Week Ahead | Model Portfolio Changes Alert

20 April 2021

Global markets were higher on Friday (S&P 500 index +0.4%) as US stocks climbed to new highs. European stocks also set new records, while the UK index got back up to levels last seen in early 2020.

The positive mood was driven by a fresh flurry of corporate results to end the first week of US earnings season and solid Chinese growth data added which to signs of a global economic recovery. Morgan Stanley was the last of the major US banks to report on Friday and, like the others, beat expectations, even after revealing an almost $1b loss related to the collapsed family office, Archegos.

Market sentiment also remains underpinned by expectations of life post covid. Last week, the US crossed the 200 million threshold of vaccine doses administered, with just under 40% of the population having had at least one shot.

Contact Energy (CEN:NZX / CEN:ASX)

Closer to home, the big news locally was in the renewable electricity generator space as the much anticipated clean energy ETF rebalance took place Friday. Meridian Energy saw more than 106 million shares change hands, or 4.1% of all shares on issue, while another 81.5 million Contact Energy shares were bought and sold, or 10.4% of all shares. However, both stocks were up on Friday as a “tremendous amount of prepositioning” from active investors helped the price to stay stable.

We have added Contact Energy to our NZ model portfolio at a 6.0% weighting.

Our Model portfolios now have an impressive 5 ½ year track record (since launch in September 2015):

  • The NZ Model portfolio is up +107.6% in absolute terms (including dividends). On an annualised basis, the portfolio has returned +14.0% per annum, versus the NZX 50 return of +15.4% per annum.
  • The Aussie Model portfolio has now outperformed the general Australian market by +35.9% and is up 66.3% in absolute terms.

We have refreshed our model portfolios and made the following changes:

  1. In New Zealand we have added Contact, and increased positions in Summerset, Kiwi Property Group, and Tourism Holdings. To fund these, we have trimmed Pushpay, Delegat’s, Genesis, Fisher & Paykel Healthcare, and Auckland Airport.
  2. In Australia, we have added Westpac, De.mem, and QBE insurance. We have increased holdings in Telstra and ANZ. We have removed Invocare, Select Harvests, and Treasury WIne Estates. We have also trimmed and taken profit on Macquarie, Elders, and Xero.

Login below to see our full detailed model portfolio weights.

Australia & New Zealand Market Movers

The Australian market (ASX 200 index +0.1%) inched higher on Friday, with the ASX notching its fourth consecutive week of gains.
Origin Energy fell -8.9% after lowering its full-year guidance on higher-than expected gas supply costs.

Australia’s PM said international hotel quarantine-free travel won’t happen until the second half of the year, paring back hopes of an imminent easing of international travel restrictions. He said restrictions were still months away from being eased and vowed international travel would be done in a way not to jeopardise Australia’s status: “Australia is in no hurry to open those borders, I assure you”.

The New Zealand market (NZX 50 index +0.4%) was higher on Friday as trading volumes surged and the market edged higher as passive fund manager BlackRock sold more than $1 billion worth of shares in Contact Energy and Meridian Energy.

In stock news, Napier Port (+2.9%) was higher as it upgraded guidance. Powering Australian Renewables and Mercury NZ have agreed to increase their offer for Tilt Renewables to NZ$8.10/share from NZ$7.80/share.


3 Things Markets will be Watching this Week

  1. Corporate earnings season gets into full swing this week with around 80 S&P500 companies reporting, including Netflix, IBM and American Airlines. 
  2. Highlights globally include the ECB’s latest interest rate call.
  3. In Australia, Wesfarmers will host an Investor Briefing while a number of quarterly updates are due including BHP, Northern Star, Challenger, Sydney Airport, Oz Minerals, AMP, Evolution Mining, Santos, Brambles and Woodside.
Global markets were higher on Friday (S&P 500 index +0.4%) as US stocks climbed to new highs.

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