ethical Investment Mid-Cap Portfolio returned 2.23% for the quarter, bringing the one-year return to 13.33%.

Performance for the quarter was driven by the strong return of over 60% from TPG Telecom after the company announced it intends to merge with Vodafone Hutchison Australia. The Merger will create a more effective challenger to Telstra and Optus, with an integrated fixed and mobile offering with an enterprise value of $15 billion. The merged company will retain the name TPG Telecom.

Other top performing investments for the quarter included the technology stocks, Technology One (+30%) and Hansen (+16%), as well as the New Zealand telecommunications company Chorus (+18%) and a new investment to the portfolio, the waste management company Bingo (+19%).

Detractors to performance included Medical Developments International (-23%) which fell after the US Food & Drugs Administration approval for its pain relief product was delayed. Japara Healthcare (-20%) also performed poorly after the announcement of a Royal Commission into the aged care sector. NextDC (-11%) also contributed negatively with the share price pulling back somewhat from its highs of around $8 earlier in the year. 


Portfolio Changes

The Australian share market has been very volatile recently, mainly due to fears of rising US bond yields and a trade war. We took advantage of the volatility and downturn in markets to add a few new holdings to the portfolio.

New additions to the portfolio included Mercury NZ (MCY), Bellamy’s Australia (BAL), Cleanaway Waste Management (CWY), Arena REIT (ARF) and Sigma Healthcare (SIG). Greencross Limited and 1300 Smiles were removed from the portfolio.  Sirtex Medical was also removed after being taken over by a US healthcare company.

Arena REIT (ARF) is a real estate group that owns, manages and develops specialised real estate assets across Australia. Arena invests in sectors that are underpinned by supportive macroeconomic trends including population growth and emerging demographics comprising: childcare/early learning services; education – including schools, colleges and universities (and associated facilities); healthcare – including medical centres, diagnostic facilities, hospitals and aged care facilities (and associated facilities); and facilities with government and other high credit quality tenants.

Arena benefits from several supportive trends such as population growth and growing government subsidies in addition to attractive characteristics such as an occupancy rate of around 100%, high tenant renewal rates, triple net leases, and a relatively long weighted average lease expiry of 13 years. Arena’s seven medical centres, which are leased to ASX-listed Primary Healthcare, also benefit from government subsidies.

Mercury NZ Limited is a renewable energy company based in New Zealand. Mercury invest in, develop and produce electricity from renewable sources and sell energy and energy related services and products to retail and wholesale customers. The company’s electricity generation comprises two complementary fuel sources, Hydro and Geothermal. It operates the nine hydro stations on the Waikato River and five geothermal power stations in the Central North Island. Mercury NZ’s metering business, Metrix, provides electricity retailers with advanced metering infrastructure solutions for their residential and commercial customers.

Bellamy’s Australia Limited is a Tasmanian company who offers a range of organic food and formula products for babies and toddlers. Bellamy’s has operations in Australia, China, and South-East Asia and also delivers its products through an online portal. It offers over 30 products that are tailored to the needs of babies and toddlers though supermarket chains, pharmacy chains and independent stores.

Cleanaway Waste Management is a provider of waste management services in Australia. Cleanaway specialise in the collection, treatment and recycling of waste. The company aims to remove, recover and reuse the maximum amount of waste with minimal environmental impact. Cleanaway collects and treats organic materials such as grease trap waste, green waste, food waste, waste generated by abattoirs, organic wastes from industrial processes as well as biosolids waste generated by sewage treatment plants.

These wastes are beneficially used for soil conditioners, potting mixes, composting, land rehabilitation, landscaping, forestry and agricultural purposes. Biosolids and organic waste applications are used on large-scale agriculture and mine site rehabilitation projects across Australia. Waste oil is also collected and processed for reuse as pristine base oil.

Sigma Healthcare is a full line wholesaler and distributer of pharmaceutical products through its pharmacy and grocery sales channels. Sigma has a pharmacy-led network, including over 700 retail brand members representing the brands Amcal, Guardian, PharmaSave, Chemist King and Discount Drugstores.


The contents of this newsletter are intended as general advice only.  No specific person’s circumstances, financial situation or objectives have been taken into consideration.  You should not act on the information provided without seeking personal advice from an appropriately qualified financial planner.   Past performance is no indication of future performance. While the data source has been verified as reliable, the actual content has not been checked for accuracy. Consequently, Ethical Investment Advisers does not warrant the accuracy of the information nor accept liability for any errors in the data. Portfolio inception date for performance calculation purposes is 25/05/2015. The returns shown are estimates only. The returns are for the Ethical Investment Mid-Cap Portfolio on the Hub24 platform and are AFTER investment management fees, but BEFORE administration fees, performance based fees and taxes. The performance returns have been calculated on a daily basis taking into account brokerage costs, and are accumulated for the period shown. Returns are shown as annualised if the period is over 1 year, or as total returns otherwise. and may not match your actual return as this can be affected by the timing of additions and withdrawals, as well as fees and customisations.
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