A look back at a year of momentum

A look back at a year of momentum

The Momentum portfolio is Rivkin’s newest strategy and has been running for over a year now. As we approach the half way point in the year, it is a good time to review some of the winning and losing trades that we have had so far. So far this year, the portfolio is up around 8% although the rolling 12 month return is 22.19% which is consistent with the 22.7% average annual return achieved in the back-test.  

Figure 1: Equity curve of Rivkin Local Momentum Strategy since inception

The first two months of the year saw large and rapid gains in the portfolio as the likes of Downer EDI (DOW) and Fortescue Metals (FMG) made tidy gains.

Unfortunately, things took a turn for the worse as DOW’s share price was hit hard due to its announced acquisition of Spotless (SPO) and associated capital raising.

The capital raising received only a lukewarm reception which the market did not like (as a side note, SPO was an event trade recommendation that returned 7.1% for our members in approximately two months).

Compounding the declines in DOW, FMG’s share price began to retreat from its highs as a result of a pull-back in the iron ore price.

The decline in value of the portfolio continued through March and part of April at which point it bottomed out at $115,000, still a 15% gain from inception.

Since then, however, the portfolio has resumed its upward trend. In April, we closed out the FMG trade for a very healthy profit. Although the year to date performance of FMG was negative, the return since the trade was opened in June last year was an impressive 88% which included two dividend payments.

Once FMG was sold from the portfolio, Bluescope Steel (BSL) became the top performing open trade as the stock price surged to above $13 per share, well above our $8.99 buy price, although it has since pulled back slightly to its current price of $11.66. Aristocrat Leisure (ALL) has been another good performer for the portfolio.

Although the position is still open, we are currently sitting on a 19.7% gain since April. ALL presented its half year results in late May which were significantly better than analyst expectations.

An honourable mention must also go to Computershare (CPU). This position was entered in March of this year and in just two months earned us a realised return of 6.5%.

On the negative front, the worst result so far this year came as a result of a 10% loss on a trade in Rio Tinto (RIO) which retreated from highs largely as a result of a pull-back in the iron-ore price.

Although the portfolio has now rebounded off its lows somewhat, it is still a good time for new members to start the portfolio as the strategy has regained its upward momentum. Anyone interested in participating in this strategy please contact me at william.oloughlin@rivkin.com.au or by phoning +612 8302 3633.

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